Steelmakers experiencing new growth

G. Patrick Kelley

Stark County steelmakers have done their part to help push down the U.S. trade deficit.

The Commerce Department said the deficit declined during the third quarter to the lowest level in two years. The better-than-expected showing raised hopes that the country’s trade troubles could be easing.

But the department and analysts say the change also is a product of the weak U.S. dollar.

Allegheny Technologies spokesman Dan Greenfield said the company’s subsidiary, ATI Allegheny Ludlum, which owns the former J&L Steel plant in Louisville, exports about 25 percent of its product.

But that’s a “soft” number, Greenfield said, because “over 50 percent of our sales are driven by global markets in aerospace and defense.”

One example is an airport being built in the Middle East. A new Allegheny alloy is being used to make the airport’s roof, which will be the largest stainless steel roof in the world. Allegheny sold the steel to a U.S. customer, but it will be exported.

There is strong demand for new airplanes outside the U.S., and Allegheny is selling a lot to domestic manufacturers who will be shipping their products overseas, he said.

The Louisville plant, which Allegheny acquired in 2004, also specializes in flat-rolled titanium.

“That plant -- what they do -- they’re among the best in the world,” Greenfield said. “A very large percentage of their products end up outside the U.S, in Asia and in Europe.”

Greenfield said exports have grown with the company. The level of exports -- about 25 percent in 2004 -- is the same now, but the company has grown from $2.7 billion in 2004 sales to a rate of $5.5 billion this year.

“The Louisville plant in particular,” he said. “Their shipments outside the U.S. have grown quite significantly.”

Timken sees growth in China

Timken exports of steel to China alone have grown from $30 million to an expected $70 million. President and CEO James W. Griffith has said he expects demand from China to continue because the country doesn’t have the ability to make Timken-quality steel.

Griffith said he expected to send 10,000 tons of steel to China last year, a year in which the company’s industrial product exports rose 20 percent.

“That’s an ironic type of thing,” said spokesman Jeff Dafler. “People wouldn’t expect to hear there’s a company here in Canton, Ohio, and we’re exporting steel to China.”

The trade deficit with China is higher than a year ago, and may pass last year’s record. The total account deficit had set all-time highs for five consecutive years but has declined for two consecutive quarters, prompting economists to predict that this year will see the deficit finally start to decline.

But the change is partially because of the decline of the dollar against many other major currencies. A weaker dollar makes U.S. products cheaper in foreign markets while making foreign goods more expensive for American consumers.

“There has been a huge decline in imports and a large increase in exports,” said steel industry analyst Charles Bradford, president of Bradford Research in New York.

“There has been a very large, favorable swing in the steel trade ... and across the board,” he said by cell phone while on a train between Brussels and Paris.

“That’s what happens when you have a weak dollar.”

He said a strong dollar probably “isn’t in the cards” for a year or two.

Ocean freight rates have doubled, and steel prices here are cheaper than in other countries.

“It’s not an attractive market for imports,” he said.

Lesson to be learned

But there’s a lesson that U.S. steelmakers haven’t learned in 50 years, he said. “If you want to be in the export business, you have to perform. You can’t go in and out” when the U.S. economy improves.

To keep foreign trade partners, “You have to establish a relationship and continue and stay with ‘em.”

Ken Braun, spokesman for Republic Engineered Products, said his company’s exports are up “not necessarily because of the change in the dollar.”

The company has found new customers in South and Central America and Europe to increase exports, he said. Republic doesn’t even count steel sent to North American Free Trade Agreement partners Mexico and Canada as exports.

Exports to the Americas and Europe were less than 1 percent five years ago, but last year and this year, they’re about 5 percent, he said.

“Next year, we’re expecting it to increase substantially.”

The growing percentages also are coming with an increased capacity to turn out product. The company has brought a new caster and a second electric furnace on line at its Eighth Street NE plant in Canton, and increased capacity at its Lorain facility through operational efficiencies, Braun said.

Reach Repository Business Editor Pat Kelley at (330) 580-8323 or e-mail