Product

SMU CEO Reflects on SDI's Mark Millett Comments on Steel Supply

July 20, 2021

Mark Millett, CEO of Steel Dynamics, had some interesting comments in this morning’s earnings conference call with analysts. Based on his comments, the domestic steel industry is capable of producing 90-95 million tons of steel annually. The demand for steel is closer to 120 million tons; in extremely strong markets in the past it has gone as high as 140 million tons. So, the U.S. is in a net deficit of 25-30 million tons in decent markets and as much as 45 million tons in booming markets. In the past, foreign steel has made up the difference, which helped keep inventory levels high and prices muted.

MarkMillet Through May, the U.S. has imported 11.46 million net tons (10.4 million metric tons), and we are well on our way to exceeding 20 million tons for the calendar year. However, we need to remember one-third of those tons are semifinished steels (mostly slabs), which go to the conversion steel mills (California Steel, NLMK USA, ArcelorMittal Nippon Steel, JSW Texas, etc.).

On top of this, the U.S. is on pace to export 7.5 million net tons of steel this year. Those tons would need to be deducted from the 90-95 million tons of domestic production referenced by Mark Millett.

Mr. Millett believes the approximately 6 million net tons of new capacity that is coming into the market in late fourth quarter and into 2022 is doing nothing more than replacing tons that were removed from the market by the integrated steel mills.

Without a large change in the inflows of foreign steel, or a reduction in demand, the expectation is for the market to remain tight over the near term. Mr. Millett spoke of prices remaining tight into 2023/2024 based on discussions with large service centers and their inability to build back inventories (which must happen prior to a slide in steel prices).

I will remind everyone that I have a tremendous amount of respect for Mark Millett. He does tend to be on the optimistic end of the chart, and he is not always right with his longer-term predictions, but his opinons matter. He will be one of the featured speakers at this year’s SMU Steel Summit Conference.

Today we participated on the monthly galvanized steel conference call with the HARDI wholesalers (HARDI = Heating, Air Conditioning, Refrigeration Distributors, International). The call was well attended with wholesalers who supply galvanized sheet and coils to the mechanical contractors who work on residential and commercial construction projects. The last few months have seen the calls become predictably the same. Demand is strong, inventories are tight, wholesalers are all on allocation, prices continue to rise and the expectation is for more of the same.

Update on SMU Steel Summit Conference

As always, we encourage anyone attending the 2021 SMU Steel Summit Conference to get vaccinated against COVID-19. Data is suggesting 98% of the new COVID cases are non-vaccinated people. My entire family and close friends have all been vaccinated with zero ill effects.

Registrations keep piling in as we move toward 900 executives registered for this year’s event. It looks like we should be around 950-1,000 attendees when all is said and done. The following companies have registered over the past couple of days (those with an * means more than one person is registered to attend from that company): Appleton Supply Company, Inc.; Chore Time (a division of CTB, Inc.); Dover*; Galvasid S.A. de C.V.*; Gibraltar Industries*; Gibraltar-SEMCO; Heritage Capital*; Lousteel LLC; North Shore Steel; Polaris Industries*; PPG Industries; Shivom Jay Steels International LLC*; USG; and Whirlpool*. The following companies added more executives to their registration: Quaker Houghton* and Zekelman Industries*.

If you would like to register to attend the SMU Steel Summit Conference, either to attend it live or virtually through our platform, you can do so by clicking here.

We will be using the SMU Events Platform instead of the App we previously used to provide both live and virtual attendees with information about the conference. This includes the schedule (we have decided not to print a hard-copy program this year), speakers, speaker presentations, list of attendees (name, company, title), ability to directly contact other attendees, ability to watch live presentations, or go back and watch them in the days after the conference, etc.

On Aug. 11 we will host an SMU Community Chat Webinar for anyone attending or interested in this year’s conference. During the webinar we will discuss how to use the platform, what protocols will be in place inside the conference venue. We also will discuss the program and what you should be looking forward to, etc. We will provide a link for registration for this webinar later this week.

We have a good SMU Community Chat Webinar coming up on Wednesday, July 28, when Bernard Swiecki of the Center for Automotive Research (CAR) will talk about electric vehicles and what it means for the supply chain and the steel industry. Swiecki will also be a speaker at the SMU Steel Summit Conference in August. You can register to attend this Community Chat by clicking here.

As always, your business is truly appreciated by all of us here at Steel Market Update.

John Packard, President & CEO, John@SteelMarketUpdate.com