We attended Steel Business Briefing’s Steel Markets North America 2012 conference last week and in two jam-packed days, we heard a wide-ranging debate on a number of issues – most interesting was the theme of the supply side discussion, which ran throughout the conference.

It’s our own belief that supply has become more important than demand in calling the steel markets – with imports ranging from 24% of the market (netting out exports) to 36% of the market over the various months of 2011, the net impact – 11.5 mtpy – is FAR greater than new capacity!

Mark Schweitzer, Senior Vice President and Director of Research at the Federal Reserve Bank of Cleveland, shared the view that there is still overcapacity in the marketplace.  Tony Taccone, Partner at First River Consulting, says that Europe and Japan are not natural “net exporters” and that US exports are likely to surprise moving forward, which would take supply out of the market.

Lourenco Goncalves, Chairman, President & CEO at Metals USA, says that we do not have overcapacity in the United States, and that this is misinformation as US steel consumption always outpaces production. Mark Breckheimer, President of the Heavy Carbon Group at Kloeckner Metals, says that imports are likely to remain at higher levels through May and then decline starting in the June/July period, falling back to 1.5-1.7 million tons.

Sergei Kuznetsov, CEO of Severstal North America, sees the market as easily absorbing his new capacity and that it is displacing some imports. Export opportunities are also helping sales growth, according to Kuznetsov.  Mark Millett, President & CEO of Steel Dynamics, believes there is more than enough room for the new sheet capacity coming online when the market recovers. Mark Parr, Managing Director at KeyBanc Capital Markets, pointed to Thyssen as having “staying power” while he said that he doesn’t see RG Steel as “working out.”

Jim Tumulty, Senior Managing Director at the The Seaport Group, said that the September USW labor contract expiration could be a “black swan” event, disrupting supply.  Timna Tanners, from Bank of America Merrill Lynch, sees oversupply in the market and says that inventories have already been rebuilt.