Final Thoughts

A lot might have depended on where you were starting from. It might have been a $100/st increase for bigger buyers who were seeing prices in the mid/low $700s st. For smaller buyers, it might have looked like mills were mostly trying to hold the line in the face of potentially lower scrap prices.

US HR, crazy like Bitcoin

What strikes me if you look at US sheet prices compared to those just about anywhere else in the world is how volatile the market here is. We saw HR price increase 62% ($400/st) throughout Q4. They then immediately decreased in the New Year, falling 22% ($230/st) in 2024 to date. (You can keep tabs on prices here.) How do steel consumers in the US manage a business with a raw material price that whipsaws even in times of roughly stable demand?

Yes, steel is a cyclical business, and it always will be. But the volatility of the last few years in sheet is something new. It’s almost like trying to build a stable, profitable business around Bitcoin – the posterchild for volatility. I don’t know whether anyone has charted Bitcoin volatility compared to HR volatility. But I suspect US sheet prices and crypto might have more in common than we might think.

Tech is hungry for electrons

Speaking of things digital, AI was one of the big themes at the Fabricators and Manufacturers Association (FMA) conference I attended in Florida last month. The hope, and I’m way oversimplifying it here, is that AI will perform a lot of the grunt work that we do now (think back-office tasks, PowerPoint presentations, etc.) without destroying life as we know it.

It reminds me of conversations around any powerful new technology. Think debates around nuclear energy in the middle of the last century or the power of social media at the beginning of this one. So why am I thinking about nuclear and tech right now?

I used to cover aluminum and much of that coverage focused on electricity. That’s because electricity is the biggest single cost for an aluminum smelter. Think of how closely steel follows scrap price movements, and you’ll have some idea.

Industry veterans would sometimes point out to me that smelters built in the western US had become uneconomical in the late 1990s and early 2000s, partly because of the rise of tech – which increased demand (and prices) for electricity. Another factor was a lack of new electricity supply to meet increased demand – something that resulted in rolling blackouts in California in 2000-2001. (There were factors too. But I’m not going to delve into the Enron saga here.)

Are there enough of them?

Are we in danger of something similar now? I ask that because Bitcoin mining, for example, is notoriously energy-intensive. (And much of that energy is derived from coal.) Then there is the electricity needed to keep all our digital stuff in the cloud, whose carbon footprint rivals the airline industry. And now we’re adding generative AI, whose thirst for energy could grow to rival that of entire nations.

Steelmaking doesn’t require as much electricity as aluminum smelting. But as more production shifts to the EAF route, not only in the US but abroad as well, electricity will become a more important factor. That’s not a problem, if there is enough electricity to go around and if electricity rates don’t become as unpredictable as Bitcoin.

But back to the example of California in the late ’90s and early aughts. A drought then, combined with the state’s reliance on hydropower, resulted in one set of rolling blackouts. What happens, for example, if we see a big heat wave this summer?

Let’s say we see increased demand for electricity from residential customers for air conditioning collide with current industrial demand and sharply higher demand from tech. Do we have rolling blackouts like we did 20 years ago? (I should note here that it wasn’t just California that saw blackouts in the early 2000s – so did New York City, which suffered a blackout that lasted for days in the summer of 2003.)

SMRs – a term you’ll be hearing more often

Steel and big customers like automotive want not only more electrons but also more “green electrons” – think renewables like wind and solar. So where do all those electrons come from when the wind is not blowing or the sun is not shining? It seems like an obvious solution would be for the US to adopt more nuclear power generation.

That’s why I think you’re going to be hearing a lot more about SMRs, or small modular reactors. The International Atomic Energy Agency (IAEA) notes they can produce about a third of the electricity of a traditional nuclear power plant at a fraction of the size. Also, because they are modular, they can be made in an assembly-line process – which makes them more affordable.

Other countries and regions are already pursuing SMRs. The technology itself is safe and proven. But not everyone feels that way about nuclear power in general. Younger generations might be more accepting of nuclear energy – understanding that is a necessary supplement to renewables. But older generations might still identify nuclear energy mostly with past disasters – Three Mile Island in Pennsylvania in 1979 or Fukushima Daiichi in Japan in 2011.

The two major US political parties don’t agree on much these days. But they have been surprisingly unified when it comes to subjects like trade, infrastructure, and industrial policy. Perhaps they could get behind changing perceptions on nuclear? Maybe they could even work together to cut red tape when it comes to permitting and building SMRs? We might not agree on a lot of things. But I think we can all get behind a greener, more industrial US economy.