Market Conditions, Value Over Volume and Sustainability
by Ken Jaycox,
I was honored to participate in a Fireside Chat at the Tampa Steel Conference presented by Steel Market Update and CRU Group. Michael Cowden, senior editor at Steel Market Update, was the moderator. Together we covered a wide range of topics about today’s steel, and how it's more relevant than ever. We talked about how U. S. Steel is evolving as a brand, and how we produce steel that’s lighter, stronger and increasingly more sustainable. What follows are some highlights of our conversation, with a special focus on our customer-centric approach to doing business as we pursue our Best for All® strategy.
Steel Market Overview
The current market for steel does have noteworthy bright spots. One thing we’re very excited about is the renewable energy market. According to a recent poll, over half of Americans saw purchasing an electric vehicle (EV) in their future. And 72% said that in their lifetime, they saw EVs overtaking traditional gas combustion engines. There’s a lot of excitement in this space, and we’re already having conversations with customers about how product that will come from our new non-grain oriented (NGO) electrical steel line currently under construction in Arkansas, will be important to the electric motors of the future.
We also feel great about energy. Customers are telling us both oil country tubular goods (OCTG) and line pipe energy transmission will have strong demand for a prolonged period. In terms of renewable energy, we’re seeing a significant jump in the solar space, which we believe is tied to the new infrastructure bill. We’re also excited to see a slight uptick in the auto forecast, and non-residential construction, where we supply a good amount of steel, has been relatively resilient. Appliance is flat, but we are seeing our service center customers rebuilding some inventory in line with their customer shipments following destocking at the end of last year.
The Intersection of Automotive and De-carbonization
The Big Three automakers in Detroit have been out front in their messaging about making cars that will aid with the transition to a low-carbon economy. But this year has marked a turning point in terms of turning goals into action, and U. S. Steel is well positioned to meet the moment.
We’re regularly having conversations with automakers and suppliers on how to provide products to help them reduce vehicle emissions. This includes our verdeX® sustainable steels, which are produced with up to 70-80% less Scope 1 and Scope 2 greenhouse gas emissions. We also have something no other steel company can offer – a brand name that can connect not only with the OEM but also with the customer. I think we’re moving to a place where the consumer buying a new vehicle or appliance will start making the connection between the steel in their purchase and the company supplying that steel.
The Impact on the Marketplace of Big River Steel
Adding Big River Steel to the U. S. Steel family in 2021 has enabled significant advancements in sustainability efforts for our company and the customers we serve. One of those advancements is the NGO electrical steel finishing line currently slated for completion later this year.
In the third quarter of 2023, we expect to produce around 40,000 tons on this line. In 2024, we’ll continue ramping up with a focus on product qualifications, and we expect to hit full production of 200,000 tons in 2025. We think there’s a lot to this market, and it’s certainly different than anything else that we have done in the past. We’re already talking to auto and industrial customers about this line’s capabilities and how its products offer new opportunities to achieve their sustainability objectives.
Big River Steel is also providing our company with another exciting opportunity. Through Entergy, our energy partner in Arkansas, we will soon be consuming 100% of the renewable energy generated by their new 250-megawatt solar farm currently under construction near our facilities. If a customer says bring me your most sustainably produced steel, then we can guarantee production through Big River, our first ResponsibleSteel™-certified facility, and know it was produced with renewable energy. This will be a tremendous advantage in this growing market.
GALVALUME’s New Extended Warranty
While we’re constantly innovating and evolving, we’re also very serious about both our brand and our existing product lines. A great example is the recent news about us doubling our warranty on GALVALUME® products from 20-25 years to an industry-leading 40-60 years. This move was 100% customer driven. Several of our customers came forward and asked us to explore a longer warranty. They love the product and wanted us to offer more support for their investment. We listened, reviewed the data and frankly it was a no brainer. Not only for the customer but also as part of our Best for All strategy. GALVALUME products allow builders to build more sustainably because the product lasts and lasts and lasts. At U. S. Steel, we’re constantly exploring how to take a multi-dimensional approach to product, customer and planet, and extending the warranty on GALVALUME products checked all those boxes.
Value over Volume or Volume over Value?
Toward the end of the session, there was a discussion of whether U. S. Steel was looking to be more focused on volume or value. Of course, we’re hoping to do both. But if we had to choose, we’re going to choose value every time. We’re in the business of producing the right kind of steel for our customers, because in turn they’re going to take that steel and meet the needs of our nation. We believe that volume is an easy trap to get caught in. Which is why value is something that we’re talking about consistently. How can we create value for our customers, who we see as our most trusted and most valued business partners. We’re going to stay very, very focused on meeting and exceeding their expectations. Because they’re out in the marketplace trying to create value for the consumer, and we want to be the steel company – the partner – that makes that possible. At U. S. Steel, that’s what it means to deliver what’s Best for All®.
About the author
Ken Jaycox is Senor Vice President and Chief Commercial Officer, U. S. Steel
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