Not being able to find qualified people in a slow economy is a major problem for US industry, and it is going to get worse, according to Michael Rippey, CEO of ArcelorMittal USA (and part of the Management Committee of ArcelorMittal world-wide). ArcelorMittal, is the world’s largest steel producer. The company has operations in over 60 countries, produces 10% of the world’s steel, and is privately owned. The following are remarks made by Rippey, while speaking last Thursday at the Lakeshore Chamber of Commerce in East Chicago, Indiana.
Currently, ArcelorMittal employs approximately 10,000 people in the NW Indiana area. However, out of those, 5,000 are veteran steel workers who will retire in the next 5 years. When they do, it will be difficult to find qualified trades people. Rippey’s point of view is that not everyone needs a college degree. If we could find schools that would teach trades, as they did 40-50 years ago, it would be a great help to the US manufacturing base. This country was built on manufacturing and it is coming back a little, but we need to train our young people how to manufacture products. Rippey reached out to Indiana University and area colleges to set up trade schools or programs to help train our future workforce.
On the economy, Rippey gave a mixed review of the US and the world. He does not see our economy coming back until 2014, based upon what he has seen in the steel industry. “The economy today isn’t bad, but not good. Unemployment is still a major problem. ArcelorMittal is challenged to relieve shortage of qualified people for electrical, mechanical repair, and the like. He believes that the Federal reserve needs to keep interest rates low for the economy to recover.
Rippey sees China, which now has 45% of the steel market, with an oversupply of steel. The Chinese production base could be detrimental to the US market, because Chinese steel that was destined for Europe is now being stored, and could possibly be diverted (dumped) into the US market. Right now the domestic demand for US steel is being injected with 24% of off-shore imported steel, because of free trade and political agreements. This is an area that causes Rippey great concern.
In 2007 the US produced 150M metric tons of steel. During the great recession of 2008-09 dropped to 70M, a level last seen in the 1950s. Presently we are back up to 120M, so there is definitely an up-cycle. Economic Notes According to Rippey, the growth of the steel industry and our economy is based all on the automotive and energy industries. The auto industry should produce 15M new vehicles this year (2012), with 2013 projections hitting 15.4M. The auto industry is keeping our steel industry alive, along with the energy industry, gas and oil well drilling, platforms, fabrication, windmills and pipelines, and off-road and construction vehicles from Caterpillar and John Deere specifically.
The one market area that is lacking is infrastructure and construction and the construction of primarily housing.
As for the future, Rippey asked the audience, of approximately 100 people, whether they were going to buy a new car next year. Only one hand was raised. When he asked the audience (who were primarily mature age bracket and knowing that they would not be purchasing new homes) whether they knew of a young person who would be buying a home next year he had about a dozen hands raised. At this point, Rippey said that housing growth would be dependent on the younger generation’s ability to maintain their job position (security), which is of the utmost importance.
Rippey was very excited about the definite path that the US is on to become energy independent. This path directly affects the steel industry. The expansion markets he sees are in refinery expansion, drilling, petrochemical plant building, and oil and liquefied natural gas facilities being built to ship our energy resources overseas.
Economic growth. Rippey sees China’s growth at 6.5-7% for 2013 and foreseeable future. For Europe, Rippey sees stagnation. For the Middle East, more instability. The US market growing at about 2.5%. Rippey’s main fear at this point is the fiscal cliff.
He remarked about that someone in the media said things were going well, the Republicans and Democrats were going to get together—and the market opened high. Then along came John Boehner, Speaker of the House of Representatives, who later stated that nothing seems to be getting accomplished — at which point the market declined.