Cold-Rolled Steel Sheet, Strip, and Bars

SIC 3316

Industry report:

This industry covers establishments primarily engaged in cold-rolling steel sheets and strip from purchased hot-rolled sheets; cold-drawing steel bars and steel shapes from purchased hot-rolled steel bars; and producing other cold-finished steel. Establishments primarily engaged in the production of steel, including hot-rolled steel sheets that are then cold-rolled, are classified in SIC 3312: Blast Furnaces and Steel Mills.

Industry Snapshot

The demand for cold-finished steel comes primarily from the automotive, aerospace, construction, housing, and home appliance industries. The largest sector of the industry was cold finishing of steel shapes, followed by bars, steel, and cold-finished steel; strip and cold-rolled steel; and cold-rolled strip or wire. According to industry statistics from Dun & Bradstreet, there were an estimated 196 cold finishing of steel shapes producers in 2010 that together reported $2.3 billion in annual sales. States with the most facilities in this industry were Ohio, California, Michigan, Illinois, and Pennsylvania. Oregon, however, was the number one state in terms of revenues in the industry in 2010.

Organization and Structure

Cold rolling is the process of rolling steel without first reheating it. This method produces a smooth steel surface that reduces thickness and enhances machinability. Cold rolling gives steel the ability to be stretched and shaped without cracking and provides it with a bright finish. The three main product classes within the industry are steel sheet, steel strip, and steel bars.

Steel sheet and strip are both flat products that are generally less than one-quarter inch thick. Sheet is the wider of the two by 12 inches or more and is produced to less exact thickness than the strip. Steelmakers produce most sheet and strip in the form of large coils that the user can cut into pieces of any desired length. Much of the sheet and strip manufactured is used in automobile bodies, but they are also used in thousands of other products.

Steel companies make bars in many sizes and various shapes, including squares, circles, ovals, hexagons, and rectangles. Products made from steel bars include many precision-engineered components that power automobiles, trucks, tractors, hand tools, washing machines, and lawn mowers.

Background and Development

The production of cold-finished steel became industrialized early in the twentieth century, prompted by the mass marketing of automobiles, household appliances, and industrial machinery. New and more efficient steel production methods rapidly followed.

During World War II, the U.S. steel industry boomed while other steel manufacturing facilities in other countries sustained considerable damage. U.S. firms dominated global steel markets during the post-war years, and by 1960, U.S. shipments of cold-finished steel shapes reached 17 million tons, rising to 20 million tons by the middle of the decade. During this time, however, Japan and several European countries focused on rebuilding their steel industries, using the most modern facilities and equipment available, while U.S. steelmakers continued to use older, less efficient equipment. Consequently, U.S shipments fell below 17 million tons in 1970.

Worldwide inflation and high interest rates in the early 1970s curtailed foreign steel production, particularly in developing nations, allowing U.S. shipments to realize significant gains. In 1973, U.S. shipments stood at 24.09 million tons, the highest level reported by the industry in over two decades. That year, steel sheet and bar shipments peaked at 20.38 and 2.25 million tons each. Economic recession in the United States, however, eventually pushed shipments back down to 20.76 million tons in 1979.

The cold-finished steel industry faced intense foreign competition during the 1980s. Due to the high value of the dollar, foreign steel became significantly less expensive than U.S. steel. Furthermore, having rebuilt and improved their facilities, foreign producers marketed a superior product, and the quality gap widened significantly during the decade. Consequently, U.S. companies operating with outdated equipment and production methods were often priced out of the market. From 1979 to 1980, U.S. shipments of cold-finished steel dropped 24 percent. The industry recovered slightly in 1981, with shipments rising 8 percent, but the following year shipments fell 25 percent to a 30-year low.

Hoping to become more competitive by realizing productivity gains, some U.S. companies began installing completely automated, high-speed production equipment with computer-controlled systems. In 1988, industry shipments were $6.3 billion, representing a small increase over previous years. However, the Gulf War and the early 1990s economic recession depressed the value of shipments to a low of $5.4 billion in 1991. Nevertheless, the industry regarded the 1990s with optimism. As the industry gradually shed its excess capacity, its ability to raise prices in the face of increasing demand helped buoy profits. Steelmakers also relied on investments in new technologies and commitments to reducing costs to increase their chances for survival and long-term profitability.

By 1995, the industry had increased production as world steel demand surged to levels higher than those before the Gulf War. In 1995, shipments of cold-finished products were over $7 billion.

While prices did rise somewhat throughout 1996, worldwide steel capacity surged as foreign production, particularly in China and Russia, began to swell market reserves. The influx of foreign steel on the market diminished the ability of domestic producers to pass increasing costs to consumers. Some industry leaders, such as Worthington Industries and LTV Corporation, sought to expand their operations to produce economies of scale and to diversify into more value-added steel products. The growth of non-union steel mill competitors forced older members of the industry to seek additional cost-containment strategies to sustain profit margins.

The value of cold-finished steel shipments rose substantially in 1995 and increased similarly during the rest of the decade. As consumers pushed for cost reductions from all parts suppliers, however, some steel bar manufacturers had difficulty passing along their rising costs. Steel sheet price was 5 percent higher in 1996 than 1995, but remained well below 1994 levels. Imports were the major factor in keeping prices down.

As the industry entered the mid-1990s, its success hinged on its ability to meet the needs of domestic durable goods customers in a climate of rising competition, business costs, labor difficulties, and alternative uses of new metals and plastics. The industry was therefore called upon to improve quality, technology, and productivity while working in partnership with its customers to enhance its prospects for long-term survival.

Price increases dominated the news in the late 1990s for this industry. The price of the source, sheet steel slabs, peaked in early 1998 at $265 per ton, plummeted to $150 per ton by the end of 1998, and in 1999 returned to the $200 mark. The value of industry shipments fluctuated as well, plunging from $6.26 billion in 1998 to $4.79 billion in 1999.

On January 30, 1998, several companies simultaneously announced price increases for finished sheet steel. Middletown, Ohio-based AK Steel Corp., Bethlehem, Pennsylvania-based Bethlehem Steel Corp., and Mishawaka, Indiana-based National Steel Corp. raised their prices for hot-rolled sheet by $10 per ton from $310 for cold-rolled sheet; by $15 per ton from $460; and for coated sheet by $20 per ton from $520. Prices continued to rise in 1999, starting with increases in February by Allegheny Ludlum, Armco, and J&L Specialty, raising the price 4 percent above 1998 lows. Allegheny initiated another price increase of 7 percent on stainless hot- and cold-rolled strip, sheet, and continuous mill plate on July 19, 1999. Armco followed on Allegheny's heels with the same hike, effective August 1, 1999.

Then, on August 5, 1999, Cleveland, Ohio-based LTV Steel Company Inc. effectively raised its prices by lowering its competitive discounts, by $30 per ton, of flat-rolled steel (hot- and cold-rolled as well as coated) as of October 3, 1999. Other companies, such as Chicago-based Ispat-Inland Steel Co., Pittsburgh-based US Steel Group of USX Corp., Wheeling, West Virginia-based Wheeling-Pittsburgh Steel Corp., Weirton, West Virginia-based Weirton Steel Corp., National Steel and Bethlehem Steel, followed suit. National then raised its hot-rolled sheet prices $25 per ton and its prices for cold-rolled sheet, hot-dipped galvanized sheet, and electro galvanized sheet $20 per ton on January 2, 2000.

The value of industry shipments varied considerably during the late 1990s. After increasing to $6.26 billion in 1998, the value of shipments dropped to $4.79 billion in 1999. The following year, however, shipments increased to $5.09 billion. The cost of materials fell from $4.32 billion in 1998 to $3.28 billion in 1999 and increased slightly in 2000 to $3.46 billion.

Prices rose considerably through the early years of the first decade of the 2000s, attributed mainly to China's tremendous demand for the world's steel. Early in 2003, the price hovered around $300 per ton, but in August 2004, the price reached a record $780 per ton. By 2005, it had dropped to $640 per ton. Accordingly, industry producers steadily increased the prices they charged for the end products, hot- and cold-rolled sheets and coated sheets. Industry producers attributed the hikes to the tight market. Industry analysts further elaborated by pointing out that strong demand, continued low inventories, and increasing backlogs led to reduced imports as European shortfalls started eating up excess stocks of Asian steel.

Faced with high prices and limited supply, American steel mills avoided closing mills by implementing reconstruction and consolidation. As a result, the hot-rolled and cold-finished steel mills were controlled by a few companies, including Nucor and Steel Dynamics. Consolidation in the steel industry made the industry as a whole stronger, due to increased pricing power. For example, hot-rolled sheets that sold for $220 per ton at the close of 2003 rose to nearly $800 per ton in August and September 2004. At the onset of 2005, as supplies became scarce, the price of hot-rolled sheets fell to $600 per ton. Even though higher energy and raw material costs were being passed on to the steel industry, the sector remained profitable. The main concern for steelmakers was how long the end user could sustain the extra cost without looking overseas. Although the steel industry was thriving, concern over high scrap prices and increased energy costs raised red flags to the threat of imports flooding the shorelines once again. Steelmakers were forced to attach surcharges to their shipments, compensating for the increased scrap and energy costs, which only heightened their concerns.

Imports for hot-rolled sheet fell 30 percent, hot-dipped galvanized sheet and strip dropped 22.8 percent, and cold-rolled sheet fell 22.2 percent from January to February 2005. However, imported rebar climbed 80.9 percent during that same time. A representative of one industry leader, Gerdau Ameristeel, was quoted in Purchasing as saying that "the key unknown is the sustainability of the positive industry pricing trend in an uncertain political, economic and globally competitive environment." After a stall in 2002 and 2003, when industry shipment values dropped slightly from $5.57 billion to $5.53 billion, the value rose to $7.89 billion by 2005. By 2008, U.S. steel production totaled 91.4 million metric tons, whereas total global production was 1,326.5 million metric tons, compared to 1,351.3 million metric tons in 2007.

Despite the global economic downturn of the late years of the first decade of the 2000s, which left steel producers practically at a standstill, imports of finished steel products from China reached 713,000 net tons in December 2008. "America's steel producers will not allow the U.S. market to become again a dumping ground for unfairly traded steel from offshore," Thomas J. Gibson, president and CEO of the American Iron and Steel Institute, reported in Breakbulk magazine upon hearing the information.

Meanwhile, the American Steel First Act of 2008, H.R. 5935 required all federally funded construction projects under the Transportation, Defense and Homeland Security departments to use 100 percent U.S.-made steel products in public construction projects. Under the old program, Buy America, launched in the 1970s, only imposed restrictions on the Department of Transportation projects.

Since the industry relies heavily on the automotive, aerospace, construction, housing, and home appliance industries, steel demand weakened along with the struggling global economy in the late 2000s. "The U.S. economy remains firmly locked in a deep recession that will be difficult to emerge from in the months ahead," which will keep steel demand depressed, Scott Anderson, the senior economist at Wells Fargo Economics in Minneapolis, noted in Purchasing in December 2008. The price of steel fell in 2009, averaging roughly $502 per metric ton, compared to $854 per metric ton in 2008. Steel prices continued to trend downward, averaging about $485 per metric ton in 2010.

In 2008, cold finishing of steel shapes occurred at 125 mills responsible for 54.8 percent in market share, with 6,533 workers shipping $160.2 million in steel shapes. Cold finished steel bars, from purchased hot-rolled steel bars, were produced at 48 mills, with shipments totaling $328.8 million. Based on shipments, cold-rolled strip steel, not elsewhere classified, produced from purchased hot-rolled sheets, generated $3.27 billion, or the majority of industry shipments. Other important sectors were producers of cold-rolled steel sheet, not elsewhere classified, with $188.8 million in shipments; cold-rolled strip or wire valued at $62.1 million; and cold-rolled strip (wire or flat), not made in hot-rolled mills, with shipments of $56.5 million.

Current Conditions

According to industry statistics from Dun & Bradstreet, there were 196 establishments engaged in cold-rolling steel sheets and strip from purchased hot-rolled sheets, cold-drawing steel bars and steel shapes from purchased hot-rolled steel bars, and producing other cold-finished steel in 2010. Together these firms generated $2.3 billion in annual sales and employed 10,181 workers. Although 65 percent of establishments in the industry employed fewer than 50 workers, those that employed more than 100 people accounted for about 87 percent of total industry sales.

Although the industry suffered from the economic recession of the late 2000s, recovery was on the horizon by 2010. A 2011 market research report by IBISWorld on the steel drawing and rolling sector of the industry predicted, "As the economy recovers and the automotive and construction sectors rebound, demand for steel will also improve, benefiting the industry." The report also noted, however, that steel substitutes as well as lower cost imports would continue to pose major threats to the industry throughout the 2010s.

Industry Leaders

Reorganization within the steel industry resulted in the realignment of several industry leaders. In 2002, former industry leader LTV Steel Company was acquired by ISG, forming International Steel Group, Inc. In 2003, that company acquired Bethlehem Steel, the largest integrated steelmaker in North America. In 2005, International Steel Group was acquired by Mittal Steel, the world's largest steel producer by volume, and the following year Mittal Steel merged with Arcelor, forming a new company called ArcelorMittal. With more than 273,000 employees in 60 countries, in 2010, ArcelorMittal, headquartered in Luxemburg with U.S. operations based in Chicago, posted revenues of $78 billion and was the largest steel producer in the world.

Other industry leaders were U.S. Steel (formerly USX-U.S. Steel Group) of Pittsburgh, Pennsylvania, which posted sales of $17.3 billion in 2010 with 42,000 employees; Nucor, of Charlotte, North Carolina, with $15.8 billion in 2010 sales and 20,500 employees; and AK Steel Corp., of Westchester, Ohio, with $6.0 billion in 2010 sales and 6,200 employees.

Workforce

In the early 1990s, attrition and early retirement incentives were used more often than layoffs to cut back on labor costs. Flexible assignment of employees helped reduce the number of classes of skilled steel trades. Approximately 12,852 employees served the industry in 2000, compared to 15,100 in 1994. In the mid-2000s, the U.S. Census Bureau combined the industries of cold finishing and steel wire drawing in their tallies. Employment in the combined industries in 2009 was 21,042, compared to 23,419 in 2005 and 30,505 in 2002.

About 75 percent of the employees in 2009 were production workers, and average production wages per hour were $20.24. Nearly all non-management employees belong to the United Steelworkers of America union.

America and the World

According to the World Steel Association, China was the world's largest crude steel producer in 2010, with 626.6 million metric tons (mmt), followed by Japan with 109.5 mmt and the United States with 80.4 mmt. China also produced the most rolled steel products, reporting 796.2 mmt in 2010. Japan and the United States were second and third in this category as well, with 97.7 mmt and 75.6 mmt, respectively.

The U.S. steel industry filed charges of unfair competition against several foreign firms throughout the 1990s and 2000s. In the late 1990s, for example, the U.S. International Trade Commission (ITC) found that 25 of the claims were justified and assessed duties accordingly. Due to the increased potential for duties imposed by the ITC on their steel, many foreign steelmakers reduced their exports to the United States. China and Japan, however, continued to export massive amounts of steel and steel products into the late 2000s and early 2010s. In 2010, for example, China exported 41.6 mmt of finished and semi-finished steel products, whereas Japan exported 42.7 mmt. The United States, on the other hand, exported only 11.8 mmt of these products.

Research and Technology

The industry was concerned with improving the quality and reputation of steel in the face of aggressive marketing techniques by makers of alternative metals. Manufacturers that purchased steel bar typically looked to obtain straight components, tight tolerances, fast machining rates, and quality surfaces, characteristics that could be furnished by alternative materials such as plastics, aluminum, and brass. The low density of aluminum, for example, was found to lengthen tool life and productivity in machining operations and produce lighter-weight, and therefore more fuel-efficient, automobiles. Moreover, steep declines in brass and aluminum prices made those materials more attractive to manufacturers.

To compete for market share, the steel industry sought a better understanding of the product's end use and to communicate to customers the advantages of steel. By becoming a part of their customers' product problem-solving and supplier development teams, steel firms hoped to win back lost markets and combat the substitution of alternative metals for their cold-finished steel.

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