Leaner, More Efficient Steel Industry on Mend

Job cuts, plant closings, productivity improvements and import controls have returned profits to American steel producers after a long period of devastating financial losses.

But the industry’s turnaround has meant something else to Russ Weidner.

“Right now, we can’t buy for love or money a pound of steel for delivery in 1987,” said the executive vice president of Paragon Industries, a producer of welded drilling pipe based in Glenpool, Okla. “We just can’t get steel.”

Paragon uses hot-rolled steel, a semi-finished product, for its drilling pipe. Weidner said if he could get as much steel as customers were demanding, the 4-year-old company could triple its sales of approximately $1 million a month.

“The market now is pretty hot because our industry has gone through a dramatic change in the last 12 months,” he said.

With oil prices edging higher, the number of drilling rigs operating in the United States has increased to about 1,000 from around 600 last year. With the oil price collapse, the rig count fell from nearly 4,000 early in the 1980s, and drillers and their suppliers took the plunge as well.

Similar forces have been at work in the steel industry. An abundance of American metal and cheap, imported steel collided with sluggish demand from oil drillers and other steel users.

To adapt to the changing environment, steel producers closed plants, slashed work forces, trimmed wages and successfully lobbied for import controls, which have contained foreign steel’s share to roughly one-fifth of the U.S. market.

With the U.S. demand for foreign steel waning, American producers are experiencing greater demand for their products. Surviving domestic mills are being used more efficiently; order books for most products are filled through year-end, and prices have stabilized.

“It’s more of a supplier’s market than it’s been in quite some time,” said Robert Toothman, a spokesman for National Steel, one of Paragon’s suppliers.

National’s mills are running at full throttle, and the company’s order book is filled into January for its major products, including hot-rolled, cold-rolled and coated sheet, he said Tuesday.

“Hot-rolled usually lags the others, and it’s right out there with them, maybe even leading the pack,” Toothman said.