AISTech 2022: Execs Say Infrastructure Spend Mean Bullish Times for Steel

Other panelists were John Brett, CEO of ArcelorMittal North America, David Burritt, president and CEO of US Steel, Mark Millett, co-founder, chair and CEO of Steel Dynamics, and Chuck Schmitt, president of SSAB Americas.

Recall that roughly six months ago President Biden signed into law the $1.2 trillion Infrastructure Investment and Jobs Act, a move that will modernize US roads and bridges, transit, broadband, as well as drinking water and wastewater infrastructure.

At the time, the American Iron and Steel Institute (AISI) said demand for American steel could increase by as much as 5 million tons for every $1 billion of new investment. The Steel Manufacturers Association (SMA) agreed and emphasized that the bill would also support sustainable steelmaking, green energy and domestic procurement.

On the panel, Brett agreed, noting that better infrastructure will enable the market to move goods more effectively. The result is a more productive marketplace. “I think there’s a chance the secondary and tertiary benefits can be greater than the numbers we’re seeing,” he added. “Let’s get moving! We’ve been talking about this for years. We finally have it, and here we are still waiting.”

Though it’s difficult to analyze in detail and quantify the impact of such a bill on the US domestic industry, it suffices to say that there will be a noticeable increase in consumption and demand for steel.

“Our infrastructure is in a state of ill repair,” added Brett. “Right now, it’s all on paper, we’re waiting for the first dollars. We’re ready.”

Critical to that execution are the ‘Buy America’ rules with ‘melted and poured’ provisions that the Office of Management and Budget (OMB) issued in late April, the executives said.

“Melted and made in the US is very important. It’s critical that counites can be self-sufficient,” said Burritt, pointing to the supply crunch exacerbated by Russia’s invasion of Ukraine.

“You need partners around the world, but it’s most important that we can take care of where we live and work. It’s imperative,” he added.

When asked if such a measure is enforceable, Burritt said that if it’s not enforceable, it won’t work. “Just like with trade, if it’s not enforceable it won’t work.”

“Covid showed us that we cannot rely on ports that don’t work and railroads that are not efficient,” remarked Goncalves. “We have a reality that we need to unravel. It is our responsibility in this industry to influence (lawmakers) to understand that these things have consequences.”

When asked if the US government has learned the lesson during the pandemic? The answer was an emphatic ‘No!’, from the panel.

“We only learn lessons when things change,” griped Goncalves. “We’ve treated this pandemic like most Californians deal with wide fires… as soon as one is put out, they just move on and forget for eleven months.”

Goncalves said that steel executives need to remain committed to continuing to educate those in the political sphere to see the need for a fair and protected steel industry. “We’ve made progress, but we haven’t learned yet.”

Burritt agreed but noted that awareness is increasing, especially with a significant focus on Europe’s dependence on Russian oil. “There is greater awareness,” he said “We’re learning and changing. I’m bullish we will have fair-earned trade.”

Though no specific orders for steel have come through directly related to the infrastructure bill, mill execs are not concerned. They expect a ramp up over the next 12-18 months.

“There’s definitely going to be a ramp-up, but you do not have to travel far to see that there’s major construction going on,” said Schmitt. “It is not directly related to the bill, but we will see that come through.”

“They’ll get it figured out,” said Burritt. “There will be a crescendo… 2023-2024… Bullish, I tell you. I’m bullish on steel.”

Others noted that it’s not an imperative need for an immediate ramp-up, pointing to strong markets and significant backlogs.

“Despite the struggle with the chips, pent-up demand remains incredibly solid,” said Millett. “Nonresidential construction is very strong as well. When the infrastructure bill comes around in 8-12 months, it’s just going to extend the bullish market.”

Burritt pointed to recent remarks from Jerome Hayden, the chair of the Federal Reserve, of a “softish landing” regarding an impending recession period as the Fed raised interest rates.

“A recession is coming folks,” said Burritt pointing to the fact that an economic recession has happened 11 out of 14 times when the Fed has raised interest rates.

But he argued that a strong steel sector will aid in the “softish landing.”

“We’ve seen yield curves invert; we know it’s inevitable. But having this crescendo, this infrastructure bill could be just here at the right time,” he added.

By David Schollaert, David@SteelMarketUpdate.com