Final Thoughts

Final Thoughts

Written by Michael Cowden

The US steel market continues to revert to where it was before the outbreak of war in Ukraine.

SMU’s prices for sheet products are lower. Prices abroad are too. The latest bit of evidence: Published mill lead times.

Case in point: Steel Dynamics Inc. (SDI) published updated lead times on Tuesday, May 3. They indicated that hot-rolled coil was available from the company’s sheet mill in Butler, Ind., by May 30 – so a little less than a month. Scroll back to April 21, when SDI released a prior lead time sheet. HR lead times for Butler were May 23 – so a little more than a month.

Four weeks, give or take a few days, is a pretty normal lead time for hot-rolled coil. And that’s the point: Lead times are normal now. They’re not extending like they were immediately after Russian forces invaded Ukraine. And it’s hard to find many data points that would supporting steel prices increasing or lead times extending in the weeks ahead.

Scrap is expected to be down this month, maybe by a lot. High scrap prices in prior months have drawn in more obsolete material. And with pig iron in short supply, obsoletes are not exactly in high demand. The solution to pollution is dilution, as a cousin in the sanitation business once told me. And there isn’t as much pig iron around to dilute with.

The consensus seems to be that sheet prices will see small week-over-week declines, in the range of $20-40 per ton ($1-2 per cwt), until we’re back to, I don’t know, $900-1,000 per ton. I suggest that $900-1,000 per ton range simply because Cleveland-Cliffs was quick to announce a price increase in February when prices dipped into that territory. Could they fall below that point? Maybe.

The consensus of small declines (small being relative because prices are still incredibly high) has a logic. That said, there was also a consensus at the end of last year that prices would fall gradually over the course of Q1. Instead, prices went into freefall until the war changed the direction of the market. I wouldn’t write off the possibility of a swift decline. Some service centers are lowering prices more aggressively than others. Why are they doing that?

Also, all that new capacity we’ve been talking about for the last couple of years really is coming online, finally. (Speaking of lead times, I’m tempted to say that new mill start-up dates should in the future be listed as “inquire.”) There is also the question of imports. Mexico has new capacity not just from ArcelorMittal but also from Ternium. With US prices as high as they are, why wouldn’t more of those tons go to domestic buyers? What about other traditional sources such as South Korea, especially considering how low Asian HRC prices are?

Maybe I’m being too bearish. But it’s not just me. ArcelorMittal has changed its global steel consumption forecast for ’22. The steelmaker, one of the largest in the world, had predicted a modest increase in steel consumption this year. Now it expects modestly lower consumption. That’s a pretty big deal.

Here is how one service center executive put it: “We are not seeing any mills calling us and begging us for business. But I can’t find any reason why it (price) would stop continuing to go down. … And there are some guys (other service centers) who are selling out to the market cheaper than we would like.”

What about you – can you think of any reasons why prices won’t continue to fall in the weeks ahead?

Steel Summit

Registrations for the 2022 SMU Steel Summit Conference are beginning to surge as we quickly approach 500 for this year’s event. Over the past few days, we received new registrations from the following companies (an * means more than one executive was registered): 3VC Consulting LLC, Altec Industries Inc., Ameristar Perimeter Security, Arcosa, Array Technology Inc., ASSA ABLOY Door Group*, Associated General Contractors of America, CSN LLC, Exltube*, Ferguson HVAC*, Headwall Partners, Hyundai Corporation (USA) Houston, Kloeckner Metals Corp., Magic Coil Products, LLC*, Material Sciences Corporation*, McNeilus Steel Inc.*, Mill Steel Co.*, Nikola Motor Co., Old Dominion Supply, O’Neal Steel*, Pacific Metals Trading Inc., Salit Steel*, and Stelco.

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We look forward to seeing you in Atlanta on Aug. 22-24 at the Georgia International Convention Center.

By Michael Cowden,

Michael Cowden

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