Steel Products Prices North America

Lowrey: ‘I’m Bullish on the Short-Term Outlook for Steel’

Written by Tim Triplett

Industry analyst Paul Lowrey is “bullish on the short-term outlook for steel,” but his goal as a presenter during the Tampa Steel Conference this week was “to get some of you to think differently about what is going on.”

Lowrey, founder of Pittsburgh-based Steel Research Associates, is a contrarian when it comes to the common belief that new steelmaking capacity coming online over the next few years will oversupply the market and undercut steel prices.

Tampa.Steel.ConferencePointing to historical data, he made the case that steel consumption is actually lower than a decade ago. For example, construction has not yet recovered to pre-COVID levels, he said, noting that the U.S. built 2.0 million new homes in 2004, but just 1.5 million last year. What he termed “indirect imports,” the steel content in finished goods such as cars and appliances from overseas, remains on the rise. “That’s another way of saying we have offshored manufacturing,” he said. “Indirectly, we bring in two and a half times the amount of steel we bring in directly.” The downgauging of steel, notably in advanced high-strength steels (AHSS) for automotive, also has decreased the tonnage consumed in the U.S.

Including the new flat rolled capacity coming online at SDI’s new mill in Sinton, Texas, and expansions at Nucor Gallatin and North Star BlueScope (NSBS), the market will soon have 5.3 million tons of production it did not have last year when the market was in short supply. But consider where that capacity is located, he said.

The four largest ports of entry for flat rolled steel into the U.S. are Houston, Los Angeles, Detroit and New Orleans. Sinton is not far from Houston, NSBS is near Detroit and Nucor recently acquired a majority stake in California Steel Industries. Thus the new production in the U.S. won’t be a net gain in capacity, but will likely displace some imports. “We need to think differently about imports. They are going to see new competition they haven’t seen before,” Lowrey said.

Consolidation’s effect on steel pricing will become more pronounced, as a small handful of mills now have big say in where steel prices go. There are basically just four major flat rolled producers in the U.S. now—Cleveland-Cliffs, Nucor, SDI and U.S. Steel—and eight hot strip mills. That compares to 21 companies operating hot strip mills in the year 2000. And it’s the HSM capacity that ultimately determines how many coils make it to market. By his calculations on hot strip capacity, the U.S. will have 3.0 million tons less in 2025 than it did in 2000, not counting any mill closures that may be announced in the next few years.

“Higher prices are here to stay. Get used to it,” he concluded, asserting that the latest changes are just part of a “great rationalization” and “modernization of technology” that has been ongoing for 30 years.

“Capacity is everybody’s favorite topic, with the sensational headlines [about how oversupply spells doom for steel prices]. But I’m tired of hearing it,” he said. “If the definition of new capacity is the age of the equipment, then we have new capacity. If the definition of new capacity is incremental supply that we did not have before, that is a provably false statement.

”We are not adding new capacity; the technology is changing. The industry is transforming itself. You need to think differently about that one,” he told the crowd in Tampa.

By Tim Triplett,


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