Final Thoughts

Final thoughts

Written by Michael Cowden

It was great to have Gary Stein, CEO of Triple-S Steel, join SMU for a Community Chat earlier this week. (Btw, you can find a record of the webinar here.)

We covered a lot of ground. From Andrew Carnegie and the Johnstown Flood to the current steel market and the state of domestic manufacturing broadly speaking.

A two-tiered construction market?

One thing that stuck with me was how unevenly construction spending appears to be on “green” initiatives and other key items funded by infrastructure spending, the Inflation Reduction Act, and the CHIPS Act.

Think big projects like battery plants and chip factories. Such work has provided a big boost to larger construction companies and fabricators. That stands in contrast to an earlier boom in warehouse construction from companies like Amazon. That warehouse work also benefited local, smaller, and mid-sized construction firms and fabricators, Stein said.

“Fabricators around the country are not nearly as busy as they would like to be, or as busy as they were two years ago,” he said. “These big, monster plants being fabricated by a handful of very large fabricators.”

Stein also noted that infrastructure spending, while a welcome thing, might not be felt for years because of the permitting required to build something as simple as a bridge.

His thoughts dovetailed with a comment made by an executive on the HARDI Sheet Metal/Air Handling Council webinar earlier this month. That executive said more skilled union construction workers were “on the bench” in major cities in the Northeast than he’d seen in a while – maybe since the pandemic.

The data is not encouraging

So is it time to start to worrying about construction, one of the biggest end markets for steel?

Triple-S and the HARDI folks have their fingers on the pulse of the construction market. And it’s not just anecdotal evidence. Some of the data gives cause for concern as well. Construction spending has slipped. And the Architecture Billings Index (ABI), a key advance indicator of construction activity, fell in May to its lowest level in nearly four years.

That gives credence to what I’ve heard from some of you. Namely, that once current projects are wrapped up, there isn’t enough in the pipeline to replace them.

Keep an eye on CDK

The outlook appears better on the automotive side, the most concentrated market for steel in the US. Cox Automotive predicts that US sales will finish the first half higher – even if that growth might be held in check by high prices and high interest rates.

But Cox also forecasts that auto sales will dip in the second half of the year. And the Detroit Free Press reports that futures sales could be hit by the cyberattack on CDK Global. Recall that CDK makes software widely used by dealerships.

I’d keep an eye on that one. It has the potential to be disruptive the longer it drags on because it effectively forces dealers to use pen and paper to sell vehicles. And I’m guessing it’s been a generation, at least, since folks have had to rely on dead trees and ink.

If a major mill goes out, and no one notices…

Another wildcard, as I’ve noted before, is the labor action at ArcelorMittal Mexico. If the CDK hack has the potential to impact demand, the strike – legal or otherwise – has the potential to impact supply.

I didn’t expect that I’d still be writing about that situation a month after it first hit the headlines. What surprises me even more is that I’m not (yet) hearing much in the way of it impacting customers in the US. What a contrast from Q1’21, when a strike at ATI – which at time was toll rolling slabs for CSN, JSW Steel USA, and NLMK USA – made news.

Bulls on parade in futures

And yet despite that – and anecdotal reports we’ve gotten of high inventories all along the supply chain – hot-rolled (HR) coil prices are sharply up on futures markets. What’s driving that?

I think you could make a good case that US prices don’t typically stay in the $600s per short ton (st) for long – and so upside risk might be more than downside risk. Also, US HR prices are, based on our calculations, lower than the landed price imports. Typically, we don’t see that happen for long before US prices go shooting up again.

If prices do inflect upward after falling for most of Q2, what would be the catalyst: Price hikes or trade action? There are rumors of both. Or something else entirely? Let us know if you have any good theories.

Speaking of sharing your thoughts, SMU has had some good Op-Eds lately from a variety of viewpoints. USW President David McCall wrote a solid one last month on the limits, and real-life costs, of unfettered free trade. And Canacero General Director Salvador Quesada Salinas brought some insightful figures to the table to inform the debate around whether there has been a “surge” of Mexican steel into the US.

Reach out to us at if you’re a leader in your industry or your company and have thoughts you’d like to share.

Steel Summit

We’ll take a deeper dive into long-term automotive trends at Steel Summit on Aug. 26-28 in Atlanta with a great panel of industry experts. That panel includes:

  • Alan Amici, president and CEO of the Center for Automotive Research (CAR)
  • Dan Bowerson, vice president, energy and environment, for the Alliance for Automotive Innovation
  • Dean Kanelos, market development and production applications manager at Nucor
  • Michael Davenport, executive director and president of the Auto/Steel Partnership

We’ll look into things like EV supply chains vs. those for internal combustion engine (ICE) vehicles, what increased competition from aluminum die-casts means for steel, and whether automakers will prove willing to pay steel suppliers for “green” steel. And we’ll of course take your questions too!

You can see the full agenda here and register here.

Michael Cowden

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