Final Thoughts

SDI, Nucor and Cleveland-Cliffs are all bullish on the need for more galvanized production and each mill has projects in process: SDI Sinton, Texas, new mill; Nucor Steel Arkansas, new Gen 3; Nucor Gallatin, Ky., hot band galvanizing line, which produced at 116 percent of its design capacity during Q1; and Cleveland-Cliffs announced they are restarting their Columbus galvanizing line during the second quarter. On top of this, SDI recently announced their intention to build two new galvanizing lines and two coil coating lines, one each in the North and another in the South.

When Cliffs’ CEO Lourenco Goncalves was asked by Lucas Pipes of B. Riley Securities about the relationship between Cliffs and their automotive customers, he said, “Lucas, the relationship is great because it’s a relationship built on co-dependence. They depend on us and we depend on them. The good news is that since we acquired AM USA, our percentage of automotive business in the overall business dropped dramatically, so even though automotive is still important, it’s not a make or break like it was for AK Steel when AK Steel was a stand-alone company.

“Another thing is that the only real competition for the more sophisticated grades of steel that AK Steel makes was AM USA. Now Cliffs owns both. So, the automotive clients, they have already realized that. And they are no longer negotiating with a beggar. They negotiate with the supplier that treats them with a lot of respect and demands respect in return, so we are doing great.

“We haven’t had to shut down any clients yet in contract negotiations, but every time they think about playing hardball, they should know that at this side of the table there is someone that loves to play hardball. So, so far so good.”

I also found the comments made by Lourenco about decarbonization quite interesting. 

“Yes, it’s a lot to pack in an answer for you, but I will try to summarize the best I can. First of all, I believe the fact that President Biden is retaking the U.S. leadership in this environmental conversation is a very welcome move and it’s overdue. I have heard way too much from countries and companies that don’t have anything to say; the United Stated can say a lot. We have the most stringent and the most serious laws and regulations.

“In order to operate in the United States, you need to comply with them day in and day out. That’s the stock. The other thing that I love about what President Biden is doing is that he established a deadline for the reduction of 50% [in emissions] by 2030, and 2030 is around the corner. I hate when I see companies and countries that say they will be carbon-neutral by 2050, or in the case of China 2060. There is only one certainty about 2060–most of us on this call will be dead…

“But 2030 is around the corner, so it’s good that Biden is talking about 2030. And he is putting a target of 50% reduction from 2025, and that’s a good point to start. If you look at our environmental commitments, we are talking about a 30% reduction in 2030, taking as a base case 2017…

“Going forward in our business, the data will start to be realistic and we are going to start to see things the way they are. China is responsible for 64% of greenhouse gas emissions from the steel business, the United States is responsible for 2%. Here in the United States, we have excellent performance from our EAFs at Cleveland-Cliffs and also from blast furnaces that are all filled with pellets…

“For example, the usage of imported pig iron because imported pig iron goes against Scope 3 and everything that’s been reported in Scope 1 and Scope 2. So we are going long story short, with the involvement of President Biden and President Xi, things will start to be more in the real side of the world in terms of being discussed between academics and funded to people that are starting to sell consulting services, reality will sink in and will prevail in Cleveland-Cliffs is reality.”

Later in the call with analysts Goncalves said, “Large capex investments are motivated by real need, not by availability of capex. So, keep in mind, when I started building the HBI brand at the time with a budget of $700 million to produce 1.6 million metric tons of HBI, there was a massive investment for legacy Cleveland-Cliffs and we made it anyway. Because that was the right thing to do. If I had not done that, today I would be announcing an HBI plant and people would be telling me congratulations, Lourenco. So, you are thinking ahead, you are thinking about doing an HBI plant and HBI will be something really good for the environment.

“Guess what? Remember that plant that you said was a widow-maker that nobody could finish on time and finish on budget. We finished on time, we finished on budget, we increased the size…and now we have it in our towers and we are decarbonizing.

“In Europe where you live, people are talking a lot about decarbonizing. They’re talking about hydrogen; the technology is not there. They’re talking about breakthrough technologies that not even the universe knows where they are going. The exception is probably ArcelorMittal; they really do know what they’re talking about. Everybody else is fighting against bankruptcy, dealing with lenders at Goldman Sachs, dealing with banks in Switzerland… It’s a frickin mess in Europe, as far as environmental. The person running the show in environmental in Europe is a girl that’s 18 years old. Here it’s a 63-year-old guy that has been doing this for 41 years. If you guys start paying more attention, you’d be better off. We also need to know about decarbonization.”

SMU Note: Lourenco Goncalves of Cleveland-Cliffs, Mark Millett of SDI and Leon Topalian of Nucor will all be featured speakers at this year’s SMU Steel Summit Conference.

Decarbonization, Scope 1, Scope 2, and Scope 3 are going to be the new buzzwords in the steel and manufacturing industries as we move into the future. The U.S. steel mills are well positioned and continue to make strides for a cleaner industry. We will be discussing this topic with Mr. Goncalves and other mill CEOs during the 2021 SMU Steel Summit Conference in Atlanta on Aug. 23-25.

This will be the third year for the SMU Youth Leadership Award sponsored by the Steel Manufacturers Association. This award is for anyone 35 years or younger who has established themselves as a visionary, leader, motivator or exceptional employee within the industry. It is for those who work in the manufacturing, distribution, steel mills, fabrication, trading company or other sector associated with the steel industry.

Before you nominate someone (or yourself) for the 2021 SMU Youth Leadership Award, I recommend that you read about the award on our website, and then read the nomination for Meredith Meade of Tempel Steel who won the award in 2019. This will give a better feel for how to prepare a nomination in order to get the most attention from the judges.

The 2020 winner was Stephen Sterling of Quality Metals Stamping.  You can learn more about Stephen by clicking here.

The winner of the 2021 SMU Youth Leadership Award will receive:

• A mentorship day with a leading industry CEO
• Recognition in the form of a trophy or plaque, which can be proudly displayed on your desk or office area.
• Invitation to attend one of the SMU Steel 101 or SMU Steel 201 workshops (no registration fee).
• An invitation to attend the 2022 SMU Steel Summit Conference with registration fees waived.
• Recognition in the Steel Market Update newsletter and the SMU/CRU websites.
• A video of the award presentation.

You can learn more about the SMU Youth Leadership Award by clicking here. Please take a moment to nominate a worthy candidate (or two) from your company for this year’s award.

As always, your business is truly appreciated by all of us here at Steel Market Update.

John Packard, President & CEO, John@SteelMarketUpdate.com