Steel Success Strategies XVI

Session Highlights

Co-sponsored by World Steel Dynamics and

American Metal Market

Tuesday, June 19, 2001

Keynote Presentation: "Steel in 2001: Constraints unparalleled. Opportunities unmatched."

Despite a little first-half improvement in a handful of key world flat-rolled steel prices, the second half of 2001 will probably bring "moderate worsening," noted Peter F. Marcus and Karlis M. Kirsis, managing partners of World Steel Dynamics, Englewood Cliffs, N.J. They said there was a "fair likelihood" prices will weaken in the latter part of 2001 after a first-half recovery following lows reached at the end of 2000.

Kirsis called the phenomenon a "death spiral, double dip" that will raise the possibility of additional bankruptcy filings in the North American industry. Already, more than 15 United States and Canadian steel producers are operating under court-mandated protection from their creditors.

Among the factors contributing to this outlook, according to Kirsis, are flat or declining steel demand in the United States and Western Europe. This, coupled with the high value of the U.S. dollar, is driving down relative costs in many countries outside the United States and putting domestic integrated producers near the top of WSD's World Cost Curve.

Marcus noted that world slab prices, after falling to a brief low of $155 per tonne late last year, strengthened to $170 to $175 per tonne in June, FOB port of export, fueled by relatively strong demand. He said it is not unlikely a slippage back to $160 to $165 a tonne could occur in the second half. Marcus suggested it is likely the world export price for hot bands, which strengthened to $205 per tonne in May from a low of $175 per tonne at the end of last year, could fall back to $180 to $190 per tonne in the next few months.

Overall, the two analysts maintained that these and some other extremely negative conditions "cannot be sustained" beyond 2001. This means, in their opinion, that the stage is set for an industry recovery in the following years.

For example, Marcus noted that while U.S. integrated sheet mills have estimated annual capacity of 65 million net tons, some 35 million tons of this carries an operating cost of $300 per ton compared with a current hot band price of $240 per ton. "Clearly," he summarized, "something has got to give."

Highlight Speaker: Francis Mer, chairman and chief executive officer, Usinor

Not mincing words, Francis Mer, chairman and CEO of Usinor, France, said he was "fed up" with U.S. steel producers blaming their pricing and financial troubles on imported steel, pointing indirectly to inefficient U.S. capacity as the real culprit.

"I'm fed-up with being the scapegoat," Mer remarked. "The largest part of the problem is a U.S. problem and not scapegoat behavior outside," he said, adding U.S. steel prices are currently higher in the United States than in Europe and the import trend is down.

In his presentation, Mer pointed to the steel industry in Europe as a successful model of mergers and consolidations over the past 20 years. The result, he emphasized, has been reduced capacity. He acknowledged that European mills were able to avoid the prohibitive legacy costs carried by integrated mills because retiree health costs in Europe are provided by the government and not companies.

"The new mini-mills in the U.S. are not slightly interested in seeing the competition subsidized," Mer replied when asked about solutions to legacy costs. "The only way is to substantially reduce capacity."

Asked from the audience if European mills would be investing in or buying any large U.S. steel mills, Mer said it would be "useful, possible and interesting for us to share in the necessary restructuring of U.S. business, which needs to be far more concentrated than it is."

Mer described Europe as "the most open market in the world," adding that the industry has to stop indulging in "bloody price wars" to keep capacity at any cost. Instead, industry participants must realize the importance of viewing the world as a single world market -- one selling steel at one price.

Panel I: New Paths to Steel Success

One path to steel success discussed in this session (from the vantage point of USA steel producers) is a road domestic steel mills have been down before: Section 201. Domestic steelmakers on this panel affirmed their support of President George W. Bush's effort to seek relief for the industry via Section 201 trade action. That same path, however, in the eyes of offshore producers and some steel-buying customers, can be a slippery slope.

"If a 201 action includes restrictions on imports of semifinished steel, it is complete nonsense," said Jose Armando F. Campos, president and chief executive officer of Cia Siderurgica de Tubarao (CST), the Brazilian slab importer. "It would undermine the pursuit" of an Americas free-trade agreement, he added.

Daniel R. DiMicco, president and vice chairman of Nucor Corp., Charlotte, N.C., said the beauty of a 201 case is in the eye of the beholder. "The idea that it is complete nonsense is like beauty," DiMicco said. "It is in the eye of the beholder. It depends on how you are looking at things."

DiMicco and co-panelist Joseph A. Cannon, chairman of Geneva Steel Holdings Corp., Vinyard, Utah, said Section 201 relief, which would involve establishing import quotas set back to levels established in the mid-1990s, would provide a needed "time out" for U.S. producers, giving them time to implement capital improvement projects that, over the course of the restrictions, would allow them to emerge as stronger players in the global steel market.

"We have done much to be competitive," Cannon said, citing workforce reductions and cost cuts taken at Geneva over the last two years. "But we have not been able to capitalize on what we have done to be able to take our costs even lower. If we could install a walking beam furnace, as many of our competitors have, and move to electric furnace production, we could cut our costs another $50 per ton. Trade relief would give us the time to strengthen ourselves and to emerge as more cost-effective producers."

"Surges of imports come and go," DiMicco added. "And right now they are going away. But it won't be long before they are back. Our objective is to get a time out to prevent these surges of imports and to work on long-term solutions to the overcapacity issue, not only domestically but globally." DiMicco challenged questioners in the audience, saying the United States needs to enforce its trade laws. "Free trade comes with responsibilities," he said. "It does not mean you can do whatever the hell you want. (Importers) have to play by the rules."

Dan Ronchetto, manager of strategic sourcing-steel for Emerson Electric Co., St. Louis, said the key to success for the U.S. industry lies in restructuring and cutting costs. "Our experience as a major global steel consumer supports the conclusion that the U.S. producers are high cost, and that the U.S. has been one of the highest-priced steel markets in the world over the past five years," he said. "The problem facing the U.S. steel industry is the same as that challenging all manufacturing industries in the U.S.--globalization and a strong dollar. "We need our steel prices in the U.S. to be globally competitive so that our products can compete in the global marketplace," he said. "It is our opinion that the U.S. steel producers need to focus on long-term cost-based solutions to resolve the underlying issues of this industry as opposed to short-term price solutions such as trade restrictions."

One of those underlying issues is consolidation of the U.S. industry. John Lichtenstein, associate partner with Accenture, Wellesley, Mass., said consolidation in and of itself will not ensure the future success of the steel industry in the United States. "Across all industries, it is well documented that most mergers fail to create value for the acquiring company's shareholders within the first few years of the merger," Lichtenstein said. "And within the steel industry, there is at least one, recent glaring example of a merger gone awry."

Lichtenstein proposed a network of steel-related businesses. "Our vision of the future of the industry features a small number of global companies as many others see, though we believe that these will operate as networks of businesses rather than as a single monolith: more like the Cisco model than the General Motors model," Lichtenstein said. "Included in these networks will be not only the familiar steel producing and processing operations that comprise the companies today, but also a cluster of strategic business partners who are responsible for conducting many of the none-core activities."

Willy Korf Steel Vision Award, presented to:

Jorge Gerdau Johannpeter, chief executive officer, Gerdau

Jorge Gerdau Johannpeter, chief executive officer of Brazil's Gerdau Group, was presented with the Willy Korf Steel Vision Award Tuesday, June 19th as part of the World Steel Dynamics/AMM Steel Success Strategies conference proceedings. The award is presented annually to individuals who have made major contributions in advancing the steel industry and developing its good will and integrity.

Astrid Korf-Wolman, daughter of the late technology leader, presented the award to Gerdau. She also presented the first Willy Korf Award for Young Excellence to Lena Laitila of Finland's Rautarukki in recognition of her thesis on dusts, scales and sludges as inputs in the conversion process.

Gerdau was recognized for his company's success, particularly since he took over as chief executive officer in 1983. His company celebrates its 100th anniversary in 2001, having evolved from a small nail manufacturing company near Rio de Janeiro to a world player in the global steel industry. Gerdau is a family owned business that now has the capacity to produce 8 million tons of steel annually from nine steel mini-mills.

He represents the fourth generation of his family to run the company. There are five family members representing the fifth generation currently working at Gerdau. The company began to expand outside Brazil in 1980 and now owns operations in Chile, Uruguay, Argentina, Canada and the U.S. Gerdau was humbled to win the award, calling Korf's developments in steel technology "revolutionary" to the industry's success.

"I will try to live up to what this means," he said. "I am very proud and pleased with this, especially with this being the 100th year of our company."

Luncheon Speaker: Charlie Black, president and chief executive officer, BKSH & Associates

A multilateral steel agreement (MSA) aimed at eliminating global overcapacity is most likely a no-go in Washington, despite the enthusiasm of Treasury Secretary Paul O'Neill to negotiate an agreement, a Washington lobbyist told the Steel Success Strategies luncheon crowd. "I don't think it will happen or work," Charlie Black, president and chief executive officer of BKSH & Associates, told attendees on Tuesday, June 19. Black, whose clients include Bethlehem Steel, said the old voluntary restraint agreements of the Reagan Administration involved 29 countries, while today there are more than 100 producing steel. The majority of those countries have no serious trade issues with the United States, and would have no motivation to negotiate a capacity agreement.

"The U.S. and the European Union have bigger problems than steel," Black said, citing agricultural trade issues and discussions about another World Trade Organization round. Black said Bethlehem would likely support an MSA along the lines endorsed by O'Neill as opposed to the more rules-based MSA that failed to reach fruition in the 1990s.

"The problem is there's a big split over an MSA," Black said, adding O'Neill believes such an agreement could be completed in six to eight weeks, whereas U.S. Trade Representative Robert Zoellick and the State Department see such an agreement as years in the making. "It's easier to stop something in Washington than get something done," Black said. "I would be surprised if an MSA initiative took off."

According to Black, "Bush got briefed on the industry back in 1999 and met with the chief executive officers back then. He committed before the election to do something definite for the industry. He believes the industry was hurt by unfair trade."

Black said a Section 201 would help get congressional support for trade promotion authority--which gives the president wide latitude on negotiating trade agreements--because it would show the administration was willing to go to the mat to defend U.S. industries against unfair trade practices.

The Bush administration, he said, is also split on the issue of legacy costs, with "some high officials" advocating assisting the integrated steel industry and others maintaining that in doing so the government would be engaging in industrial policy, "which has negative connotations for this administration." In illustrating the kind of legacy cost burdens borne by the integrated steel industry, Black said Bethlehem pays pension and health care costs for 132,000 retired workers and dependents compared to an active payroll of 14,000 workers.

Asked where the U.S. government would get the resources to assist the companies, Black said, "$1 billion to $2 billion over 10 years might solve the problem" for the integrated steel industry. He said that is not a huge sum of money when compared to an overall $3-trillion annual budget.

Panel II: When and How Can Endemic Steel Overproduction Be Reined In?

The best way to eliminate excess global steel capacity, which is estimated at 100 million metric tonnes per year (perhaps more) is to simply let the weak mills die, according to a number of top steel industry executives.

"Now is the time to face the music," said Kirby C. Adams, president of Australian flat rolled producer BHP Steel, who added "financial discipline should not be sacrificed--it should be allowed to work." Adams noted that the industry's lack of discipline reflects the same "recklessness" in capital spending that got it into the predicament in the first place. It has little choice but to let its inefficient producers exit, he argued, because on one side its own customers are "consolidating big time" while its raw materials suppliers are doing the same, and faces the danger of ending up as a "toll converter."

Adams' view was echoed by Jamshed J. Irani, managing director of The Tata Iron and Steel Co. Ltd. of India, who said the most rational way to lower capacity is "to allow the inefficient to die out." Irani claimed that more than 10 years ago Tata's outlook was similar to today's troubled U.S. mills, but he decided against seeking government aid, and instead invested about $2 billion during the following decade to the point where today it claims to be among the world's lowest cost producers. Still, even though Tata can produce hot coils for $160 per tonne or less--at least $100 per tonne under U.S. mills--the Indian producer is prepared to stop its shipments to the United States under threat of Section 201 sanctions.

Keiichiro Shimakawa, president and chief executive officer of Nippon Steel USA, New York, said oversupply has been "aggravated" by surplus output and inefficient facilities that can't survive without subsidies or high import tariffs. "It is imperative that these uneconomical facilities be shut down to restore a healthy supply and demand balance in the world steel industry," Shimakawa said.

One executive advocating outside support for rationalization was Francis Mer, chairman and chief executive officer of Usinor of France, who said governments should help "ease the social costs" of plant closures. "Capitalism cannot solve this problem," Mer said.

Meanwhile, some steel company officials insist they're well along the road to rationalization. In Russia, which produced 47 million tonnes of rolled products last year but has been exporting 23 to 27 million tonnes annually, the outlook for improvement in domestic consumption above the level of last year's 25 million tonnes is "optimistic," according to Alexey A. Mordashov, general director and chairman of the executive board of Joint Stock Co. Severstal. Mordashov said Severstal's forecast for growth in the Russian economy shows that internal demand may grow to 30 to 35 million tonnes per year, resulting in a reduction of exports to "reasonable volumes." Severstal also projects that Russia's rolling capacity will be reduced by some 10 to 15 million tonnes per year, particularly in long products.

In China, the gap between steel consumption and production is a steady 10 to 20 million tonnes per year and skewed towards relatively high-value added products, said Liu Jinghai, deputy director and senior economist at the Metallurgical Economic Research and Development Center in Beijing. He suggested that the industry's problems are related to scale rather than total output, since there are over 294 producers but only five that turn out over 5 million tonnes per year. "So the number of steel producers should be cut down," he said, adding that over 100 smaller mills with annual capacity totaling 4 million tonnes per year are due to be shut down before 2002. Moreover, consolidation will result in China's 10 largest producers accounting for 80 percent of national output in 2005 compared with 50 percent last year.

Panel III: Is Steel e-Commerce Relevant and Necessary?

With talk about steel industry consolidation a recurring conference theme, those involved in the e-commerce part of the industry are also discussing consolidation maneuvers.

Now that the glow of the dot-com craze has dimmed considerably, the problem facing these companies is that as the e-commerce dating game continues, they do not find each other particularly attractive. Most e-commerce participants agree that with websites closing rapidly, the idea of consolidating among those who are left represents some intriguing options. Given the difficult financial state of the steel industry and the lack of ability to attract new investment capital, however, the sites are not all that enamored of each other at this point in time.

"There are too many exchanges," said Lou Schorsch, president and chief executive officer of GSX, the Global Steel Exchange. "I think over time, there are ways for us to work together."

Michael Levin, chairman, CEO and founder of e-Steel, said his site, which like others in the business has moved into more software development, is interested in acquisitions, but there are many hurdles along the way. "It's difficult to convince yourself why you would want to buy a burn rate," Levin said. "So many of these sites are negative cash flow. You have to think hard about buying."

Ferit Ferhangil, CEO of FerrousExchange, echoed that sentiment. "We are all working through a tough steel market and a difficult financial market from the technical side of the business," he said. "Those are just some of the issues. Right now, these companies do not want to take on more liabilities. One of the problems is the greed factor. People would rather let something die than take a cheaper price for it."

David Centner, chairman and chief strategy officer with MaterialNet, has seen his exchange move more toward software development and away from steel trade in recent months. He, too, believes consolidation of sites is necessary, but difficult to achieve. "I think we will see a further reduction in the number of players," Centner said. "But there is not a lot of value in the companies. I think there will be some surprises in the future."

Scott Blatnica, senior market maker, diversified manufacturing, with FreeMarkets Inc., sees the answer developing in a different manner. "Attrition is a natural part of the game," he said. "But I do not envision a one-stop shop. I think what will happen is that each of these companies will fill a niche. The steel companies then will match with that."

Wednesday, June 20, 2001

Panel IV: Minimills Reinvent Themselves

As U.S. mini-mills work to reinvent themselves to cope with changes in the steel industry, their likely path is away from consolidation and more towards greater rationalization. "For those who survive, the industry as we know it is gone," said panelist Donald F. Barnett, president of Economic Associates Inc., Great Falls, Va., a longtime steel analyst and consultant. "The mini-mills represent a blueprint for the future. The future is here."

Consolidation of the minimill sector, which most believe is necessary, is nonetheless likely a long way off. "We have not seen a lot of consolidation," said Howard Meyers, chairman and chief executive officer of Bayou Steel Corp., LaPlace, La. His company did some of that on the nonferrous side, creating a multinational. "But in steel," Meyers said, "we have not seen a lot of that. I think what we are talking about, instead of consolidation, is rationalization. We have not seen that in the mini-mills, either. There has been some fallout by those who could not keep up with changes in the business. So I think what we will see in the future is acquisition rather than consolidation." Meyers pointed to the recent closings of Trico Steel, Decatur, Ala., Northwestern Steel and Wire Co., Sterling, Ill., and the Kansas City, Mo., plant of GS Industries, Inc., Charlotte, N.C., as likely acquisition targets.

John Correnti, chairman and chief executive officer of Birmingham Steel Co., Birmingham, Ala., said his company is continuing to get its financial house in order via deep cost cutting and the closing of outdated, non-productive facilities. He said when the company emerges from its current financial situation, it will be a player in the acquisition game. "We will do what is best for our shareholders," Correnti said. "If that means acquiring, merging, selling, we will do that. This company has solid assets. We should be an attractive suitor."

The growth strategy of CMC Metals Group, Dallas, is more internal, according to James Frisch, its vice president of Commercial Planning. Frisch said CMC, which started as a Texas company, is attempting to grow into a nationwide steel player. That growth is being achieved, he said, by expanding into new products, services and geographic areas and extending its product lines in the regional areas it serves. "We are looking to grow through niche applications, such as with stainless-clad applications," he said. "We don't see, right now, a lot of technological breakthroughs on the mini-mill side. That makes managing costs extremely important."

Panel V: Why Have Steel Middlemen Gone from Most-Threatened to Best-Positioned?

Having survived the immediate threat of e-commerce, steel service centers and traders now are turning their attention toward a relatively new competitor: Enron Corp. of Houston, and its steel futures and steel distribution plans.

 

"Enron is the new player in the marketplace," said Wilfred von Bulow, president and chief executive officer of Ferrostaal Inc. "We have seen (new players) come and go in the past. Now we have to face another new player in Enron."

 

"We've seen that e-commerce was not the panacea many analysts claimed it would be," said Bud Siegel, president and chief executive officer of Russel Metals Inc., Mississauga, Ontario. "Last year at this time, we were talking about how e-commerce was going to put us out of business. Now e-commerce is a topic unto itself."

 

This year, however, Enron dominated the discussion because of the perceived threat it poses to steel middlemen. In addition to establishing a futures market for steel, Enron plans to set up four regional depots from which it will sell steel products, putting it in direct competition with service centers. At the same time, Enron plans to offer service centers risk-management capabilities.

 

"Enron is successful in most of the businesses it is in," said Michael Siegal, chairman and chief executive officer of Olympic Steel Inc., a Cleveland-based service center. "But they are not in the delivery business. Enron is just another entity. But I will add one thing," Siegal quipped, "Enron believes a contract is a contract, and that will be a huge change in the steel business."

 

Russel's Bud Siegel(no relation to Michael Siegal) said he had never been able to get an answer from Enron on what its exact plans were. "Every time I ask Enron what they are doing, I get a different answer," he said. "This is the greatest thing since Swiss cheese. They are going to put in depots to compete with service centers, and then go and offer service centers risk management. They want to be everything to everybody, and in this business you can't do that." Siegel does not believe Enron will pose a serious threat to service centers. "My money is on (the fact) that they are gone," he said.

 

Still, Fernand Lamesch, chief executive officer of TradeArbed Inc., Luxembourg, said it would be unwise for service centers and traders to ignore Enron's presence in the industry, even if they felt that such a presence would be limited.

 

"The Enron concept is too new," he said. "We don't know enough about it yet. But I think we would be ill-advised to dismiss Enron. They have been a successful company."

 

Luncheon Speaker: Martin Wolf, associate editor and chief economics commentator, Financial Times

 

There are formidable economic risks in the short term according to Martin Wolf, chief economics commentator for the Financial Times of London. He told the luncheon audience, however, that there is a long-term opportunity for steady growth in the world economy-on the order of 4% per year. Be that as it may, there may be a global slowdown, or worse, a deep global recession, before sustained growth revs up.

 

Longer term, "Japan will continue to stagnate," Wolf said, "but the Euro-zone should manage 2-2.5% (growth), and the United States about 3-3.5%." Additionally, he expects dynamic growth in Asia, where investment, construction activity and consumer demand for steel will grow the fastest.

 

Before that happens, nonetheless, the short- and medium-term may be rough. The most recent boom in the United States resulted in a doubling of productivity growth (from 1.5 to 3.0% per year), "soaring asset prices, rising investment and rising consumption."

 

The current question posed by Wolf is: "How far will it reverse?"

 

There are parallels to Japan of the late 1980s/early 1990s, he cautioned, concerning the US economy. One optimistic scenario has the easing of US monetary and fiscal policy working to sustain consumption and slow the fall in investment, with the rest of the world picking up demand growth. The pessimistic scenario maintains that the downward forces are irreversible, with the correction of equity overvaluation leading to disappointment and dashing hopes. The negative outlook will be made worse by high oil prices, falling productivity growth, and rising labor costs.

 

Wolf pointed out that the Federal Reserve thinks there is a 3-to-1 (maybe greater) chance that the optimistic scenario will play out. He suspects it's more like 50:50. The reasons for his concern include: weakness in demand everywhere else; the vulnerability of the dollar; uncertainty about productivity; rising unemployment and dwindling consumer confidence.

 

Over the longer haul, Wolf acknowledged how growth will be driven by productivity improvements and innovation, global integration, and a desire to "catch up." All of these elements are "in quite good shape," he said. Wolf added that "US productivity growth may not be 3%, but it should be 2% per year."

 

Meanwhile, he said global integration is likely to proceed unchecked, barring a catastrophic recession in the short-mid range. Wolf noted that China and India are playing catch-up. "They have 38% of the world's population," he said, adding, "India may do for software what China is doing for capital- and labor-intensive industries." The background of monetary stability is good, Wolf commented, and the only big worries clouding the longer term are serious financial instability and protectionism.

 

Panel VI: Turmoil in Scrap May Hurt Steel Mills

Three years of low scrap prices have been a boost to mini-mills but not to their suppliers, an international panel of scrap executives generally agreed, with some of them holding out the hope that the market had bottomed and would recover in late 2001 or by the first quarter of 2002.

 

Low-priced Russian scrap and scrap products coming into the U.S. market, coupled with the upheaval in the U.S. steel industry were the major concerns among the U.S. scrap executives. They complained their real and nominal scrap prices were lower today than 20 years ago.

 

"Turmoil in steel has killed the scrap industry," said Albert Cozzi, chairman and chief executive officer of Metal Management Inc., Chicago. "The last three years were disastrous. Many scrap processors filed for bankruptcy because they couldn't handle the debt load." Cozzi's own company filed for bankruptcy protection but was on track, according to Cozzi, to emerge from it shortly.

 

Donald J. Forlani, executive vice president-commercial, for PSC Metals Inc., which sells approximately 5 million tons of scrap annually, said the business is currently running five to 10 percent below normal. PSC Metals, he said, has instituted cost reductions by reducing inventory and delaying capital investment projects, and looking for ways to limit credit exposure and risk. "We believe the market has bottomed out in scrap," he said, referring to current prices. "We think it will improve in the second half. The market will eventually recover; it always does."

 

Addressing how recent mill closures have affected the obsolete scrap market, Cozzi and Forlani agreed it resulted in some product dislocation in the Midwest, but the material would eventually land somewhere.

 

Challenged about low-priced Russian scrap being sold in the United States, Serafim Z. Afonin, president of the Russian Metal Products Exporters Union, said there would be no change in his country's home price of steel scrap. At its best, Russia can export 8 million tonnes annually and he gave no indication this rate would subside any time soon, given the large volume of scrap available through infrastructure dismantling.

 

Another panelist, Ralph L. Pinkert, president of business-to-business portal ScrapSite LLC, which closed down when its companion business MetalSite Inc. went out of business in early June, said the industry was slow to adapt to the technology for buying and selling scrap on-line. He predicted that ScrapSite would return in a few months and that one or two e-commerce sites devoted to scrap would survive to service the market.

 

 

 

 

Panel VII: Breakthrough Technologies Changing the Face of Steel

 

Suppliers, mill builders and technology providers to the global steel industry are suffering along with primary steelmakers. Panelists such as Gianpietro Benedetti, president and chief executive officer of Danieli, Dieter Rosenthal of SMS Demag, and Horst Wiesinger, VA Technologie, agreed that their business is depressed. They concurred, however, that there are pockets of prosperity where mills are spending - most notably in China.

 

All acknowledged that in order to make money today, the steel industry needs to make a better product at a lower cost. That simple, perhaps easier-said-than-done, two-pronged approach was at the core of a presentation from Richard L. Wechsler, president of Castrip LLC. "We need to produce a product which a customer will willingly pay more for, and we need to do that at costs that are significantly less than they are today," he said.

 

Citing an example from his own company, Wechsler described the newly developed Castrip thin strip steel casting process, which is designed to cast molten steel into strip steel no thicker than 2 millimeters and ideally as thin as 0.7 mm, about the thickness of 24-gauge steel sheet.

 

Wechsler said the mission for Charlotte, N.C.,-based Castrip was to take the direct strip casting technology developed by BHP Steel Ltd. and operating at a pilot plant at Port Kembla, Australia, and make it available around the world. Castrip is owned by BHP Steel (47.5 percent), Nucor Corp. (47.5 percent), and Ishikawa-Harima Heavy Industries of Japan (5 percent).

 

In addition to owning a portion of the equipment maker, Nucor also is installing the first commercial-scale Castrip operation at its Crawfordsville, Ind., plant to produce both carbon and stainless steel. The Crawfordsville plant, built in the late 1980s, houses the world's first thin slab caster, a technology that revolutionized steel sheet production.

 

According to Wechsler, direct strip casting will result in a product that is superior to hot-rolled band but not cold-rolled sheet and strip. Still, Wechsler said, the direct cast steel would be less costly to produce than hot-rolled steel and have the quality to meet applications that hot-rolled and even some cold-rolled sheet products now fill.

 

Wechsler said that operating costs on an annual per-ton basis would be slightly more cost effective than the best practice in slab casting, while the investment cost would be lower than the best thin slab casting operation. He cautioned that Castrip did not expect to achieve that lower investment cost with its first commercial unit, but he predicted that the industry would see the cost of building the steelmaking facilities fall to less than $100 a ton.

Another panelist, Robert J. Mann, chief executive officer of StarTec Iron LLC, an Edina, Mich.,-based company updated the audience on the Tecnored ironmaking process. In late 2000, North Star Steel and Tecnologos Desenvolvimento Tecnologico of Rio de Janeiro, its partner in the 50-50 joint venture, formed StarTec Iron LLC to promote, utilize and license Tecnored technology.

The technology involves a patented compact shaft furnace that reduces and smelts self-reducing pellets containing iron ore fines or waste oxide fines using low-cost solid fuel sources of carbon. The StarTec venture, according to Mann, is making good progress with the first pilot plant, located in Brazil. The first stage of the plant is designed to produce 150,000 tons of either hot metal or pig iron annually. Start-up is expected in late 2001.