Both of our Houston warehouse facilities have been experiencing this increase also, especially with regards to material bound for energy projects.

Some Gulf ports bolstered by steel
October 20, 2008 – 11:49 am-->Journal of Commerce - Breakbulk

Despite a general drop in U.S. steel imports this summer, the Texas ports of Houston, Brownsville, and Beaumont will post increased year-to-year volumes thanks largely to a strong demand for steel used in energy projects in the U.S. and general building projects in Mexico.
But other Gulf ports were down — and some down sharply. The Port of New Orleans was hit hard with a halving of steel imports year-to-year through July 2008. Tampa dropped by nearly two-thirds year-to-year through the fiscal year ending in June.

“August was down more than we anticipated,” said David Phelps, president of the American Institute for International Steel. “But the truth is that the United States needs at least 30 million tons of steel imports a year and we expect to exceed that in 2008, so we’re talking about not a great year for imports but not a bad year either.”

However, AIIS forecasts increased imports in only three of 12 steel categories — structurals; oil- and gas-related pipe and tube; and “all other” pipe and tube — over the next three to five months. Other categories, including hot- and cold-rolled steel, slab and others, are expected to hold steady at best or decrease further.

Year-to-date figures for the country through August were down 10.8 percent, dropping to 21.2 million tons in 2008 from 23.8 million tons in 2007. From July to August this year, steel imports dropped 19.4 percent, or to 2.35 million tons from 2.91 million tons, according to the AIIS. August 2008 imports were down 11.4 percent compared to August 2007.

James M. Baldwin Jr., a former executive with steel carrier Forest Lines, said the current import situation is a function of the volatile global economy rather than anything ports are or aren’t doing. “The Port of New Orleans is really going to be singing the blues now, but it’s the market, not the port,” he said. “I believe we’re going to see an upswing in the fourth quarter, but it’s not going to pay for a real good dinner on a Saturday night.”

Indeed, New Orleans’ steel import tonnage figures have cratered year-to-year. AIIS figures show the port handled 1.8 million tons of imports for the 12 months ending July 2007, opposed to only 872,000 tons through July 2008. “That tells me that the New Orleans region is not seeing much demand for energy-related steel imports,” Phelps said. “Houston, on the other hand, is having a very good year.”

Robert Landry, director of marketing for the Port of New Orleans, said, “The weak dollar is just a real issue for us. “The other issue we are watching is the purchase of domestic mills by foreign concerns. We feel they may step up domestic U.S. production in order to avoid the increased transportation costs of importing steel.”

Despite those trends, Landry said, the port could show a strong fourth quarter. And, he said, “I’m willing to bet that September is one of our strongest months on steel in two years. We’ve had a lot more cargo than anticipated, and I’m very curious to see why that is happening.”
Port of Houston Authority figures show Houston imports up to 3.44 million tons from January through August 2008 from about 3.16 million tons January through August 2007 — a 9 percent increase, and just slightly behind the 2006 import totals for the same months. Nearly 300,000 tons of steel year-to-date were exported from Houston through August 2008, versus about 208,000 year-to-date through August 2007.

Brownsville also is having a very good year, said Antonio “Tony” Rodriguez, the port’s director of cargo services, because the port serves as a major gateway for steel bound for Mexican mills and building projects.

“We expect to be up over 1 million tons year-to-year by the end of the year,” Rodriguez said. “The Mexican economy is doing somewhat better than the American economy right now and there are a lot of big building projects near Mexico City.”

Brownsville saw 2 million tons of steel and other metal move into its port from January through August 2007 and is above that total year-to-date now, Rodriguez said. Exact year-to-year comparisons were not available, but port statistics show that the port is exceeding 2007 in the amount of iron and steel coils shipped as well as iron and steel slabs.

Energy-related steel imports have more than doubled at Beaumont, said John R. Roby, the port’s director of customer service. For the fiscal year ending in August, Beaumont counted 354,525 tons of imported steel, versus 169,798 for the same period last year. “The biggest driver has been pipe to be used in energy projects, particularly LNG projects,” Roby said. “We have a couple of LNG terminals and pipe-coating facility at the port where pipe is coated and then transported.”

At Mobile, James Lyons, director and chief executive of the Alabama State Port Authority, said steel exports are up and “that is a bright light.” Exports through the port will exceed imports this year. “Overall, imports are off a little but with around 600,000 tons in exports and imports we’re having a decent year,” he said. “We’re holding up reasonably well given the economy.”
Estimates of steel and iron imports through Mobile are 307,500 tons for the fiscal year ending Sept. 30, 2008 versus 442,300 tons a year earlier, port statistics show. Imports were nearly 564,000 tons during the 2006 fiscal year. Exports through the port in those same time periods have boomed, from only around 8,000 tons in 2006 to 141,000 tons in 2007 to an estimated 325,000 tons this year.

Tampa, too, saw a sharp decrease in imports through the fiscal year that ended June 30. Steel imports totaled only about 112,000 tons in fiscal 2008, down from 320,000 tons a year earlier. These comparison periods include portions of calendar year 2006 when steel imports were particularly high and do not reflect July or August 2008 tonnage.

“There definitely is a downturn in imports as a result of the construction downturn,” said Wade Elliott, senior director of the marketing division for the Tampa Port Authority. “We have seen an increase in recycled scrap for export.” The authority, which has scheduled the Port of Tampa Steel Conference for Feb. 16-17, 2009, hopes to benefit from expansions by Titan Metals and One Steel Recycling.

Phelps of the AIIS said three major product areas that drive steel demand — automobiles, white goods and residential building — all are weak in the U.S. economy right now, even as oil- and energy-related projects remain white hot.

But it is not just the state of the immediate economy that is impacting imports, he said. Buying habits and inventory levels, coupled with the weakness of the American dollar, have an effect, as do the prices of domestic steel and of transportation.

Generally, steel buyers have a lot of inventory right now, Phelps said. “What we are seeing among buyers is typical when you have very high prices, such as we did in June and July,” he said. “Buyers sat down and took a deep breath, looked at their inventories and said, ‘Unless I need something immediately, I’m sitting on my hands to see where price goes.’ ”

“Steel is cyclical, and if somebody blinks on the buyer side, it could all jump again, just like that,” Phelps continued. “But any deal transacted today on imported (waterborne) steel won’t really arrive until December and January.”

In part, AIIS bases its slowing import predictions on falling imports from Canada, which have just a two- to six-week lag from order to delivery. Statistics show that imports from Canada into the U.S. fell to 463,000 tons in August from 657,000 in July — a good indicator of weakened import orders in the United States. Orders filed at the same time as the Canadian orders but from steel producers in other countries are still in transit on water routes and thus lag deliveries from Canada by three to five months.

Therefore, Phelps believes that weak imports from Canada now — on the two- to six-week delivery cycle — may foreshadow weak waterborne imports — on the three-to five-month cycle — through the rest of this year.

Imports from North American sources represented the largest declines in August, with imports from Canada falling by nearly 30 percent and from Mexico falling 27 percent (to 202,000 tons from 276,000) from July to August, Phelps said.

Based on AIIS forecasts, the trend of imports over the next three to five months will almost certainly drop in several categories, including hot-rolled and cold-rolled sheet, corrosion-resistant steel, wire rod and rebar. Only structurals and stainless steel have decent chances of remaining level.

Over the next two months, according to AIIS estimates, only oil and gas pipe and tube will be up with any degree of certainty, with other pipes and tubes showing a slight tendency to rise. Most other types of steel imports are expected to decline over both the two-month and three- to five-month periods.

John Anton, a steel industry analyst with the consulting firm Global Insight, said prices were the key reason for the rise in exports and the slippage in imports. “There’s a lot of countervailing forces. Imports should be rising because U.S. prices are higher,” he said. “Offsetting that is the fact that total volume will decline because of the weak economy, so imports are being buffeted by opposing forces.”

By Robert R. Frump, with contributions by William Armbruster.