By Taras Berezowsky
While agreeing on the supply and import challenges facing the North American industry, on the demand side, chief executives of major producers U.S. Steel (NYSE:X), Evraz (OTC:EVRZF), and Severstal sounded hopeful across the board. They're optimistic about not only the sustainability of recent automotive and housing market demand increases, but also on oil and natural gas development as demand drivers.
"The renaissance of oil and gas is here to stay," said Mike Rehwinkel, CEO of Evraz, also mentioning increased railroad capacity since 2009 and the employment gap closing in residential housing. Rehwinkel is confident that non-residential construction will follow soon. "Forget the instability created by [U.S.] policy or lack of policy," said Mario Longhi, COO of U.S. Steel. "Businesses are exhibiting tremendous resilience in this country."
Sergei Kuznetsov, Severstal's CEO -- being Russian -- took a more cautious and skeptical approach to his outlook. A lot of that has to do, of course, with Severstal's position as a foreign producer making steel within the U.S. market. Kuznetsov struck a starker tone of facing stiff competition from foreign imports than the other two executives -- "I went to Home Depot in Detroit and I found the cheapest pipe from India I've seen; we can't compete with that" -- but otherwise remained on their side on sustainability. "I'm an optimist, otherwise I wouldn't be here," he said, in a classic Slavic monotone.
On the direct reduced iron (DRI) front, which has been a hot topic throughout the conference -- Timna Tanners sung its praises and imminent arrival as the raw material savior, while Sachin Shivaram, the chief metallics purchaser for Severstal in North America, wondered when exactly the "DRI deluge" will hit -- the CEOs all seemed positive. "As a steel company, if you're not looking at DRI, you're falling behind, because gas is here to stay," Rehwinkel said.
Longhi played it down as the be-all, end-all, since optimal transportation logistics for DRI have not yet been solved. But on the natural gas front, Longhi, for one, crystallized its importance for the domestic steel sector moving forward. For producing tubular goods, "we're using massive amounts of gas -- 6 million BTUs per ton of steel produced -- so we're in a virtuous cycle" with the gas industry. As long as, you know, prices stay nice and low.