Finished. Steel.

The global steel industry has been transformed over the last 40 years. Ahead of his retirement, S&P Global Platts' Joe Innace looks back on four decades of reporting on a dynamic sector.

Finished steel is that which is ready to be traded. It meets all specifications, has passed inspection and is bound for use in markets – construction, automotive, oil/energy and many more.

Finished steel is the final product to leave those special places known as steel mills.

And this – after some 40 years covering the steel industry and its markets as a journalist and analyst – is my final product to the S&P Global Platts audience.

A lot has changed since the late 1970s/early 80s. But some of the major industry issues then are still making news today.

Endless Trade Conflict

The subject of steel trade disputes, for instance, has been a constant.

From the late 1970s/early 80s, both presidents Jimmy Carter and Ronald Reagan tried to remedy the ills of the American steel industry.

The Carter administration put the Trigger Price Mechanism in place in 1978. The TPM established reference prices for steel imports. Imports entering at price levels below the reference price would set off – trigger—a Commerce Department investigation into whether or not steel was being unfairly dumped and causing injury to US producers. The TPM didn’t change antidumping laws, but did help streamline the process for domestic producers and enhance enforcement of the trade laws.

Initially, TPM helped US steelmakers. In 1979, prices climbed, production increased, import penetration lessened and steel industry jobs grew. But by 1980-81, imports increased again as some global producers were able to evade and avoid, take advantage of currency exchange rate fluctuations and cut prices.

Domestic producers became increasingly disgruntled with TPM, but with Ronald Reagan taking the oath of office in 1981, the powerful steel lobby thought they would get another, better shot in the war on imports.

The 1981-1982 recession, however, thwarted any immediate remedy. The now ineffective TPM was gone by 1982. Mills were closing. Steelworkers were losing jobs. Laid-off workers were exploring pathways to employee-owned steel mills. With domestic unemployment nearing 11%, downturns in automotive, construction and across manufacturing were sapping steel demand. The steel crisis in the US worsened. In the mid-80s, about 300,000 steelworkers’ jobs were lost and the number of companies making steel diminished greatly.

Reagan rode in promising a domestic steel agenda. And by 1984 his administration had restarted a Voluntary Restraint Agreement program whereby the US Trade Representative sat down with other steelmaking countries to agree on quantifiable limits to their steel imports. The VRAs, however, shunned outright quotas and tariffs under the free trader-minded Republicans.

As a young reporter with McGraw-Hill’s 33 Metal Producing magazine, I went to Washington to interview Murray Weidenbaum, Reagan’s chairman of the Council of Economic Advisers. I was part of a team doing a special edition about former actor Reagan, which was titled “Scripting Steel’s Survival.”

Flash forward to January 2018: I found myself having an eerily similar conversation about steel trade with a high-ranking member of President Donald Trump’s White House staff.

China: From non-factor to powerhouse

Back in the late 1970s/80s, Chinese steel was hardly on the radar. The TPM price levels, in fact, were based off the cost of production in Japan.

In 1979, the world’s total crude steel production was nearly 748 million mt, according to International Iron and Steel Institute historical data. Global production this year, according to IISI’s successor association, today known as worldsteel, will be around 1.8 billion mt – more than doubling in the past five decades.

China produced a mere 35 million mt in 1979. It will finish 2019 with an estimated 925 million mt – an astonishing, exponential change more than 26 times over.

India’s steel output in 1979 was about 10 million mt. This year, it will approach 110 million mt.

US output in 1979 was 123 million mt. It should produce an estimated 86 million mt in 2019.

Japan’s 1979 steel production was 112 million mt; it should finish 2019 at around 104 million mt.

The future(s)

A major transformation since the ‘70s and ‘80s: ferrous futures contracts. Unlike aluminum, copper, precious and other base metals, steel trading on futures exchanges was non-existent 40 years ago.

The appeal of bringing pricing transparency to a traditionally opaque market and helping to create market benchmarks enveloped by quality news, commentary and analysis is what drew me back to Platts in 2006.

Since then, dozens of Platts’ price assessments in the ferrous space are now established benchmarks underpinning exchanges’ derivatives contracts—from iron ore to US hot-rolled coil to Australian metallurigical coal to Turkey-imported steel scrap and others.

As importantly, our many independent steel price assessments – none of which were offered by Platts prior to 2006 – are now widely used to help settle physical contracts in the market.

In 1979, the price of US-made hot-rolled coil was about $350/st, according to several historical sources.

The Platts assessment closed Friday, December 13, 2019, at $560.50/st. One pricing moment in time compared with another; but think about that – just a 60% higher price after five decades. (And adjusted for inflation, that $350/st in 1979 is about $1,200/st in 2019 dollars, making the current price less than half of what steel cost just ahead of Reagan’s election.)

And on that last point, retirement beckons and my work here is finished.