Executive MBA Luncheon Speaker Series: Lou Schorsch
The ArcelorMittal executive talks candidly about the ‘cost game’ of steel production and its role in developing countries By Rachel Farrell
5/13/2010 - It’s a tight market for commodities, but Lou Schorsch is glad to be in the business of steel.
Last year, for instance, “there was no steel company in the world that went bankrupt, despite the economic crisis,” said Schorsch, the president and CEO of Flat Carbon Americas for ArcelorMittal, a leading global steel company. “In part, that’s because the industry has consolidated. With that scale you have better access to financing, and you have a broader portfolio of businesses.”
Schorsch visited the Kellogg School on April 30 as part of the Executive MBA Luncheon Speaker Series. At ArcelorMittal, he has overseen flat carbon facilities in the U.S., Canada, Mexico and Brazil since 2006.
During the economic crisis, steel continued to be an important resource for developing countries — particularly BRIC countries — as they built new roads, facilities, rail lines and other infrastructure, Schorsch noted. As the global economy continues to recover, the demand for steel is expected to continue to rise.
Historically speaking, “as the economy is rebuilding, the amount of steel that [countries need] goes through the roof,” Schorsch said. However, he added, “then after the economy recovers, it flattens out.”
As a leader among developing countries, China is using large quantities of steel, but only that which is locally produced. Last year, China increased its steel production by 23 percent (compared to a decrease of 17 percent in the rest of the developing world) and occupied 48 percent of total steel production worldwide.
“They’re stunning numbers,” said Schorsch. “There’s a stark differential between China and the rest of the world.”
Schorsch speculated that China may eventually be “overbuilt,” he said. “Is it a bubble? Time will tell. However, so far they have been able to consume the steel within the country.” China is projected to consume 550 million tons by 2011, by contrast to 70 million tons in India, he said.
Looking forward, Schorsch acknowledged that ArcelorMittal expects challenges in Europe and North America. “We have a long road to go before we get back to a healthy situation in the mature economies,” he said. “But we have a good position in high-growth areas, such as Brazil.” He notes that, in 2009, ArcelorMittal spent $4 billion on capital; this year, the company expects to spend about $5 billion.
At the end of the day, the steel business isn’t about innovation. “I believe it’s a cost game,” he said. “Because almost by definition, it’s very difficult to differentiate yourself.”
The Executive MBA Luncheon Speaker Series features lunchtime talks by a variety of senior executives to Kellogg Executive MBA students. Recent speakers have included Roslyn Brock, chairman of the National Board of Directors, NAACP (March 5); Kate Maehr, executive director of the Greater Chicago Food Depository (March 12); Tony Hunter, CEO of Tribune Media Group (March 19); and Andrew Prozes, CEO of LexisNexis (April 23).