Final Thoughts

Final Thoughts

Written by Michael Cowden

This week could be a big one for steel, or at least for the steel rumor mill.

For starters, there is renewed speculation that an announcement about the U.S. Steel sales process could be in the works.

The rumor mill is also churning fast when it comes to the duration of the UAW strike and the direction of sheet prices.

Finally, I’d like to draw your attention to an interesting wrinkle in Nucor’s sheet price hike relevant to plate.

Let’s take them in order.

U.S. Steel Sale Rumors Ramp Up

Yes, I know, there were similar rumors a few weeks ago. The difference this time: Cleveland-Cliffs, Nucor, and U.S. Steel are announcing earnings this week. (Cliffs and Nucor on Tuesday, U.S. Steel on Friday.) Could one of those calls produce news?

Cliffs has made no secret of its intention to acquire U.S. Steel. Several minimills are rumored to be interested in U.S. Steel’s Big River Steel EAF sheet mill in Osceola, Ark.

Is SDI among them? The Fort Wayne, Ind.-based steelmaker didn’t rule out the possibility in its earnings call last Thursday. What might Nucor have to say on Tuesday? And what might ArcelorMittal – the AM in AM/NS Calvert, an EAF sheet mill in Alabama – have to say when it releases earnings on Nov. 9?

There is also a lot of talk about who might acquire which integrated mills if a deal is done. That’s because there is chatter that OEMs – auto and appliance, for example – will fight harder against additional consolidation in sheet.

Cliffs was not obligated to divest facilities when it acquired AK Steel and ArcelorMittal USA. What if that’s not the case this time?

Let’s say Cliffs were allowed to keep Gary Works but required to divest another mill. Scenarios like that appear to be driving speculation that you could see some unusual bedfellows – a joint bid, for example, from a union-represented mill and a non-union EAF mill.

That would not be without precedent. As I noted in a prior Final Thoughts, we saw something similar in 2014 when the former AK Steel acquired the integrated assets of Russian steelmaker Severstal in Dearborn, Mich., while SDI acquired its non-union EAF sheet mill in Columbus, Miss.

Could we see something roughly similar this time around?

UAW Strike Duration Speculation

There had been speculation in some corners of the market that a deal between the UAW and the “Big Three” automakers might be close.

UAW president Shawn Fain on Friday provided ammunition that could be used by either side of that debate.

Fain teased the possibility of striking additional truck and full-size SUV plants. He also said that the biggest battles often occur during the “last mile” of a strike. Does that mean we could see another big truck plant hit by a strike before a tentative deal is reached?

Either way, there are already some market participants saying that HRC at $800-850 is a reality or soon will be. Some of the more bullish in that crowd suggest that domestic mills have a strong hand for the next few months.

They point to limited production, lower inventories, and long lead times – in some cases into December or even January depending on the mill and the product. And some think $900-1,000/ton HRC, or a repeat of what we saw in Q1’23, is possible.

A few will also admit that it’s hard to see beyond three to four months. That if HRC prices really do reach $1,000 per ton, we’d likely see them cycle back down again – especially should prices not rise in tandem abroad.

Nucor’s Big Price Hike on Thick Coil

Nucor sparked – or at least gave renewed momentum to – what might prove to be a sheet price rally. Its leading move, targeting a minimum base price of $800 per ton for HRC, got most of the attention.

If successful, that would be a $75 per ton increase from where SMU’s HRC price stood last week. That might prove to be modest compared to the increase buyers of thicker sizes could be facing.

The Charlotte, N.C.-based steelmaker also said it would seek at least $1,000 per ton for heavy-gauge HRC – material more than 3/4-inch thick. Why do that? It appears that Nucor doesn’t want its sheet mills to be undercutting pricing for discrete plate.

Plate prices used to move roughly in tandem with sheet. In early 2022, plate shot above HRC and hasn’t looked back. That has led some customers to purchase thicker coils, which they can cut to length, instead of buying discrete plate.

The math is not complicated. SMU’s average sheet price is at $725 per ton. Our discrete plate price is at $1,475 per ton. Using thick coil as a substitute for discrete plate makes sense if plate costs more than double what sheet does. Does product substitution make as much sense if the gap narrows from $750 per ton to $475 per ton?

I’ve heard that other mills have applauded the move. Will they follow? And, if they do, could that change plate market dynamics? Let me know what you’re seeing.

SMU Community Chat Webinar

Wiley partner Alan Price will be the featured speaker on Steel Market Update’s next Community Chat webinar on Wednesday, Nov. 8, at 11 a.m. ET. You can register here.

We’ll discuss the big issues facing steel when it comes to trade policy. Among them: Will the US and EU reach a meaningful agreement on decarbonization in steel and aluminum by year-end? Or could Section 232 tariffs, and retaliatory measures by the EU, be re-imposed?

Also, how might the two sides square differences between the EU’s carbon border adjustment mechanism (CBAM) and a US-proposed carbon border tax?

Michael Cowden

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