Electrometallurgical Products, Except Steel

SIC 3313

Companies in this industry

Industry report:

This category includes establishments that manufacture metal additive alloys for ferrous and nonferrous metals using electrometallurgical or metallothermic processes. Establishments primarily engaged in manufacturing electrometallurgical steel are classified in SIC 3312: Steel Works, Blast Furnaces (Including Coke Ovens), and Rolling Mills.

Industry Snapshot

The alloying metals most commonly used to enhance iron and steel are nickel, molybdenum, manganese, silicon, aluminum, phosphorus, calcium, sulfur, lead, and selenium. Tungsten carbide powder and spiegeleisen also are produced in this industry. The three main purposes of alloys are to eliminate undesired elements in a base metal; add special characteristics, such as strength, heat resistance, and corrosion resistance; and neutralize unwanted properties of a metal.

According to Dun & Bradstreet, U.S. electrometallurgical products firms garnered a total of $410 million in sales in 2010, following a downturn in business that coincided with the U.S. economic recession. Nickel, which is used primarily to create stainless steel, and molybdenum, which is used to strengthen steel for aerospace and other specialty steel applications are the most common alloys produced. Specialty metals production accounts for about 65 percent of primary nickel consumption. About 75 percent of all molybdenum consumed goes into iron and steel, with major end-use applications in machinery, electrical, and transportation.

Background and Development

North American metalworkers have strengthened and enhanced iron and steel with alloys since the 1600s. Only since World War II, however, has the mining and production of the alloying metals emerged as a significant industry. Since that time, the federal government has promoted the extraction and processing of various ferrous and nonferrous alloys as a means of insuring reserves for national defense and security.

Demand for alloy metals surged from the 1950s through the 1970s as the U.S. economy expanded and new alloying technologies broadened the industry's market. The auto and capital equipment industries, in particular, became major consumers of ferroalloys during that period. By the end of the 1970s, the electrometallurgical industry employed about 6,000 workers and was shipping about $700 million worth of products each year.

As maturing markets, high production costs, and metal substitutes reduced U.S. steel production in the 1980s, growth of alloy demand slowed although the percentage of metals that used alloys continued to rise. The value of shipments dropped from $707 million in 1982 to $661 million in 1983 and increased to $667 million in 1986. Employment plummeted to 3,600 in 1986.

As steel and other metal orders increased in the late 1980s, the alloy market rebounded, sending the value of shipments past $1.2 billion by 1988. However, even a huge increase in production tonnage did not stop the decrease in profits for the industry as the competitive and glutted market steadily eroded prices. The price of nickel, for instance, fell from $6.49 a pound in 1988 to about $3.55 by 1996. Similarly, molybdenum prices dropped from 1994 prices of $7.00 to $8.00 a pound to about $3.20 a pound in the late 1990s. Therefore, the value of all electrometallurgical shipments remained at around $1.3 billion in 1996 and 1997.

In addition to stagnant prices in the late 1990s, the industry was challenged by price-fixing accusations levied against some of the largest electrometallurgical products companies. One federal civil antitrust complaint was filed in the late 1990s against five silicon firms, alleging a price-fixing conspiracy to boost sales prices. Defendants in the suit were American Alloys Incorporated of New Haven, West Virginia; Applied Industrial Materials Corporation of Pittsburgh; Elkem Metals Company of Pittsburgh; Globe Metallurgical Incorporated of Cleveland, Ohio; and SKW Metals & Alloys of Niagara Falls, New York.

In a U.S. Justice Department criminal suit, Elkem Metals Co. and American Alloys Inc. pleaded guilty to price-fixing in violation of the Sherman Act. Criminal charges against SKW Metals & Alloys also were filed in the late 1990s, along with civil suits against some companies. Allegheny Teledyne, for example, filed lawsuits alleging price fixing, fraud, and violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act against American Alloys Inc. and Globe Metallurgical Inc.

Industry shipments plummeted from $968 million in 2000 to $676 million in 2001. They increased to $759 million in 2002, but this figure mirrored a decline over 1998, when industry shipments stood at $1.43 billion before spiraling downward. The cost of materials grew from $352 million in 2001 to $564 million in 2002, down from $874 million in 1998.

As the steel industry recovered, specifically in China, so did the price of molybdenum. During 2003, molybdenum averaged $5.22 per pound. It rebounded to $8.08 per pound in early 2004 and averaged about $15.25 per pound that year. The price in 2007 averaged between $25 and $29 per pound and was expected to remain around $25 through the end of the decade. The use of stainless steel in Europe, as well as China's growth in the steel market, helped drive up the price.

The United States reported 2004 consumption of molybdenum at 16,800 metric tons, up 7 percent over 2003. Domestic mine production continued an upward trend in 2004, with 39,900 metric tons compared to 33,600 metric tons in 2003, which represented a 19 percent increase.

Stainless and alloy steels represented 41 percent of nickel consumption in the early years of the first decade of the 2000s, but increased demand in the stainless steel industry caused a limited supply of nickel-based alloys. Therefore, "nickel prices continue to exhibit extreme volatility because of conflicting signals from the biggest customer, the stainless steel industry," according to Purchasing magazine On February 22, 2005. This was the third consecutive year that demand outpaced the supply of nickel, which Purchasing called "the vital stainless steel ingredient." Industry observers predicted that China was on the path to becoming the leader in nickel consumption.

Stainless steel imports rose 74 percent between 2004 and 2005, according to the Specialty Steel Institute of North America (SSINA), and U.S. consumption increased 29 percent. Imports accounted for 50 percent of total U.S. consumption, reflecting an increase of 13 percent. Analysts projected a continuation of increased demand for stainless steel, while worldwide nickel demand was expected to fall short.

Historically high molybdenum prices persisted in both 2007 and 2008, with producers averaging about $30 per pound. As demand softened for stainless steel, specialty steel and petrochemicals molybdenum prices began to stabilize in 2009 to roughly $9.40 per pound. Developing countries and, in particular, China boosted molybdenum production and price. The United States reported 2007 and 2008 consumption of molybdenum at 20,500 metric tons and 22,900 metric tons, respectively. Consequently, domestic mine production increased to 61,400 metric tons in 2008, up 8 percent from 57,000 metric tons in 2007.

Stainless and alloy steels constituted 52 percent of nickel consumption in 2008, compared to 41 percent in 2004. An earlier prediction that China would become the largest consumer of nickel was realized in 2007 when apparent consumption reached 348,000 tons. Volatile price swings continued, with nickel prices averaging $23.65 per pound in May 2007, which forced stainless steel producers to either use stocks or produce lower quality stainless steel grades. By mid-2009 nickel prices had plunged to $5.30 per pound, a 57 percent decline from the $12.38 per pound reached in mid-2008.

The stainless steel scrap shortage dropped in 2009 as a result of decreased stainless steel production worldwide. This affected nickel production as well, because the scrap is an inexpensive source. According to the International Stainless Steel Forum, worldwide production of stainless steel during the first quarter of 2009 fell to levels not reported since 2000.

Current Conditions

Like many U.S. manufacturing industries, the electrometallurgical products industry suffered during the economic recession at the end if the first decade of the 2000s, but started to recover in 2010. The U.S. Geological Survey reported that the United States produced about $885 million worth of molybdenum in 2010, with production in 2010 up 17 percent from 2009. Iron and steel and superalloy producers accounted for 75 percent of the molybdenum consumed domestically, and the average price was around $15.80 per kilogram. Supplies of nickel, on the other hand, came only from imports. About 44 percent of the nickel consumed in the United States in 2010 was used in the production of stainless and alloy steel, 42 percent for nonferrous alloys and superalloys, 9 percent for electroplating, and 5 percent for other uses.

According to Dun & Bradstreet, the total number of establishments in this industry climbed from 30 in 2006 to 78 in 2010. Industry-wide employment also increased during this time, from 2,854 to 3,042 workers. Ferroalloys made up the largest share of the market, accounting for about 84 percent of revenues. Pennsylvania was the leading state in terms of revenues, and Illinois employed the most workers in the industry.

Industry Leaders

Industry leaders included Elkem Holding subsidiary Elkem Metals Company of Pittsburgh, Pennsylvania, founded in 1962, which had sales of $91 million in 2010. Another large producer was Globe Specialty Metals of New York. In 2010 Globe's annual sales were $472.6 million. Blue Pearl Mining Ltd. of Englewood, Colorado, and Toronto, Ontario, Canada, grew significantly in 2006 with the purchase of Colorado's Thompson Creek Metals Company. The company reported sales of slightly more than $1 billion in 2008. Other leaders included Steel of West Virginia in Huntington, West Virginia, with estimated annual sales around $237.3 million in 2010, and Climax Molybdenum Company of Phoenix, Arizona. Climax was purchased by Freeport-McMoRan Copper & Gold in 2007, making the latter the world's largest molybdenum producer.

Workforce

In 2010 there were 3,042 employees in electrometallurgical ferroalloy manufacturing, according to Dun & Bradstreet. Because income growth in the industry comes largely from increased productivity, the number of workers employed in most sectors of the industry was expected to decline through the 2010s. New manufacturing and information technologies to increase automation were predicted to yield most of the productivity gains.

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