Stelco's Alan Kestenbaum Gets Candid with SMU

Though we’ve already seen prices skyrocket and dip back down, Kestenbaum clued us in on where to watch to get a better grasp on where prices are headed. “Demand is decent and is holding, but there is a lot of supply. When considering the impact of cost, the most important thing to look at is scrap; scrap is a great predictor. EAF producers drive price, they buy scrap and hold conversion prices,” he said.

As prices continue to drop and everyone wonders where the floor is, Kestenbaum is confident we will see increases soon. He noted the slowdown in industrial production and the imminent increase within the next 2-3 months. Nucor and Cleveland-Cliffs seem to have gotten a head start, but as Kestenbaum pointed out, those increases are symptomatic of their own costs.

On the same hand, he said European mills are struggling due to rising electricity costs, with some shutting their doors. With a worldwide supply shrink and a necessity for raw materials, costs are adding up quickly, including labor costs.

Labor Negotiations

The Canadian flat-rolled steelmaker recently renewed its collective bargaining agreements with its union employees and avoided a strike. Situations like this may be inevitable, but how they’re handled is what matters.

Kestenbaum expressed that under circumstances like that, it’s essential to keep everything out of the press. “They are members of the family. Things have radically changed. The biggest change is people are being directly impacted by inflation. You have to understand where the anger comes from,” he said.

“Workers have choices, especially for skills that are in short supply. They don’t have to work in a steel mill,” added Kestenbaum.

He also expressed the immense pride individuals in the steel industry have, and that he would not be surprised if there were some stoppages here and there due to negotiations.

Long-Term Plans

Like everyone in the industry right now, Stelco is looking to take advantage of immediate opportunities, but that doesn’t mean sacrificing strategy.

With Evraz being up for grabs, it could be an option for the Stelco brand. Kestenbaum, however, does not envision going in that direction. “No, it’s not a great fit. They’re a downstream producer, and it historically hasn’t been a great business. Unless I can add value and there are synergies, I can’t see going in that direction,” said Kestenbaum.

“It’s an EAF, that’s not the route we typically go, it doesn’t fit Stelco’s goals,” he added.

Whatever direction Stelco decides to go, it appears remaining true to self is integral to the company’s success.

By Becca Moczygemba, Becca@SteelMarketUpdate.com