Sustainability is ingrained in the steel industry. More steel is recycled each year in North America than all other materials combined. At Majestic, we view environmental responsibility as both an ethical obligation and a logical cost-reduction measure. In other words, it’s common sense. There are a number of initiatives Majestic Steel has adopted over the years to reduce energy output and deliver a sustainable product: 

Fully Recyclable Packaging
Our steel is packaged in Majestic's signature red, white and blue polypropylene metal wrap, wooden skids, banding and chipboard, all of which are 100 percent recyclable and contain recycled materials.

Big Ass Fans®
Our 24-foot high-volume fans are a low-energy way to control the temperature and humidity of the service center.

T-8 Fluorescent Lighting and L.E.D. Lighting
All fixtures throughout the service center are equipped with T-8 fluorescent lights that use less energy and actually produce more light. We recently replaced the neon signs on the outside of the service center with high efficiency L.E.D lighting. This technology consumes less electric and is more reliable than the neon that it replaced.

High-Speed Truck Bay Doors
Fast-moving vinyl doors specially made to open and shut in seconds allow minimal heated or cooled air to escape from our truck bay and reduce our energy expenditure.

Company-Wide Recycling Program
In addition to having recycling bins throughout our facilities, we don't keep wastebaskets at our workstations, so we have to think twice before throwing anything away.

Cardboard Recycling Partnership
We recently began a program with our cardboard tube vendor to recycle the cardboard tubes that are inside the rolls of our packaging paper. By sending them back to the vendor to be reused, we prevent the cardboard tubes from going into a landfill.

Paperless Processes
Newly created electronic processes increased organizational efficiency and cut our paper use by 50 percent.

Supporting Local Farmers
Locally grown fruit is delivered to our offices on a regular basis to support local agriculture and to encourage healthy lifestyles.

Steel mills billowing plumes of smoke paint a visual of the steel industry that is inherently pollutive and anti-environmental. However, as Earth Day approaches on April 22, we in the steel industry can take pride in the sustainability of our product and in the strides we are making to reduce our environmental footprint. 

Each year, more steel is recycled in North America than all other materials combined. So far this year, more than 22 million tons of steel have been recycled, compared to 15 million tons of paper and only 700,000 tons of plastic. The Steel Recycling Institute (SRI) announced in February that the 2010 recycling rate for steel is 88%, as measured by net tons produced compared to tons of steel scrap consumed. (This is down from 103% in 2009, but that was reflective of an unbalanced economy when steel production was uncharacteristically low.) 

Steel can be recycled indefinitely. The steel industry’s largest source of raw material is scrap metal, which is commonly collected by recycling steel. One ton of recycled steel saves 2,500 pounds of iron ore, 1,400 pounds of coal and 120 pounds of limestone. 

In many ways, steel is a superior building material. A steel frame for a 2,000-square-foot, two-story house is equivalent to the material of about six recycled cars. A comparable wooden frame would require more than 40 trees to produce. In addition to being highly recyclable, steel products are far more durable than those made with alternative materials. The strength-to-weight ratio of steel is the highest of any residential building material. 

Being strong yet lightweight, steel structures can be engineered to better withstand hurricanes and earthquakes. Steel is also unique in that it is dimensionally stable: “Unlike other materials that shrink, expand, warp and twist with age to cause settlement cracks or floor squeaks that require builders to make costly repairs,” and unlike wood is fire- and termite-resistant.

A global move toward sustainability seen over the past few decades has also made its mark on the steel industry. Since 1990, energy intensities to make one ton of steel have been reduced by 27% and CO2 emissions per ton of steel shipped has been reduced by 33%. This has been accomplished in large part by the widespread adoption of thin-slab, flat-rolled production using electric arc furnaces and other advances in steelmaking processes.

More recent studies on the life cycle of steel products (the manufacturing phase, the use phase and the end-of-life/recycling phase) can help manufacturers better understand the emissions associated with each stage and deliver more energy-efficient products to market.

The shale gas boom has become a major demand driver for steel, and its impact on the industry is expected to grow substantially. (This is the first in a series of shale gas blog posts.) 

The Wall Street Journal recently stated that "Steel Finds Sweet Spot in the Shale" and according to the American Iron and Steel Institute, tubular-good shipments increased to 7.3 million tons in 2011 from 3.9 million tons in 2009.

The shale gas boom is in its infancy. In 2011 only 33 wells were drilled in Ohio. According to a recent study, by 2014 the number of wells could increase to 2,000 with an additional 1,000 wells being drilled per year. That will require a lot of steel.

Why is it happening now? Until recently, energy companies were unable to develop shale gas using traditional (vertical) drilling techniques because it is trapped in fragmented pockets. Record-high energy prices in the mid- to late-2000s encouraged companies to invest in R&D with the goal of unearthing this valuable resource. One of the innovations was Horizontal Drilling. Coupled with advancements in a technique known as Hydraulic Fracturing or “fracking” (first used in 1947 Texas) horizontal drilling enabled companies to break shale rock barriers and bring these fragmented pockets of gas to market.

Majestic Steel will continue to research shale gas and we look forward to having dialogue about it with our customers.

As manufacturing and steel demand in the U.S. continue to show growing optimism, both sectors can thank the automotive industry for helping to pull them through the recession.  The domestic automotive industry, which is measured by sales of vehicles manufactured domestically, has arguably been the strongest sector during the recovery.

According to AISI, the automotive industry is the second largest driver of domestic steel demand, behind construction, with more than 25% of all steel shipments going into automotive in 2011. Auto sector shipments have shown growth recently as 2011 shipments are up from 24% in 2010 and 19% in 2009.   While the construction sector has lagged behind in the recovery, though showing bright spots currently, the automotive sector has been a strong driver of steel demand.

Not only is the increase of demand and sales from the automotive industry a positive, but the increase in domestic market share continues to boost the demand from the domestic steel industry.  The current market share of domestic light vehicle sales is at 78%, up from 75% in March 2011 and around 70% during the pits of the recession in 2009.

While the sales of imported vehicles have seen improvement as overall demand has increased, the demand for domestically manufactured vehicles has increased at a stronger rate. 

Besides the big three (GM, Ford, and Chrysler); foreign auto investment in the U.S. has been a strong driver of steel demand.  In some cases, foreign auto companies are investing in U.S. manufacturing facilities and then exporting the finished vehicles back to their native countries.  This increase in domestic investment is a continued good sign for domestic steel demand.

March continued to show the growing strength of the industry as total sales of light vehicles climbed to 1.40 million units, the single highest monthly total since June 2007.  The recent strong trend of sales gave the automotive industry its strongest quarter since pre-crisis 2Q 2008.

The Perception: The United States economy has reached a point where manufacturing is less important than the service sector for job growth. 

The Reality: While the service sector has grown as a percentage of GDP, many of these jobs were because of the manufacturing sector’s strong multiplier effect.  

According to the U.S. Department of Commerce, manufacturing has a multiplier of 2.26, whereas the finance, insurance, and real estate sector has a multiplier of 1.53. If you take into account the Industry Multiplier (which tracks how money spent in one industry creates jobs in other industries) manufacturing remains critical to GDP growth.

The Boston Consulting Group recently reported that we are entering a “Manufacturing Renaissance” in the United States that will create 2 to 3 million new jobs. “Approximately 600,000 to 1 million jobs will come directly through manufacturing work while the rest will come through supporting services, such as construction, transportation and retail.” 

Jobs in manufacturing create jobs in the service sector. 

A couple weeks ago, I wrote that the extra leap day could boost GDP. One of our readers quipped, “This should counteract the lost time from the NCAA tournament!” Majestic Steel listens to reader feedback, so we decided to consider the economic effects of March Madness. 

Challenger, Gray & Christmas releases an annual Challenger March Madness Report, which it admits gives “legitimate scientific studies a bad name,” that estimates employers will lose $175 million from their employees’ distracted time during the first two days of the tournament. Although they expect it to be taken tongue-in-cheek, they make a good point, “Internet speeds may be slower, some workers will not respond to emails as promptly, and lunch breaks may extend beyond the usual time limits.” Another study found that university research activity drops in the week following Selection Sunday by about 10%, even at libraries not connected to universities with Division I teams.

The NCAA tournament has become big business; CBS and Turner Broadcasting are paying $10.8 billion for TV rights through 2024. There are 67 games in the tournament (four play-in, 32 first round, 16 second round, eight in the Sweet 16™, four in the Elite 8™, two in the Final 4™, and finally the championship game). Almost all games are played at neutral sites, so there is additional economic activity created by teams and fans traveling to host cities and filling hotels.

When a team goes on a run (as VCU did last year), the local community floods retail shops and sports bars, spending money and getting caught up in the moment. It’s similar to the impact of Super Bowl™ Sunday, which can amass more than $11 billion in consumer spending. Hopefully the extra economic activity helps offset lost productivity.

Consider how March Madness creates camaraderie among the workforce; most years a college team emerges that is better than the sum of its parts. Use them as an example and rise to the occasion when your time comes to excel as a team. Good luck with your bracket and enjoy this spectacle!

March 11, 2011, will be a day that most Japanese will never forget.  While most of us in America were sleeping, Japan was hit with one of the worst natural disasters in their country’s history.  If the 9.0 magnitude earthquake wasn’t bad enough, it triggered a powerful tsunami whose waves reached heights of 100+ feet.  Now a year later, as Japan is continuing to rebuild, the U.S. steel industry may be influential in this recovery. 

The aftermath of the tsunami was fierce; towns were wiped out, the infrastructure was destroyed and nearly 19,000 people had lost their lives.  Over this past year, the country has been rebuilding where they can to overcome this tragic event.  Despite the rebound, some things will never be the same and have changed the country and the way they do business for the foreseeable future.

One of the main sectors affected by the natural disaster that had a direct effect on the U.S. was the auto industry.  Production from both Nissan and Toyota were virtually halted due to damaged facilities, flooding and a loss of key part suppliers.  While up to 25% of the country’s auto production was expected to be lost, that number was actually closer to 5%.

The lack of production in Japan caused supply shortages of many made-in-Japan models like the Prius and Honda Fit, and were not available to U.S. buyers.  This lack of foreign inventories boosted domestic sales as both GM and Ford increased market share.

As global demand increased, the recovery in Japanese auto production was accelerated.  Nissan reported record sales of 4.7 million vehicles in 2011, up 14% from the previous year, and Toyota, while initially expecting a loss of production of 2 million vehicles, ended up losing production of 370,000 vehicles with 220,000 of those in the first month after the disaster.

Another major concern after the disaster was Japan’s reliance on nuclear energy.  The seven meltdowns at the three reactors of the Fukushima Daiichi Nuclear Power Plant left a 12-mile radius dead zone, which is uninhabitable.  

The problems caused by this nuclear accident have led the Japanese government to turn their reliance on nuclear energy to something safer, such as natural gas.  While Japan is low on its natural gas self-dependence, North America (Canada and the U.S.) is flush with the energy source and could become a large supplier to the Japanese.   If this turns into the case, an increase in demand for pipe/tube and storage bins for this exported liquefied natural gas will become necessary, boosting steel demand.

So as Japan fights to rebuild the northern part of their country severely damaged by this tsunami, the U.S. steel industry could become an integral part on both the supply and demand side moving forward.

Last week, Majestic Steel Research summarized key employment and foreign fiscal policy indicators of a continued economic recovery. We intend to report on the following further key demand and economic indicators to be released this week:

• On Tuesday, February 2012 retail sales data. 
• At the end of this week, February 2012 inflation, including the Producer Price Index available on Thursday, and the Consumer Price Index to be released on Friday.
• On Thursday, the February 2012 Empire State Mfg. Index and the Philadelphia Fed Survey. 
• By the end of this week, the February 2012 Industrial Production/Capacity Utilization Rate report.

Be sure to download this week’s edition of the (C)ORE Report for discussion on these topics.  Also, tune in to the (C)ORE Blog and @Steelresearch twitter account to keep close tabs on what’s happening throughout the week.