Steel Products

U.S. Sheet Supply Squeeze Is On Again, Sources Say

Written by Michael Cowden

Availability from domestic sheet mills is getting worse again after briefly improving last month, according to some market participants.

The trend follows winter storms taking out production at electric-arc furnace (EAF) producers in the southern U.S. in February and ahead of a raft of upcoming maintenance outages in the second and third quarter, sources said.

Some had, before the severe weather last month, reported being able to secure increasingly greater tonnages above their contracted minimums. That is no longer the case for many. And spot tons–especially for some smaller, regional service centers–are hard to come by, buyer sources said.

“Mills are holding us to the minimum of our contracts. And it’s kind of wash, rinse, repeat,” one Midwest service center source said. “The volumes are back to where they had been.”

The result: U.S. hot-rolled coil prices have set yet another new all-time high mark. Steel Market Update’s benchmark hot-rolled coil price stands at $1,270 per ton ($63.50/cwt), up 2.4% from $1,240 per ton last week and up 25.7% from $1,010 per ton in early January.

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And some market participants said the focus on price misses the bigger problem–namely, the lack of supply.

“Don’t worry about the price. That’s the wrong question,” a second Midwest service center source said. “If you need steel, you are willing to pay any price.”

And there does not appear to be any short-term relief coming from U.S. mills, many of which have slated maintenance downtime in the months ahead.

Just a few examples:

• EAF steelmaker North Star BlueScope has a planned 3-7 day outage coming up in April at its mill in Delta, Ohio.

• U.S. Steel plans to take a 25-day outage to repair a blast furnace at its Mon Valley Works in western Pennsylvania.

• And Cleveland-Cliffs plans to take an outage at the No. 7 blast furnace at its Indiana Harbor steelmaking complex in East Chicago, Ind., after restarting a furnace taken down for repairs at its Middletown Works in Ohio.

The latter outage is notable because Indiana Harbor is the largest steel mill in North America, according to the U.S. Army Corps of Engineers. And the No. 7 furnace is the largest in North America, per the Association for Iron & Steel Technology (AIST) 2020 Directory of Iron and Steel Plants.

The No. 7 furnace has a hearth diameter of 13.72 meters. The second largest furnace in North America, the No. 14 at U.S. Steel’s nearby Gary Works, has a hearth diameter of 11.73 meters, according to the AIST directory.

While the resolution of a strike at NLMK USA’s steel mill in Farrell, Pa., and the restart of JSW Steel USA’s EAF and caster in Mingo Junction, Ohio, might ease the supply squeeze, a potential strike at Allegheny Technologies Inc. (ATI) threatens to cut into that additional volume.

Steel Dynamic Inc.’s (SDI’s) new mill in Sinton, Texas, should help to alleviate the supply squeeze when it comes online this summer. But some sources noted that it will start up its coating lines first, something that could in the short-term squeeze supplies further because SDI will need to feed those finishing lines with substrate.

Yet even as service center sources said supply was a bigger issue than prices, downstream consumers warned that record high prices threaten to destroy demand.

And it’s not just steel prices that are inflated, so too are prices for other basic supplies–which might lead to gains in alternative products such as PVC pipe, one Mid-Atlantic fabricator said.

“Everything is 2-4 months behind. … And the owners of some of these projects are saying they are not going to pay that much for lumber, for steel, for nuts and bolts,” he said.

By Michael Cowden,

Michael Cowden

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