Metals News
Tom Stundza, Executive Editor -- Purchasing, 2/12/2002 2:00:00 AM
Metals News
STEEL
Double Eagle customers unaffected by fire
Deliveries of galvanized sheet for automotive applications have not been disrupted by the recent major fire at Double Eagle Steel Coating Co. in Dearborn, Mich. Production from the factory has been reallocated to other coating facilities operated by owners of the joint venture, Rouge Steel and U.S. Steel.
The fire started in the facility’s strip cleaning operation, but quickly spread through the building’s air evacuation system. Launched in 1986, Double Eagle is the world’s largest flat- rolled steel continuous electrolytic galvanizing facility with an annual operating capacity of 850,000 tons. Application of zinc or zinc-iron coatings to steel through electrogalvanizing provides corrosion protection.
STEEL TRADE WARStop
Appliance makers oppose tariffs on sheet imports
Major appliance manufacturers, speaking through their trade group, have notified the Bush administration of their opposition to the possible imposition of tariffs or quotas on imported carbon and alloy flat-rolled steel and stainless steel products. Home appliance manufacturers alone purchase more than two million tons of sheet steel annually.
The U.S. International Trade Commission (ITC) has recommended that President Bush provide up to four years of import relief for U.S. steel companies, including additional tariffs of up to 40% on some products. President Bush is supposed to decide whether to accept the recommendations by March 6. The proposed tariffs, as recommended by the ITC after a Section 201 investigation, “will result in increased steel prices in the U.S. for both imported and domestic steel in these two categories, unnecessarily driving up material costs for home appliance manufacturers,” says Joseph M. McGuire, president of the Association of Home Appliance Manufacturers (AHAM).
McGuire says AHAM is also concerned that imposition of tariffs would further erode the home appliance industry’s domestic competitive position. The result will be job losses and further pressure to seek more attractive cost positions outside the U.S. He has recommended that the administration, the U.S. Trade Representative and the Congress “seek new ways to deal with the problems of the integrated steel companies” without affecting steel-buying companies. “International negotiations to deal with global capacity and production issues are supported by AHAM,” McGuire says.
Supporting this view, economist Daniel T. Griswold of the Cato Institute in Washington says: “Protecting a few big steel mills from foreign competition may help the Bush administration politically in the short run, but it will impose a heavy, long-term cost on the U.S. economy and the administration’s goal of pursuing free trade abroad.” He says tariffs would be an example of isolationist trade policy that “strings barbed wire around the U.S. market, sealing it off from global supplies and price competition.” And he adds: “Quotas would drive up domestic prices, turning the U.S. into an isolated island of high steel prices and artificial shortages.”
McGuire notes AHAM is strongly opposed to a steel users’ fee or tax to finance a trust fund to deal with legacy costs —retiree pension and healthcare costs—of domestic integrated steel companies seeking to restructure. But, “the imposition of such a fee would have the same impact on the appliance industry as imported steel tariffs,” McGuire says.
BERYLLIUM ALLOYStop
Purchasing outlook weak in most end-use markets
World buying for beryllium-based metals declined sharply in 2001 because of the collapse of the telecommunications equipment and computer electronics markets, the largest end-use markets for beryllium-copper alloys. The outlook for 2002 is unclear because of the uncertainty surrounding other key markets—automotive and appliance electronics, oil and gas, aerospace components, and injection and blow-mold tolling.
Market analyst Roskill Information Services in London expects a continued decline in purchasing of beryllium-copper strip by the telecommunications, computer components and automotive electronics sectors, and flat consumption by the appliance market. Roskill says the expected fall in nondefense beryllium consumption could be offset partly by increased use in defense applications. Projected to remain healthy are the medical and optical scanning electronics markets.
Roskill says use of beryllium-copper products could rise later this year for undersea communications equipment and for oil and gas pipe. Consumption of beryllium metal is unlikely to rise appreciably, though, Roskill says, since new alternative materials such as beryllium alloyed with aluminum, nickel and titanium are less expensive. In the longer term, beryllium oxide consumption should continue to grow steadily, especially in new generations of computers where increasing operating speeds generate progressively larger amounts of heat.
Beryllium-aluminum alloys are becoming increasingly because of the amount of beryllium they contain—up to 65% compared to the 0.5% and 2% typically present in beryllium-copper. Both Starmet and Brush Wellman have developed beryllium-aluminum alloys that have a wide range of applications ranging from aerospace to computers.
TITANIUM top
Timet creates unit to spur demand from automakers
Titanium Metals Corp. (Timet) of Denver has established a new division, Timet Automotive based in Morgantown, Pa., in an attempt to expand use of the premium-cost lightweight metal for motor vehicle components. Kurt Faller, who previously served as Timet’s director of automotive development, will head the new business unit as president.
The new division will focus on providing “the best-value titanium mill products to the automotive industry’s quality standards,” says J. Landis Martin, executive officer of the parent company. “The need to meet the conflicting goals of higher mileage, lower emissions and improved safety has caused auto manufacturers to increase their applications of lightweight materials. Titanium provides performance characteristics in the automotive environment that are unmatched by other metals.”
When compared with steel and aluminum, titanium’s high material cost remains the principal disadvantage among automotive designers and buyers. However, Timet says while well publicized aerospace grades are indeed pricey, the average price of titanium industrial mill products is lower by half. For automotive applications, titanium is “simply a lot less expensive than commonly thought,” says Faller. He believes titanium suspension springs “save weight, require no corrosion allowance and no protective coatings and do the same job in less space” than do springs made of conventional materials. Also, “titanium exhaust-system components are much lower in mass and can easily last several hundred thousand miles, exceeding the life of the car itself,” Faller adds.
Although the use of titanium components in cars, trucks and motorcycles is still at a relatively low level compared to many other metals, titanium consumption is growing. Seventeen automotive OEM’s are currently using titanium for an array of components ranging from engine valves and connecting rods to wheel rim screws, exhaust systems and suspension springs. The list of new applications in the past 24 months includes suspension coil springs in Volkswagen AG’s Lupo FSI cars built in Germany, compressor wheels in variable-geometry diesel engine turbochargers from Cummins Engine Co., Columbus, Ind., and muffler and tailpipe subassemblies for Chevrolet’s Corvette sports cars built in Bowling Green, Ky.
Titanium also is being used or considered for use in engine connecting rods, valves and valve springs, wheel lug nuts and studs, sway-bar fittings, shock-center rods, bumper supports, door intrusion springs and certain other components. Timet says worldwide consumption of titanium by automotive original equipment manufacturers is expected to reach 1,100 metric tons in 2002 compared to just 100 metric tons in 1995.
“The objective of Timet Automotive is to optimize the titanium production process, control, quality procedures and supply channels to meet the needs of the auto industry,” Martin says. Immediate tasks of Timet Automotive, according to Faller, will be to “help automakers see how titanium can cost effectively improve their products, and then to match our products and capabilities to their needs, further reducing costs as volumes grow.”
ALUMINUM top
Analysts: Smaller producers may grab merger baton
Merger mania among the biggest aluminum producers, sparked by low prices of the metal and economic decline, may spread to smaller companies. Prime example: Norway’s Norsk Hydro’s purchase of VAW Aluminium of Germany, creating the world’s third-largest producer behind Alcoa of the U.S. and Alcan of Canada.
“This is the time when acquisitions normally take place. If an asset’s value declines in a downturn, it’s an ideal time for a bigger stronger producer to go in and buy additional assets,’’ says analyst Adam Rowley of Macquarie Bank’s London office. “One issue is performance of prices. When prices are fairly weak, some producers fare much better than others and there are opportunities for better-performing producers to acquire assets relatively cheaply.’’ The benchmark London Metal Exchange aluminum price average was 65¢ last year, a 5% decline from 2000. The LME price has been stagnant for weeks now at 61¢/lb, which is 20% lower than the 76¢ average for January 2001.
Actually, aluminum mergers have been blowing in the wind since Alcoa took over rival U.S. producer Reynolds Metals in 2000 to claim the position of world’s largest aluminum producer. In the same year, Alcan tried to tie up with both Pechiney and Switzerland’s Alusuisse, but was foiled by the European Union’s antitrust watchdog, causing Pechiney to bow out. That allowed Alcan and Alusuisse to link up and create the new No. 2.
Analyst Rowley says the opportunity for megamergers has dwindled because many of the big producers have already joined forces. Analyst Robin Bhar at Standard Bank agrees that “the first tier of producers seems to be fairly well ordered, so we have to look at the second tier, smaller producers like VAW and Hydro that may have the need to merge.” Among possible merger candidates are the aluminum operations of the Dutch-English Corus Group, Ferrostaal of Germany, WMC of Australia (which rebuffed Alcoa’s takeover bid last year), BHP Billiton of Australia, Elkem of Norway (which rebuffed Alcoa’s takeover bid this year), and some smaller smelters in Brazil, Argentina, Poland, Mexico, Romania and Germany.
Mergers will not prompt a sharp price rally or rekindle demand, which has been badly damaged by the global economic slowdown, but the trend may serve to bring the 26.5-million tons of annual global supply closer to heel and help create a more orderly market, he says. “Consolidation in theory does help to produce more discipline on the supply side. That was the thinking several years ago when Alcoa bought Reynolds and Alusuisse and Alcan merged,’’ says Bhar. “And it remains the thinking today. When markets are oversupplied, producers will have more of a vested interest in curbing supply sooner than they would otherwise do.”
ALUMINUM top
Alcan wants to double auto revenues by 2005
Alcan Inc. of Montreal intends to double revenues from the automotive sector to $1 billion by 2005 according to Kurt Wolfensberger, president of Alcan Automotive. To achieve that goal, Alcan Automotive’s strategic activities have been restructured to expand purchasing of high-strength sheet for vehicle structures; engineered shapes for suspension, chassis and powertrain components, and primary ingot products for engine blocks and cast components.
Wolfensberger, who is also president of Alcan Engineered Products, believes that demand for aluminum in the car and light truck industry will grow to 11.6 million tons/year by 2010 from 6.4 million tons last year. Wolfensberger suggests that will happen by the end of the decade because aluminum will have gained market penetration rates of 50% or more for engine blocks, 25% for body panels and 20% for chassis and suspension parts.
Transportation is the biggest and fastest-growing segment of the aluminum market with cars and light trucks accounting for more than two thirds of sales. Total shipments to the transportation sector—including marine, ground and aviation—were 9.3 million tons in 2000. Wolfensberger says Alcan is forecasting that 2009-model family sedans in North America will average 331 lb of aluminum, compared to 268 lb in 2002 model cars.
STEEL top
European mega-merger changes U.S. management
Creation of Arcelor, the new steel giant formed from the merger of European steelmakers Usinor of France, Arbed of Luxembourg and Aceralia of Spain, has resulted in Joseph K. Kusic becoming the new president of J&L Specialty Steel in Coraopolis, Pa. Kusic succeeds Jacques Chabanier who has been promoted to senior executive vice president Arcelor, headquartered in Luxembourg. Chabanier will be in charge of purchasing, research and development, information technology, e-commerce and global alliance for what is now the world’s largest steelmaker.
Kusic, 53, who had been senior vice president of operations for flat-rolled stainless steel producer J&L Specialty, joined the company in 1999 after having been employed as vice president and general manager of the former Washington Steel Corp. Succeeding Kusic as senior vice president of operations at J&L Specialty is Thierry Bernard, formerly vice president at Sollac Lorraine, a Usinor steel facility in France, where he has been in charge of various business improvement projects. Prior to joining Usinor, Bernard was president of Carr Lowrey Glass Co., Baltimore, Md., a glass-packaging firm.
E-COMMERCE top
Alcoa expands relationship with FreeMarkets
Alcoa has expanded its use of FreeMarkets’ electronic purchasing software and services to buy goods and services globally. Jim Zuffoletti, vice president for FreeMarkets says Alcoa has created effective online markets for goods and services since the relationship began in 2000. “We look forward to continuing to provide Alcoa with the technology and services needed to meet corporate goals,” he says.
Alcoa has implemented a number of e-business solutions across the world’s largest aluminum company to control costs and deliver value for various operations, according to Betsy Harrington, director of procurement solutions. “Alcoa will continue its drive for the lowest possible cost of ownership,” she says, noting that the firm now uses e-sourcing tools and services as an integral part of its procurement activities—but declines to provide specifics.
“FreeMarkets has created tremendous value for Alcoa by providing the company with the technology, information and services necessary to create effective online markets that deliver substantial savings and returns on investment. We are pleased to be expanding and extending our relationship,” notes Christie Breves, vice president of procurement for Alcoa Business Support Services.
METALS ON THE WEBtop
eExcess links buyers, sellers of excess metals
Buyers of excess or secondary metals have a new Internet-based procurement service online at www.eExcess.com “so that business transactions can be consummated quickly and efficiently,” says Brad Magill, chief operating officer of the Gladwyne, Pa.-based company. The initial goal is to develop a database that includes detailed information about what excess or secondary metals are needed by buyers and what metals the sellers have available.
“The metals industry is hampered by old fashioned ways of conducting business that increase the costs of doing business due to inefficient communication systems,” he says. “The current method of transacting business in the excess area is as ancient and antiquated as you can imagine—primarily using fax machines, other times using handwritten messages and in some cases computerized spreadsheets that have thousands of entries that take hours to sort through.”
The eExcess service will act as a broker, sending targeted information to buyers so they will be able to find new sources of metals, obtain price quotes, and complete transactions. The system has customer information available for sellers. Metals buyers and sellers can register for the subscription service for free. After they make their first successful transaction, they will be asked to subscribe to the service, which costs $20-$50 monthly. eExcess does not charge any transaction fees. The company plans to add metals industry news, metals pricing, freight costs and other features to its Web site at a later date.
METAL CHIPStop
The nation's 53rd largest steel service center, Action Steel Supply Inc. of Indianapolis is operating under Chapter 11 bankruptcy protection. Action Steel also has a facility in Evansville, Ind., and operates Southside Steel in Indianapolis and Goodman Steel Inc., Louisville, Ill. The bankruptcy court has allowed the shutdown of the Arizona Steel unit in Phoenix. In 2001, the company was listed 53rd among the top 100 North American metals service centers. Action Steel Supply carries hot-rolled sheet, galvanized sheet, plate and floor plate, wide-flange beams, tubing and various steel channels, angles and flats.
Steel processor Huntco Inc. of Town and Country, Mo., and subsidiaries Huntco Nevada Inc., Huntco Steel Inc. and Midwest Products Inc. have filed for Chapter 11 creditor protection. The petitions, filed in U.S. Bankruptcy Court for the Eastern District of Missouri, anticipate the liquidation of all Huntco assets to repay Huntco's secured and unsecured creditors. However, based on the proceeds Huntco expects to receive from the sale of its assets and the amount of its indebtedness, the processor does not expect to be able to repay all its $90 million debt.
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