Steel production follows dropping demand to lowest levels in two decades

BY ANDREA HOLECEK, Times of Northwest Indiana
holecek@nwitimes.com

Domestic steelmakers have dropped production to the lowest levels in more than two decades in order to keep supply in line with decreased demand.

The North American steel industry's operating rate was 58.7 percent for the week ending Saturday, the American Iron & Steel Association reports.

It's "nominally the lowest since the 54.9 percent rate seen in December 1986," analyst Michelle Applebaum said Wednesday in her Steel Market Intelligence report. "To the extent that the weekly data lags, we believe that the domestic operating rate is most probably closer to 50 percent of capacity, the lowest since February 1983."

Supply is matching demand "very, very quickly," the Chicago-based analyst said.

The integrated steel industry consolidated in the early 2000s, and since then companies have shuttered production to keep pace with demand rather than remaining in full production and cutting prices.

Previous price-cutting methods spiraled into unprofitable levels and resulted in the bankruptcies of several major steelmakers, including LTV Co. and Bethlehem Steel Corp.

Last week, total steel production fell 156,000 tons to 1.4 million tons from 1.56 million tons the prior week.

At local steel operations -- including ArcelorMittal Indiana Harbor and Burns Harbor and U.S. Steel Corp.'s Gary Works -- week-over-week production was up 9,000 tons to 375,000. For the same week in 2007, area mills produced 563,000 tons.

Both companies have shut down blast furnace production in the past few months. Currently, only two of Indiana Harbor's four blast furnaces and one of Burns Harbor's are producing.

U.S. Steel has cut the number of heats to about 50 per day from 100 a day on its two blast furnaces -- No. 14 and No. 4 -- that are now operating. Gary Works' other two blast furnaces -- No. 6 and No. 8 -- have been down for scheduled maintenance since September.

U.S. Steel spokesman John Armstrong said U.S. Steel adjusts "production up and down from time to time to keep pace with our customers' orders."