Final thoughts

We did see a push to raise prices about a year ago. It didn’t do much more than “stop the bleeding.” And my guess is that any announcement now would have a similar impact – barring something unforeseen (a big, unplanned outage or idling, for example).

Steel still drifting lower

We continue to hear from bigger (but not huge) buyers that prices in the high $600s per short ton (st) – roughly $670-680/st – are available from certain mills in the North and Canada, especially for standard sizes. (In terms of volume, think 10,000-15,000 st)

Some of you tell us that prices in the South are holding up better. You tell us that Nucor is largely sticking to its published spot price of $780/st. You also tell us that other EAF sheet mills in the South are $20-40/st below that – not $80-100/st lower as we’re seeing among some Northern producers.

Perhaps the labor troubles at ArcelorMittal Mexico could result in squeezed slab supplies to mills in the US and support a regional dichotomy? But we’re not seeing any evidence of that in our surveys. And it seems a little early to jump to any conclusions.

Also, others of you in the South tell us that mills in the region are just as willing to get competitive as their Northern counterparts, especially with import volumes still high – notably for coated products.

Generally speaking, market participants tell us that, barring any obvious reason for prices to rebound sharply, they plan to buy only as needed until lead times get into September – meaning some of the bigger buys might not happen until August.

Why the confidence that prices won’t go screaming higher in the weeks ahead as they have in past cycles? Two factors stand out in conversations with you over the last week: Higher import volumes and questions about demand.

FR imports up (again)

The US was licensed to import 999,135 metric tons (mt) of flat-rolled steel in May, according to Commerce Department data. That’s the highest level since 1.03 million mt in June 2022, exactly two years ago.

The trend is even more pronounced in coated products, where 431,707 mt were licensed to be imported in May. That marks the highest level since November 2021, when supply caught up with strong post-pandemic demand and then overshot it.

Some of you told me that coated imports were the highest you’d seen in years. You weren’t wrong. If they had been just 7,000 mt higher, we’d have to go back more than six years to see a bigger tally for foreign coated.

It reminds me of 2015-16. Recall that’s when high import volumes resulted in a wave of trade petitions, including tariffs of more than 500% on Chinese cold rolled. Attention is now focused on Southeast Asia. Vietnam, for example, was licensed to ship approximately 101,782 mt of coated products to the US in May. That’s up from 87,560 mt in April and more than double 44,049 mt in March.

Some sources I’ve talked to think the import levels might drop as we get into July. Given long lead times for Asian material, that would roughly coincide with when US prices started to inflect lower in April. Still, there are a lot of tons to chew through between now and then.

Demand wobbly

Higher flat-rolled steel imports come against the backdrop of increasing domestic capacity. Don’t get me wrong. A strong, modernized domestic supply chain is a good thing over the long haul. But it’s not exactly supportive of higher prices in the near term.

I have been writing for a while now that strong demand has been the sauce that has made market volatility digestible. But I wonder if we’re starting to see some cracks there.

Yes, it could just be the summer doldrums. That said, a preliminary read of our steel market survey results indicates that about 33% of respondents did not meet forecast. That’s the highest reading we’ve seen there going back to at least the fall 2022. (To be clear, that’s not terrible. Another two-thirds of respondents continue to meet or exceed forecast.)

Trouble in auto?

Some of this is probably seasonal. Lead times are into July, which is when many automakers pause for model year changeovers. But some of you tell me there could be more to it than that now.

New vehicle sales were expected to be approximately 1.45 million units in May 2024, up 2.9% from May 2023, according to J.D. Power. And the US remains on pace to sell 16.1 million vehicles this year – no shabby number.

“However, the industry continues to produce more vehicles than are being sold, leading to rising inventories and increasing the likelihood of elevated discounts as the year progresses,” Thomas King, president of data and analytics at J.D. Power said in a statement.

Case in point: New-vehicles inventories were 2.84 million units at the beginning of last month, up 51% from a year ago, according to Cox Automotive. And incentives are twice what they were a year ago, the group said.

That squares with what I’ve heard from some of you anecdotally. Namely, that we’re seeing “truck wars” even among popular brands such as the Ford F-150 and Chevy Silverado – attractive financing and low monthly payments for models that were hard to find at any price in 2021.

Some of you closer to automotive tell me that fleet sales (e.g., rental car agencies) had been keeping sales figures up. But with fleets mostly replenished, it’s unclear where the next big source of demand might be. Do consumers, grappling with ballooning credit card debt, still have enough in reserve for such big-ticket buys?

And yet, to my surprise, buyer sentiment improved. How to explain that? Let me know if you have any good theories at info@steelmarketupdate.com!

Steel 101: Next week in Ft. Wayne!

Our next Steel 101 gets underway on Tuesday in Fort Wayne, Ind., and will feature a tour of SDI Butler.

There are only a few spaces left. If you’d like to claim one of them, register here or reach out to us at events@steelmarketupdate.com.

Thank you for your continued interest in SMU.