Can low shale gas prices attract new steel capacity to the US ?

An article in the Financial Times (June 19,2013) describes a new plant in Ohio built by Vallourec to produce steel tubes for the oil and gas industry. The company describes the low US gas prices, as well as the surging demand for steel tubes by shale gas producing companies, as reasons for their expansion. Low gas prices also enables production of Direct Reduced Iron or DRI, a product that can be added to scrap to make steel, and exported. But other US steel makers are also expanding their manufacturing of steel pipe, which represents 5% of the overall steel market, and end up driving up overall capacity for the product thus dampening prices. Given that demand for the steel pipe by the shale gas industry is driving up steel capacity, is the low shale gas price the driver of this capacity or the demand from the shale gas extraction industry itself the driver ? Will the added capacity and the ability to produce cheap DRI lead to a resurgence in steel capacity in the US ? How much of the current re-shoring of manufacturing back to the US attributable to the low price of shale gas ?

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About aviyer2010

Professor
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