“Plate is a red hot item, and I don’t see anything in the market dynamics that would change that,” says John Ferriola, chief operating officer for steelmaking operations at Nucor Corp., Charlotte, N.C. Demand should remain strong both domestically and internationally, he adds, echoing other suppliers.

Tom Endres, vice president of procurement for Ryerson Inc. in Chicago, says the market is so tight, most carbon plate mills have customers on some sort of controlled order entry or allocation. “And I don’t see the market easing any time soon.”

“Of all steel products, plate is probably the strongest market,” says Bill Jones, president of O’Neal Steel Inc. in Birmingham, Ala. With demand sky high and domestic supply limited by a lack of imports and increased exports, “pricing is in a territory that we haven’t seen before. It is unprecedented.”

Plate demand has been strong for about five years, with a couple brief periods of slowness, such as the second half of 2007 when service centers adjusted their inventories, says Dan Miksta, vice president and general sales manager for SSAB North American Division (formerly IPSCO Inc.).

Analyst Christopher Plummer, managing director of Metal Strategies Inc. in West Chester, Pa., forecasts that total U.S. plate shipments will reach 12.56 million tons this year, up 9 percent from 11.52 million tons in 2007, with the largest increase (11.5 percent) coming from cut or plate mill plate. While market growth may moderate in 2009, he expects shipments to remain higher than in 2007, which was a very good year for plate sales.

Ron Whitley, president and chief operating officer of Ranger Steel Supply LP in Houston, noticed a slight slackening of demand in July. He is uncertain whether to blame it on a typical summer slowdown or customers’ reaction to the high steel prices.

With recently announced price increases for August, domestic plate prices will approach $1,500 a ton, nearly double the $820 level at the beginning of the year, says Scott Montross, vice president and general manager of Evraz Inc. NA (formerly Oregon Steel Mills) in Portland, Ore.

“Prices are being pushed not only by supply and demand, but also the rising cost of steelmaking inputs,” says Mark Breckheimer, executive vice president of Namasco Corp. and president and chief operating officer of its Primary Steel subsidiary in Middletown, Conn.

Costs for scrap, iron ore, coke, freight and energy are likely to continue escalating, says Ferriola, as the economies of developing countries such as China, India and Russia, as well as countries in South America and southern Africa, compete for resources.

Demand is outpacing supply for most plate products, particularly heat-treated plate, which is pressured by strong orders from the energy and military sectors. Heat-treated plate is also used in production of some heavy industrial machinery, such as mining equipment, which is in high demand due to the record prices in the commodity markets.

Plummer says that the run-up in heat-treated plate demand has taken up a lot of the spare heat-treating capacity in the market “where there hadn’t been that much spare capacity to start with.” In response, plate suppliers are moving to increase their heat-treating capabilities. SSAB plans to build a 200,000- to 300,000-ton heat-treating line for quenched and tempered plate at its Montpelier, Iowa, or Mobile, Ala., mill. Nucor just announced plans to install a heat-treating facility with 120,000 tons of annual capacity at its plate mill in Hertford County, N.C. Other companies have also discussed adding heat-treating equipment, “but any new heat-treating capacity is still a few years away,” says Endres at Ryerson. 

While heat-treated plate accounts for only about 500,000 tons of the 12.1-million-ton steel plate market, it is an important market segment, Plummer says. The value-added nature of the product and the growth markets in which it is used make it a profitable one for suppliers.

Demand for plate overall has been strong in the United States, he continues. Energy applications—notably pipe for oil and gas exploration and wind towers—are among the strongest growth markets for steel. Adding in other energy-related uses, such as new power and ethanol plants, oil tankers, drill rigs and associated construction equipment, the energy sector is the single largest consumer of plate, says Chuck Mattia, SSAB NAD’s vice president of new business development. Should politicians clear the way for more offshore drilling and construction of nuclear power plants, demand for plate in the energy sector could jump significantly in the years to come, he adds.

“We’re very bullish about what is going to happen in respect to energy,” says Daniel R. DiMicco, chairman, president and chief executive officer of Nucor. He forecasts “a huge [energy] infrastructure boom” in North America and other parts of the world. “The time is right for the leadership in Washington to take bold measures to take advantage of all of the energy opportunities available to us—drilling on the outer continental shelf, drilling in the ANWR area, mining the tar sands and building more power plants of all types—so that we can transition to a carbon-free environment 20 to 30 years down the road.”

Most leaders already agree on the importance of alternative energy sources, such as wind power. Construction of wind towers currently consumes 400,000 to 600,000 tons of plate per year, at 150 to 160 tons of plate per tower, estimates Evraz’s Montross.

Growth of wind power in the past five or six years has been incredible, says Mattia. Even more amazing is a forecast for 18 percent annual growth, which will consume about seven million tons of plate by 2020—close to the current combined annual capacity of all North America’s plate mills.

Oil tycoon T. Boone Pickens made headlines recently when he announced his plan to build the largest wind farm in the world in Pampa, Texas—big enough to power 1.3 million homes. In mid-July, officials from Delaware utility Delmarva Power announced a contract with Bluewater Wind to build what it claims is the first offshore wind field, comprised of 150 wind turbines, about a dozen miles off Rehoboth Beach, Del.

In general, however, alternative energy’s impact is years, if not decades, away, says analyst John Anton, director of the steel service at Global Insight in Washington, D.C. “For at least the next 10 years it will continue to be an oil and natural gas economy,” he maintains.

Political fortunes will also dictate future demand for plate in military applications, such as armor plate for the new mine resistant ambush protected (MRAP) vehicle used in the conflicts in Afghanistan and Iraq. Currently, government orders for armor plate get priority at mills such as Evraz that specialize in such high-strength alloys.

Closer to home, nonresidential construction, including public works projects, remain “fairly strong,” Plummer says, though there has been some moderation. “There has been a bit more urgency for infrastructure spending after the Minneapolis bridge collapse. No additional money has been budgeted yet, but it is being monitored more closely,” he says.

Ferriola is confident the government will follow through with increased funding soon. “U.S. infrastructure requirements will be extremely high in the next several years. It will have to be a major focus of the federal government.”

While U.S. construction will likely slow starting in the second half of this year, infrastructure building will remain quite strong globally, predicts Charles Bradford, metals analyst and principal of Bradford Research/Soleil Inc. in New York.

“China and India are going like gangbusters, and the Russian economy is also growing nicely. As these countries grow, demand for all steel, including plate, will grow,” agrees Montross.

This is good news for exporters of plate. The weak U.S. dollar and plate prices that are higher in overseas markets than in the United States are boosting export shipments to new heights, while inhibiting imports.

“We have never seen plate export levels so close to import levels,” says Mattia. Last year there was less than a 10 percent spread between cut plate imports and exports, he notes, and this year cut plate exports are actually expected to exceed imports, which has never happened before. (The same does not hold true for coil plate, however.)

Last year, there were many months when the United States was a net exporter of cut plate, “but that is true almost every month now and the gap is widening,” says Anton.

Exports would probably be even higher if plate availability wasn’t so tight, Ferriola adds. “While there’s more opportunity to export plate, Nucor isn’t exporting a lot. It isn’t that we couldn’t if we chose to, but we want to be sure we take care of our domestic customers first, and that doesn’t leave a lot of plate for our international customers.” Nucor currently exports 8 to 10 percent of its total steel output, about the same level as last year.

Ranger Steel’s Whitley notes that the lack of imports is contributing to the tight supply situation. “With the U.S. dollar losing ground to the euro and certain other currencies, it has made imports extremely unattractive, causing them to decline. There continue to be some import offers, but at world prices. There are no cheap imports around.”

While some steel imports have crept up in recent months, plate imports have not. “Most of the increases in steel imports have been for semi-finished and hot-rolled steel, not plate,” says O’Neal’s Jones. “People are buying imports because they have to, not because they want to,” says Anton. “That is why the domestic plate mills are doing so well,” adds Bradford. “There is less supply with imports down and exports up. It isn’t that demand is doing exceptionally well.”

Experts do report strong demand for plate in certain transportation sectors, especially shipbuilding. “The backlogs of both ocean-going vessels and barges are measured in years, and the railcar market is also very strong,” says Ferriola.

While railcar deliveries as a whole are down from their 2006 peaks, production of certain types of railcars is very strong, including covered hoppers, tank cars and coal cars, says Peter Toja, president of Economic Planning Associates, Smithtown, N.Y.

Railcar deliveries aren’t expected to strengthen again until late 2009 or early 2010, Endres says. “But the high price of oil (therefore diesel fuel for trucks), has made moving products by rail very attractive,” he adds, which could accelerate railcar production.

Even with plate prices continuing to rise, Ferriola hasn’t seen any evidence of customers delaying or cancelling projects. “If that were the case, our order books wouldn’t be filling up so fast,” he says. Nucor, while not on controlled order entry, has been opening its plate order book only one month at a time.

Breckheimer maintains there has been some evidence of plate prices dampening demand. Some water storage tanks have been re-specified for concrete, several oil and natural gas projects have been cancelled or put on hold, and some capital equipment manufacturers are delaying steel purchases, waiting to see where prices go, he observes.

Plate distributors, as well as end-users, “have been very cautious [in their purchasing], careful that they do not get ahead of themselves,” says Montross. However, with plate so tight, “most service centers are buying what they can within the limits placed on them by the mills,” says Endres. The possibility of being caught with high priced inventories if prices decline is certainly a fear, “but with plate expected to remain strong probably into next year, it isn’t as much of a concern as with other products that are more volatile,” he adds.

Some mills reportedly are looking to add new plate capacity to catch up with demand, but that won’t ease the short-supply situation for years, say the experts. Nucor has commissioned a new temper mill at its Tuscaloosa, Ala., plate facility. Executives at Severstal declined to comment on reports the company may be adding a plate mill at its newly acquired Sparrows Point, Md., facility.

Most service centers have been able to pass along plate price increases to their customers, though it has been difficult because they rose so far so fast, Breckheimer says.

Prices for plate, along with most other steel products, should peak in the third quarter, followed by a correction in the fourth quarter or the first quarter of next year, Plummer predicts. “The question is whether they will flatten or collapse. Of all the steel mill products, I think plate prices will hold up the best.”

Global Insights forecasts the lowest plate prices are likely to go next year will be $800 to $900 a ton. “While off the current highs, that’s still very high,” Anton says.

Good-bye Wild West,
Hello to the Best

The U.S. carbon plate market, like most steel markets, has been undergoing much consolidation and globalization on both the mill and distributor levels.

“I think that industry consolidation was a brilliant idea,” says Ron Whitley, president and chief operating officer of Ranger Steel Supply LP in Houston. “Throughout the 1990s, it was the Wild West, but now that has changed. All the weak mills have disappeared.”

Today, four major mills dominate the U.S. plate market: ArcelorMittal, Nucor Corp., SSAB’s North American Division and Evraz Inc. NA. Except for Nucor, all are foreign-owned. The top three alone account for 75 to 80 percent of U.S. platemaking capacity.

While he admits this has resulted in a more stable market, Tom Endres, vice president for procurement at Ryerson Inc. in Chicago, observes that it gives customers less choice of suppliers.

Whitley also would like to see more domestic ownership, though he says “the foreign companies currently owning North American assets seem to be responsible landlords.” (They include Sweden’s SSAB, Russia’s Evraz and India’s ArcelorMittal and Essar.)

Will there be further consolidation and globalization? Bill Jones, president of O’Neal Steel Inc., Birmingham, Ala., feels it’s very likely. “While the market is already greatly consolidated in the United States, there are still significant opportunities worldwide,” he says.

Christopher Plummer, managing director of Metal Strategies Inc. in West Chester, Pa., says it is possible that one of the consolidators could acquire another, much as occurred with the mega-merger of Mittal Steel and Arcelor SA.

Consolidation among steel plate distributors is also under way, led mainly by Reliance Steel & Aluminum Co., Los Angeles, which just completed its acquisition of the PNA Group from Platinum Equity LLC, the private equity firm that also owns Ryerson. (PNA Group includes Infra-Metals Co., Delta Steel LP, Metal Supply Co., Precision Flamecutting & Steel LP and Sugar Steel Corp.) Likewise, Namasco Corp., Roswell, Ga., acquired Primary Steel Inc., Middletown, Conn., and ScanSteel Service Center Inc., Jeffersonville, Ind., last year.

Given that the steel service center industry, including those who sell plate, is still fairly fragmented, most experts expect further consolidation.