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Nerves of Steel: Views from the C-Suite

Electrode issue is a 'microcosm' of China trade tactics: Nucor CEO

By Christopher Davis, content director, EMEA metals, and Justine Coyne, associate editor

The ongoing graphite electrode shortage is really a microcosm of China's relationship with the global steel industry -- and indicative of what could happen in other commodity sectors if its influence continues unchallenged, according to the top executive of America's largest steelmaker.

The electrodes are used to melt ferrous scrap in steelmaking electric arc furnaces.

Speaking with S&P Global Platts this week at the World Steel Association's general assembly in Brussels, Nucor President and CEO John Ferriola said the electrode scenario -- due to a convergence of capacity going offline and competition for the raw material needle coke from the lithium battery sector -- has played out similarly in other market segments. Electrode prices have increased tenfold in the process, and availability is scarce.

"To me, this is kind of a perfect microcosm of the issue I talk about with steel all the time with China," Ferriola said. "They dumped the needle coke into the United States year after year after year at ridiculously low prices. What happens to the needle coke facilities in the United States? They shut down, and frankly, all around the world they shut down. Now, all of the sudden you have one producer. And now all of the sudden what happens? There's a shortage and the price of needle coke doubles."

He said China now is able to "control how much they're going to produce and what they're going to sell it at... It just shows how China will act when they have the power to act."

Ferriola said the situation "didn't happen overnight" but is "an example of how China… wages economic war on the United States and other countries by dominating a market through illegal, unfairly traded product – whether it happens to be steel or it happens to be needle coke or magnesite for refractories – until they are the only supplier."

Nucor has electrode supplier agreements in place for the rest of this year and all of 2018, he said. Other companies are not in such a fortunate position. Chatter has circulated of late of suppliers cancelling orders and seeking to renegotiate prices, sometimes at more than $30,000/mt.

"The bottom line is, for a short period of time, there'll be pain. No doubt about it," Ferriola said. "The price will go up, it could go up substantially. But then what will ultimately happen is it will reach a point where the US mines will open again, they'll start producing needle coke and what I hope happens is that as an industry we're smart enough to give them the business to stay in business, just like we should be doing on steel."

He was quick to point out that he did not want to sound "like I'm China bashing," but "at the end of the day, this is how they conduct business" for a number of commodities.

"They export unemployment by dumping, putting everyone else out of business, and when they have a monopoly then they take advantage of that monopoly," Ferriola said. "You might argue that's a good business practice. It is as long as you're not breaking the law to get to that monopoly position. But by dumping at unfair pricing, forcing your competition to go out of business, that's no longer a legal way to do it."


On the trade case front, Ferriola is "very confident" US steelmakers will see an affirmative preliminary determination later this month in the US anti-circumvention inquiry on Chinese sheet processed into cold-rolled coil and galvanized sheet in Vietnam.

The US Department of Commerce on October 16 said it would be postponing its decision in the case until October 30.

"To me, this is one of those clear-cut cases where we brought a case against China on galvanized [steel]; we had a very strong case, we got a very strong determination and a very strong tariff applied and were very pleased with that," Ferriola said.

"All of a sudden you see, within literally a month, the amount of galvanized steel from Vietnam increasing, increasing, increasing, and increasing now to a level that the amount of galvanized they are exporting exceeds the amount of substrate they produce."

US sheet mills petitioned Commerce for the investigation in September 2016, and Commerce launched an investigation on November 7. The mills argued that imports of cold-rolled coil and galvanized sheet from Vietnam made with Chinese material should be subject to Chinese duties.

"Unless they developed some new high-tech way of galvanizing a product out of thin air, it’s going to be tough for them to prove they are not circumventing -- the Chinese -- by bringing substrate in at dumped prices, galvanizing it and sending it in," Ferriola said.

After duty orders on Chinese galvanized sheet and CRC became effective, these imports dissipated, while imports from Vietnam surged, according to the petition filed by US mills. US CRC imports from Vietnam totaled 8,686 st in H1 2015, but in H2 2015 rose to 51,018 st.

"I will be very disappointed if we don’t get a positive result," Ferriola said. "If we don’t get a positive result, we’ll go right back at them again."


Nucor Corp and its executives have long prided themselves as defenders of US manufacturing interests. Now, national defense is part of the company's focus, as well.

"I'm extremely proud to say that we've qualified with the US Navy and supplied armor plate to the new Gerald R. Ford aircraft carrier, without a doubt the mightiest warship ever built," Ferriola told Platts.

"We were able to get several hundred tons on that [aircraft carrier] because we were just in the process of qualifying, and the material has worked so well for them that we've already been assured many thousands of tons going into the next aircraft carrier, which is the John F. Kennedy."

The armor plate sector has been a bright spot for the North Carolina-based company, Ferriola said.

"It's a great market and it's growing for us," he said. "We've got more development work to do, but to qualify for submarines, to qualify for armored plate on the aircraft carriers -- hey, we're pretty damn proud of that. This is a mini-mill that's supposed to not be able to do any of this stuff."

The flat-rolled steel market, in general, has been performing well for Nucor this year, Ferriola said. The company has invested in a new 72-inch-wide sheet line at its Berkeley, South Carolina facility and plans to commission a new high-tech cold mill -- the only one of its type in North America and one of only a handful in the world -- at its Hickman, Arkansas plant toward the end of next year or early 2019.

The Hickman mill will be capable of producing "extremely thin-gauged, high-strength steels targeting the automotive market," he said.

Nucor's pipe and tube operations also are performing well this year. "Not only is it doing great on its own in terms of driving a good profitable number, but it's also supporting our sheet mills by consuming 900,000 tons of sheet product," Ferriola said.

US steel sector shipment to military, ships, aircraft


The biggest issue facing operations at Nucor's direct-reduced iron facility in Louisiana has not been one of quality, but one of reliability, Ferriola told Platts.

The facility, which had been down for 63 days beginning this summer, restarted operations at the end of September.

"It's running and it's running well," Ferriola said.

Nucor stopped production at the 2.5 million mt/year plant on July 25 to make repairs to a material-handling system in what was at the time expected to be a temporary outage. The company later announced it was also addressing a refractory issue, and that it then expected the repairs to be completed by the end of September. This marked the third, and longest outage at the facility this year.

"I make no bones about admitting that it has been a challenging startup for us," Ferriola said. "It’s a modification of an existing technology that we’ve used for a while and when you introduce new elements into technology, sometimes it proves to be more challenging than expected."

Despite the challenges, Ferriola said the facility provides two positives for the company -- a reduction in emissions and a higher carbonization rate, which leads to a better product for use in Nucor's electric arc furnaces.

"Our sheet mills and our [special bar quality] mills that use the DRI from Louisiana, they just love the product," he said. "Now what we’re looking at is if we have to make some modifications to the technology by which we can maintain the positives of the quality and improve the reliability of the facility. That’s what we’re looking at now."

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