| Before we get into current conditions, I want to ask you: Could you characterize the steel market over the last four, five years? We've seen a general boom in commodity prices; I'm assuming we've seen the same thing in the steel market. Tell us about these price trends: What is behind it? What are the factors involved? Who is driving it? Paul Quartararo (Quartararo): Sure. Let me go back to 2004 at the peak of the housing market, where we'd seen a tremendous increase in steel demand in 2004. That demand carried over into 2005, and it was a very prosperous time for anybody who was in the steel market. Coming into 2006, people basically saw a leveling off of demand, and coming into 2007, they expected demand to remain at least constant and everybody increased their inventory levels. Well, those inventory levels took them through a good part of the year. Coming into 2008, we've already seen a tremendous movement in the steel industry. It started here in the United States, but it's worldwide.
Norman: It started here? Quartararo: Well, it started moving in January of this year. Prices overseas had been higher in the last year than they'd been here in the States. Starting in January, the U.S. mills announced a price increase of 10%. For example, on hot rolled steel, the pricing at the end of 2006 was about $590 per metric ton. That pricing went up to $640 per metric ton. It's expected now that pricing for April shipments from U.S. mills is going to increase to $700 to $710 per metric ton. Norman: That is incredible, and this gets me to what I wanted to ask you about: We continue to hear that the U.S. economy is either about to enter into a recession or is in a recession; there's also some talk about a cooling in the global economy. But steel prices, at least from what you're telling me, would belie this, and steel is a very important industrial material. Why is this happening? Quartararo: There are a number of different pieces to the puzzle. When we start putting the pieces together, we start to form a picture of what is actually happening. There's not just one factor that's affecting the steel prices. We have to look at the global economy as a whole and what's happening here in the States. Globally, demand for steel is very strong. In 2008, they're expecting a 6.8% increase in steel consumption overall. Norman: You're saying "globally," so the demand is coming obviously from places like China, India, Russia and Brazil. Is it also coming from the United States? Quartararo: No. In 2008, they're expecting demand to remain pretty much the same. That goes against what people might expect from everything that we're hearing in the economy. Norman: Yes, you'd think it would fall. Quartararo: Right, but what we're seeing right now is that the housing market, of course, has an effect on steel consumption. However, while the housing market has declined, we've seen a pickup in energy-related types of construction. Also, commercial construction has been very strong. Although the residential markets have declined, the other sectors have picked up, so demand is relatively stable. To get back to the global arena, what we have seen is that―especially in some of these economies like China, Russia, India, Brazil, ―we're looking at an astonishing 4.5% GDP growth rate in 2007. Norman: Very strong. Quartararo: Incredible. So we have these markets that are doing very well, and they're consuming a lot of iron ore and the basic raw materials used for the manufacturing of steel. That's driving the cost of steel up, and the steel prices are going to go up. Norman: So there you have it: Strong demand continuing despite forecasts for recession, resulting in steel prices moving higher.
Be sure to check Part II of our interview with Paul Quartararo. | 
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