Bly: Steel Industry Hungry for Business

With auto plants completely shut down for an extended period due to the coronavirus, automotive was the largest contributor to reduced steel consumption, dropping 30 percent or 2 million tons pre-COVID to present. Construction has fared the best through the pandemic, gaining about 3 percent year-over-year. Machine equipment and oil production goods both dropped from March to May, while appliance used the downtime to tweak production lines, said Bly. Tin plate was a sector that did quite well, producing cans for food items.

Although Q2 earnings reports will be worse than the first quarter, auto OEMs are in a much better position compared with the last recession in 2008-09 and will emerge stronger. Sales of pickups and SUVs are robust and adding to company profitability. Automakers report volumes are already back to pre-COVID levels or higher, Bly said.

About 83 percent of Applied Value clients believe the COVID-19 pandemic was the most important issue affecting their organization in the last five years and will have a lasting impact, according to a recent survey by the management consulting firm. Company devaluation puts suppliers at risk, and smaller companies may not survive the pandemic and resulting recession financially, said Bly.

Buyers are looking at “nearshoring,” shifting supply chains from China and elsewhere to Mexico and Central America, as well as back to the U.S. Manufacturers want to reduce the risk in global sourcing and get closer to customers. Their frustration with China and the related trade volatility is apparent, Bly said.

On pricing, Bly noted that steel prices are historically low right now with hot rolled prices at or below $500 per ton an infrequent occurrence. Some upward potential for pricing exists, Bly said, but he does not expect massive upward movement.

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