SMU Community Chat
Bly: Steel Industry Hungry for Business
Written by Sandy Williams
June 18, 2020
From a steel buyer’s perspective, the environment is relatively competitive now. Mills and service centers are hungry for business, said Donald Bly, managing director of Applied Value, during Wednesday’s SMU Community Chat Webinar.
Mill capacity utilization is down to about 53 percent, but still better than the 2008-2009 recession, he said. “It’s a good time to be on the buyer’s side.”
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.
Click here to view a recording of the webinar. You will need to register if you have not done so already.
Sandy Williams
Read more from Sandy WilliamsLatest in SMU Community Chat
SMU Community Chat: Tanners explores if US steel industry still needs imports
The US steel industry is edging closer to independence from imports, and it may only take one more mill to tip the scales, according to Timna Tanners, managing director at Wolfe Research.
SMU Community Chat replay now available
The latest SMU Community Chat webinar reply featuring Timna Tanners, managing director of equity research for Wolfe Research, is now available on our website to all members. After logging in at steelmarketupdate.com, visit the community tab and look under the “previous webinars” section of the dropdown menu. All past Community Chat webinars are also available under that selection. If […]
SMU Community Chat: June 25 With AGC Chief Economist Ken Simonson
We’ll have a lot to talk about because construction is at the intersection of so many of today’s hot-button issues. The main question: Will construction thrive or dive in the rest of ’25? (Nothing wrong with a rhyme, even in serious times.)
Join SMU for a Community Chat With Timna Tanners on Wednesday at 11 am ET!
Timna Tanners, managing director of equity research for Wolfe Research, will be the featured speaker on the next SMU Community Chat. The webinar will be on Wednesday, June 11, at 11 am ET. It’s free to attend.
Scrap market trades sideways in June
The US scrap market has traded sideways from May prices in basically one day without any significant descent, sources say. All major steelmakers, with maybe one exception, issued orders at prices paid in May.