WCA January 2014

From the Americas in October. The Russian steelmaker’s hot-rolled steel plant in Dearborn, Michigan, was running at full capacity as it worked to keep up with rising demand from automakers. The interview with business writer Brent Snavely marked the first public comment by Mr Dey since he took over at Severstal, in September. Previously the company’s chief strategy and procurement officer, he was promoted as part of an overhaul of Severstal’s North American leadership team. The new CEO told Mr Snavely that the prior executive team was good at managing the mergers, acquisitions, and large capital investment projects that were a feature of Severstal’s activities in North America over the last ten years. Now, however, the company is confronting new challenges. (“Severstal Profits [are] under Pressure from Competitor Pricing,” 4 th October). Mr Dey sees the challenges in the context of a global steel industry equipped to produce between 300 million and 400 million tons more than its customers want, with slower growth in Asia the main factor in the imbalance. “Cars might be flying off the shelves here,” he said 3 rd October, in Dearborn. “But we have seen significantly eroded margins in pricing.” Mr Snavely noted that back in 2008, the last time automakers were performing on this scale (more than 15.5 million cars and trucks sold in 2013), a ton of hot-rolled steel was selling for more than $1,100. When he wrote, in October, hot-rolled steel was going for about $637 per ton for November deliveries. OAO Severstal, the parent company of Severstal North America, has suffered accordingly. The company reported a loss of $44 million for the three months ending 30 th June 2013, compared with a profit of $44 million in 2012. “The gauntlet has been laid down by aluminium,” Mr Dey told the Free Press . “Let’s not ignore that fact or try to deny it.” The Severstal weapon of choice in the competition with the aluminium industry will be higher-strength, lighter-weight steel.  Since acquiring Rouge Steel for $285 million in 2004, Severstal has invested between $6 billion and $8 billion in its North American operations. Last year the company commissioned a $285-million hot dip line as part of its $1.4-billion upgrade of the Dearborn plant, which has a workforce of 1,800 people. Elsewhere in steel . . .  According to the short-range outlook of the World Steel Association, the US will likely see three per cent growth in steel demand in 2014, compared with last year’s estimated 0.7 per cent growth in demand. Favouring the improvement is the pickup in the automotive, energy, and residential construction sectors.  The Steel Recycling Institute said on 30 th September that steel is North America’s number one recycled material, with more than one billion metric tons recycled since 1988. According to Pittsburgh-based SRI, which

calculates the recycling rates for steel and major steel products, more steel is recycled in the US every year than paper, plastic, aluminium and glass combined. In 2012 the recycling rate for the North American steel industry was 88 per cent. The almost 84 million metric tons (mmt) of steel recycled that year included 16.3mmt of automotive scrap, 2.7mmt of appliance steel, and 1.3mmt of tin plate steel. Fully 98 per cent of plates and beams from demolition projects was recycled. The SRI, which reported that the industry’s recycling effort has helped it to reduce its carbon dioxide emissions by 32 per cent, was established 25 years ago by the American Iron and Steel Institute (AISI) to create a system for recycling steel cans. Automotive  The CEO of Chrysler Corp, Sergio Marchionne, said on 10 th October that the Detroit carmaker will invest $1.249 billion to build an assembly plant in Saltillo, a city in the northern Mexican state of Coahuila. Chrysler already has four plants in the area around Saltillo. Some 1,570 jobs will be created by the investment, Mr Marchionne said in Mexico City, where he met with Mexican President Enrique Peña Nieto. According to President Nieto, Mexico is the world’s eighth-largest automobile producer, ranking fourth as an exporter and fifth as a producer of car parts for both the domestic and international markets. Ildefonso Guajardo, the economy minister, said the auto industry accounts for 26 per cent of Mexico’s total exports. Automakers are expanding production in Mexico to capitalise on lower labour costs that bolster the profitability of vehicles sold in the American market. General Motors of the US has budgeted $691 million to expand three existing Mexican factories. Germany’s Volkswagen is investing $1.3 billion in a new Audi plant in San Jose Chiapa with a capacity of 150,000 cars a year. Fiat, of Italy, builds a North American version of its 500 subcompact at a plant in Toluca.  Edging closer to unloading its remaining shares in General Motors, the US government said in a 17 th September report to Congress that it has recovered about $36 billion of the $51 billion invested to bail out the automaker in 2008 and 2009. The Treasury Department said it owned a 7.3 per cent stake in GM, down from 13.8 per cent as of 12 th June, and that it plans to sell its last GM shares by April 2014. Business writer Nathan Bomey of the Detroit Free Press noted (10 th October) that, by the time it gets quit of GM, the US government is expected to have lost about $10 billion on carmaker bailouts. But the Obama administration has declared the initiative a success because it rescued the domestic auto industry and preserved hundreds of thousands of jobs. Claiming that that the government is recouping “significantly more than expected” on auto bailouts, the

46

Wire & Cable ASIA – January/February 2014

www.read-wca.com