Steel News

Shifting Lifestyles Should Drive New Demand for Cars, Says AK Steel CEO

8/27/2020 - Automakers are likely to see new consumer demand for vehicles as the coronavirus pandemic has caused permanent lifestyle shifts in the U.S., according to Cleveland-Cliffs Inc. chairman and chief executive Lourenco Goncalves.

Goncalves, who spoke during Steel Market Update’s annual Steel Summit conference, said the pandemic is forcing people out of the cities and into locations that make vehicle ownership more feasible. 

“People are moving out of high-density, high-cost places like New York City and Silicon Valley to the suburbs, and they now, more than ever, need cars and SUVs. Ride-sharing is no longer favored,” he said. 

Cleveland-Cliffs, historically an iron ore miner, entered the steelmaking business earlier this year when it acquired AK Steel, which is predominately a supplier to the automotive industry. Goncalves said 66% of AK Steel sales are tied to the automotive industry. 

Also during the conference, Goncalves spoke about the decision to close AK Steel’s Dearborn hot strip mill in Michigan. He called that decision “overdue.” 

He said the strip mill was out of place within the plant – it was a narrow strip mill feeding a wide pickling line and tandem cold mill that produces exposed automotive parts.

“That hot strip mill doesn’t belong there,” he said.  

With the strip mill closed, Dearborn is shipping high-quality slab to AK Steel’s flagship Middletown, Ohio, plant for rolling and in some cases shipping coils back to Dearborn for further processing on the pickling line and tandem cold mill.

But even with shipping costs, the company is still saving more than US$30 million annually, Goncalves said. At the same time, the Middletown hot strip mill, which had been running at less than half capacity, is now near full utilization, driving additional efficiencies, Goncalves said.