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US Steel: Solid as They Come

World demand is anything but slowing. The steel industry is in a perfect storm as in the 50's. Difference between now and then is that during that time, we were the only country that could produce steel needed for the rest of the world. Now, while USA is 5% of the world population and 25% of worlds energy consumption because we live well, developing countries have developed a middle class where they like the same things. Rice bowls are being replaced with Steak and potatoe dinners with 400 million people in India, 1.5 billion people in China. We have the food the world needs and the dollar is weak. Farmers are paying 100% more for fertilizer and seed but it is offset by a tripling in bean and corn prices as we feed the world.

There are 200 live orders on the books now for deep water offshore oil rigs and it takes 50,000 tons of steel to make 1. That is 10 million tons per yr and the USA only produces 100 million tons with all mills combined. That is only one segment. The supposed savior is the wind towers going up like crazy. Each one uses 100 tons of plate and the 665 that Boone Pickens just ordered will take 6 yrs to build and put in place that is 665,000 tons and will only generate enough juice to electrify the city of Ft Worth. Oil, Coal, Natural Gas, Minerals to make steel, alloys to produce ultra high strength steel will be needed for yrs to come as other countries need energy and equipment to try to have what we have and it will take them 70 yrs to do it. Gentlemen, it is going to last. Population and the taste of independence and freedom by others demand it. The only thing that will slow it down will be a 1930 depression in China and they are in the yr 1890 (USA analogy) They have cities to build, people to feed and our equipment and technology to do it. We did the same thing for Japan after the war and they are doing well. Only difference is they don't have a competing military that will grow along with their GDP. Just like ours.

What's the Mood Among Steel Suppliers?

When the dollar strengthens and when high strength expensive alloy demand weakens (offshore deep water oil rigs, armor plate for massive USA, European, Chinese new military products, all old and new equipment, that protect from crazy roadside bombs) will the profits slow. Keep in mind that 1.5 billion Chinese are buying their first car and producing 1/3 of all steel production. They are building 10 cities the size of Detroit from scratch needing raw material and equipment that only developed European, Japanese, US mfrs can produce in mass to get needed minerals mined out of the ground and CAT like equipment to build roads. India and China are going through an industrial revolution similar to what we went through in the 1890's and if I am correct, Andrew Carnegie did quite well.

I see the steel market remaining very profitable as US Mfg exports increase on heavy equip that offsets housing and auto slump in sales. Steel is sold in tons and a tractor and bulldozer has more tons than an Chevy Geo compact car. It is going to last for another 1-2 yrs minimum and the dollar will have to increase in value by 30% prior to the US steel producers having issues with import threats. Imports are 30 million tons per yr by NEED as US producers can only produce 100 million tons for a 130 million ton demand during normal times. Although GM, Ford are hurting, Deere, CAT, Terex, Manitowoc, Case are not by any standards. Export order books are typically 10% max and are now 30-40% of backlogs. The statebird in Dubai is the ''Crane''.