Did the price increase announced by Cleveland-Cliffs last week stick? Yes, at least partially.
Our hot-rolled coil price is up $25 per ton ($1.25 per cwt) week over week (WoW). So, whatever happens going forward, Cleveland-Cliffs has at least temporarily “stopped the bleeding” in sheet prices.
Keep in mind that sheet tags had been falling since mid-July, when a price hike initiated by U.S. Steel a month earlier fizzled. Reversing that trend, and bearish market sentiment, was no small feat.
So will this increase meet the same fate as U.S. Steel’s? Will it lose momentum a month from now? Or are its prospects better?
That depends on who you ask.
$700+ HRC – Here to Stay?
Some market participants think it’s only a matter of time before the low end of our price range – now in the mid-$600s per ton – rises to $700 per ton or more. They don’t think the year-end deals will happen. Because they effectively happened in September.
They might also point to an uptick in inquiries and to customers ordering to the high side of their “min-max” contracts to avoid stepping into what is suddenly a pricier spot market.
It’s also worth noting here that price hikes appear to have been supported by unplanned outages of varying seriousness at domestic mills, according to recent market chatter.
Those unplanned outages, even if they were short-lived, come on top of widespread and in some cases extended planned maintenance outages. They also follow the temporary idling of steelmaking at U.S. Steel’s Granite City Works near St. Louis.
I’ve in addition heard that import offers are in the $620-640 per-ton range for offshore HRC – think South Korea and Brazil (so quotas but no S232 tariff), and in the high $600s per ton from Canada and Mexico. If that’s the case, why would US mills go back into the $500s per ton for hot band?
Does that mean Cliffs will get the $750 per ton it is targeting for HRC? We’ll see. Will domestic mills be able to hold the line, at least for a while, at $700 per ton? I think that’s highly possible.
Destocking Over (Maybe)
I suggest that because I’ve heard from some of you anecdotally that you’re no longer in destocking mode. It might be early to call this a restocking cycle. But there seems to be at least a mini-restock following the destocking we saw ahead of the UAW strike.
And evidence of at least limited restocking isn’t just anecdotal. Seventy-one percent of respondents to our latest steel market survey said they were active buyers. Only 29% said they were on the sidelines. That’s the highest activity level we’ve recorded since the first quarter.
You can also see that trend in our question about buying patterns. True, most people are maintaining or even reducing inventories. But we’ve recently seen a small but perhaps notable increase in the number of companies replenishing stocks:
So why am I holding off on endorsing the idea of a sheet price rally?
For starters, some of the gains we’ve seen are prefaced on limited capacity – and perhaps on the expectation that more capacity might be taken down. That’s hard to square with any notion of increasing demand.
We’ve also heard that EAF mills have been quietly ratcheting back capacity because of the strike – thus limiting spot availability. If the strike ends, wouldn’t they increase production again?
Also, it’s not just the UAW strike that’s expanding. So, too, are the number of plants that the the “Detroit Three” automakers – GM, Ford, and Stellantis – are idling in response to the strike and the various supply chain bottlenecks caused by it.
Could we see a snapback in demand once the strike is resolved? Yes. But I’m still not sold on the consensus view among our survey respondents that this strike will be over in 4-6 weeks.
Save the Date: Tampa Steel – Jan. 28-30, 2024
Don’t forget to register for the Tampa Steel Conference, which SMU hosts along with Port Tampa Bay.
It’s Jan. 28-30, 2024, at the JW Marriott Tampa Water Street. Don’t wait until the high season for tourism kicks in and hotel rooms become scarce and expensive. Register here!
Sheet prices rose this week on the heels of a price increase announced by Cleveland-Cliffs last week that was quietly followed by other mills.
Some market participants said it could mark the beginning of a sheet price rally. Others questioned whether the gains would be sustainable amid the ongoing UAW strike.
SMU’s average hot-rolled coil (HRC) price in the meantime stands at $670 per ton ($33.50 per cwt), up $25 per ton from last week – and marking the first week-over-week (WoW) price gain for HRC since late June/early July.
Recall the summer uptick happened after U.S. Steel announced a $50-per-ton price hike in mid-June that briefly stabilized the sheet market.
Cold rolled and coated base prices saw similar increases, with cold rolled up $30 per ton WoW to $895 per ton on average, galvanized up $35 per ton WoW to $900 per ton on average, and Galvalume up $30 per ton WoW to $905 per ton.
Plate was at $1,465 per ton on average, up $10 per ton from a week ago. Plate’s gains were modest given high base prices, and sources reported little change in plate market dynamics.
Given the broad-base increases we’ve seen in sheet prices this week and the apparent end of big-volume discounts, we have adjusted our sheet momentum indicators from lower to higher.
We have also adjusted our plate momentum indicator from lower to neutral following Nucor’s decision to keep plate prices unchanged.
The SMU price range is $640–700 per net ton ($32.00–35.00 per cwt), with an average of $670 per ton ($33.50 per cwt) FOB mill, east of the Rockies. The bottom end of our range increased $40 per ton vs. one week ago, while the top end of the range edged up $10 per ton compared to the prior week. Our overall average is up $25 per ton WoW. Our price momentum indicator for HRC is now pointing higher, a shift from lower, meaning SMU expects prices will increase over the next 30 days.
Hot Rolled Lead Times: 3–7 weeks
The SMU price range is $880–920 per net ton ($44.00–46.00 per cwt), with an average of $900 per ton ($45.00 per cwt) FOB mill, east of the Rockies. The lower end of our range rose $50 per ton WoW, while the top end was $20 per ton higher compared to a week ago. Our overall average is up $35 per ton WoW. Our price momentum indicator for CRC is now pointing higher, a shift from lower, meaning SMU expects prices will increase over the next 30 days.
Cold Rolled Lead Times: 5–8 weeks
The SMU price range is $870–930 per net ton ($43.50–46.50 per cwt), with an average of $900 per ton ($45.00 per cwt) FOB mill, east of the Rockies. The lower end of our range was up $40 per ton vs. last week, while the top end of our range was up $30 per ton WoW. Our overall average is up $35 per ton vs. the prior week. Our price momentum indicator on galvanized steel is now pointing higher, a shift from lower, meaning SMU expects prices will increase over the next 30 days.
Galvanized .060” G90 Benchmark: SMU price range is $967–1,027 per ton with an average of $997 per ton FOB mill, east of the Rockies.
Galvanized Lead Times: 5-8 weeks
The SMU price range is $860–950 per net ton ($43.00–47.50 per cwt), with an average of $905 per ton ($45.25 per cwt) FOB mill, east of the Rockies. The lower end of our range was up $10 per ton vs. last week, while the top end of the range was $50 per ton higher WoW. Our overall average was up $30 per ton compared to one week ago. Our price momentum indicator on Galvalume steel is now pointing higher, a shift from lower, meaning SMU expects prices will increase over the next 30 days.
Galvalume .0142” AZ50, Grade 80 Benchmark: SMU price range is $1,154–1,244 per ton with an average of $1,199 per ton FOB mill, east of the Rockies.
Galvalume Lead Times: 5-10 weeks
The SMU price range is $1,400–1,530 per net ton ($70.00–76.50 per cwt), with an average of $1,465 per ton ($73.25 per cwt) FOB mill. Both our lower end and top end of our range were $10 per ton higher compared to the week prior. Thus, our overall average is up $10 per ton vs. one week ago. Our price momentum indicator on steel plate shifted to neutral meaning there is no clear indication where prices will head over the next 30 days.
Plate Lead Times: 4-7 weeks
SMU Note: Above is a graphic showing our hot rolled, cold rolled, galvanized, Galvalume, and plate price history. This data is available here on our website with our interactive pricing tool. If you need help navigating the website or need to know your login information, contact us at firstname.lastname@example.org.
Construction spending in the US increased in August, according to the Associated General Contractors of America (AGC).
Total construction spending increased by 0.5% month over month (MoM) in August, AGC said. Money spent on construction in that month, not adjusted for inflation, totaled $1.983 trillion at a seasonally adjusted annual rate.
The increase was primarily driven by increases in many large nonresidential construction segments and residential projects, AGC said.
Spending on private residential construction was up by 0.6% MoM, while private nonresidential increased by 0.3%. Single-family homes contributed 1.7% of the growth. Public construction dollars increased by 0.6%, according to AGC.
Despite the uptick in demand, AGC said there is still an issue finding enough qualified workers.
“For now, all types of construction are growing,” Ken Simonson, chief economist for the AGC, said in a statement. “But unless the supply of qualified workers increases, many projects are likely to be delayed.”
Stephen E. Sandherr, AGC’s CEO, said the association is seeing strong and growing investments in construction from both public and private sectors.
“But without new investments in construction education and training, as well as programs to allow skilled construction workers into the country, those projects are going to take longer and cost more to get built,” he said.
Join us for an SMU Community Chat on Wednesday, Oct. 4, to hear more from the association’s chief economist Ken Simonson. Click here to register.
Ford Motor Co. announced layoffs in Ohio and Illinois on Monday, citing the ongoing United Auto Workers (UAW) strike.
The Dearborn, Mich.-based automaker asked ~330 workers not to report work starting Sept. 30 at its Chicago Stamping Plant in Illinois and on Oct. 2 at its Lima Engine Plant in Ohio.
“Our production system is highly interconnected, which means the UAW’s targeted strike strategy has knock-on effects for facilities that are not directly targeted for a work stoppage,” a Ford spokesman said in a statement emailed to SMU.
“In this case, the strike at Chicago Assembly Plant has directly impacted some operations at Chicago Stamping Plant and Lima Engine Plant,” the spokesman added.
The spokesman stressed, “these are not lock-outs.” He said the layoffs are a result of the strike at Chicago Assembly Plant. According to the spokesman, these two other facilities must reduce production of parts that would normally be shipped to that plant.
He noted that these 330 layoffs are in addition to 600 laid off from the Michigan Assembly Plant beginning Sept. 15. This brings Ford’s total to 930 employees affected by strike-related layoffs, the spokesman said.
The UAW did not return a request for comment by the time of this story’s publication.
The strike against specific plants at all three Detroit-area automakers began on Sept. 15. It has expanded because no new labor agreement has yet been reached.
US manufacturing activity improved in September, nearing a recovery, but remained in contraction territory, according to the Institute for Supply Management (ISM).
The ISM’s September manufacturing PMI rose to 49, the highest reading since November 2022, but was still below the neutral 50.0 mark — the level that typically divides expansion from contraction. The result was an advance from a reading of 47.6 in August.
While September marked the 11th consecutive month of contraction (the longest stretch since the 2007-2009 recession), it was the third straight month of improvement, the report said.
The US manufacturing sector took a further step towards recovery last month, helped by improved production and a boost in employment. The report also showed that prices paid for inputs by factories fell considerably.
The ISM’s report said five manufacturing industries reported growth last month, including primary metals.
Among the 11 industries reporting contraction were fabricated metal products, machinery, appliances & components, and transportation equipment.
“The US manufacturing sector continued its contraction trend but at a slower rate, recording its best performance since November 2022,” said ISM chairman Timothy Fiore. “Demand remains soft, but production execution improved compared to August as panelists’ companies prepared for the fourth quarter and the close of the fiscal year.”
Comments from respondents in the survey remained mixed. A transportation equipment maker commented that “orders and production remain steady, and we are maintaining a healthy backlog.”
The report’s forward-looking new orders sub-index remained in contraction territory in September but at a slower rate, with a reading of 49.2 up from 46.8 the month prior. It was the 13th straight month the sub-index has contracted.
Algoma Steel Group has extended its iron ore purchase agreement with U.S. Steel for another two years.
The contract extension should provide the Canadian steelmaker with enough ore to cover its needs before making its final transition to electric-arc furnace (EAF) steelmaking next year.
Algoma currently has two blast furnaces (BFs): The No. 7 BF has a daily capacity of 8,400 tons of iron. The No. 6 BF has a capacity of 3,000 tons of iron per day but is idle, according to SMU’s blast furnace status table.
As you will recall, Algoma is transitioning away from steelmaking via the blast furnace route. It is currently building two EAFs at its campus in Sault Ste. Marie, Ontario. The EAF project is on track for commissioning late in 2024.
Algoma said in a statement on Tuesday, Oct. 3, that the new contract with the Pittsburgh-based steelmaker and iron ore miner includes an option to extend it for a third year “solely at Algoma’s discretion.”
“We are excited to extend our partnership with U.S. Steel, which we believe not only reinforces our strong collaboration but also aligns with our broader mission of transitioning to more sustainable steelmaking practices,” Algoma CEO Michael Garcia commented.
“We believe that the extension of this agreement provides the foundation for a reliable supply chain and uninterrupted access to essential raw materials to meet our production capacity and service the demands of our valued customers throughout North America,” he added.
Garcia recently spoke at an industry conference, elaborating on the steelmaker’s switch to greener steelmaking.
U.S. Steel is laying off ~300 workers at its Granite City Works in southern Illinois, a company spokeswoman told SMU on Tuesday.
The workers were in the company’s iron and steelmaking operations, she said.
She also confirmed an earlier report in the Belleville News Democratthat the Pittsburgh-based steelmaker believes the “layoffs will last less than six months.”
U.S. Steel has two blast furnaces at Granite City: ‘A’ and ‘B’. The ‘A’ furnace was indefinitely idled in April 2020, according to SMU’s blast furnace status table. With ‘B’ going down, there is – at least temporarily – no more iron or steelmaking at the mill.
United Steelworkers (USW) Local 1899 president Dan Simmons told the Democrat that between 260 and 265 employees at the steelmaker will be out of work starting this week. He did not return a call for comment from SMU by time of publication.
Steel prices continued to decline last month – a trend we’ve seen repeated since mid-April. Hot-rolled coil (HRC) prices ended September at $645 per ton ($32.25 per cwt) on average, having fallen by $80 per ton during the month.
The SMU Price Momentum Indicator for sheet products remained pointing Lower due to waning tags that have resulted largely from declining demand.
The Price Momentum Indicator on plate, which had been at Neutral since the end of April, shifted to Lower at the close of September. Plate prices have begun to show signs of weakness as demand has also started to trend down.
Raw material prices have fluctuated some but were again largely sideways last month. Scrap prices were flat on average in September, except for busheling, which saw a $50-per-gross-ton decline from August. Despite some movement earlier in the month, zinc and aluminum spot prices were largely stable, remaining within historical levels. You can view and chart multiple products in greater detail using our interactive pricing tool here.
The SMU Steel Buyers Sentiment Index remained positive and recovered a bit, edging up during the month. Current Buyers Sentiment rose from +55 in August to +59 on average in September. Future Sentiment hovered at an average of roughly +73, a notable increase from the month prior’s reading of +66.
Our Steel Buyers Sentiment 3MMA Index (measured as a three-month moving average) has been eroding over the past three months, to ~+59 in September from ~+61 the month prior.
Hot rolled lead times averaged 4.55 weeks in September, down from 4.71 weeks the month prior. SMU expects lead times to hover around current levels, but market chatter suggests they could increase in October should restocking efforts for first quarter 2024 demand begin. A history of HRC lead times can be found in our interactive pricing tool.
About 91% of HRC buyers reported in September that mills were willing to negotiate on prices, up from about 90% in August.
Key indicators of steel demand are still showing some signs of weakness overall but are nowhere near the bullish levels some had shown earlier in the year. While there are some backlogs in the energy and construction sectors, the UAW strike on Detroit’s Big Three automakers remains the wildcard, with little clarity on its duration and overall impact on steel prices.
See the chart below for other key metrics for the month of September:
Cleveland-Cliffs has signed a non-disclosure agreement (NDA) with U.S. Steel as the latter continues with its strategic review sales process, a source close to the matter confirmed to SMU.
The source asked to remain anonymous due to the delicacy of the matter.
Cleveland-Cliffs did not respond to SMU’s requests for comment. A U.S. Steel spokeswoman said she had no comment at this time.
Although Cliffs’ first bid for the company was rejected by U.S. Steel, Cliffs has maintained its interest in purchasing the Pittsburgh-based steelmaker. Cliffs’ website is a testament to that, clearly showing its letters and news releases on the matter. No updates have been made since August, however, leading one to conclude that an NDA has indeed been signed.
ArcelorMittal and Stelco have been named as other potential suitors of U.S. Steel’s assets, but neither have publicly made comments confirming that.
US raw steel output took a downward turn during the week ending Sept. 30, according to data released by the American Iron and Steel Institute (AISI) on Monday, Oct. 2.
Steel production dropped 0.7% week-on-week to 1,722,000 tons from the previous week’s 1,735,000 tons. At the same time, production was up 2.3% from the same period in 2022 when production was 1,684,000 tons.
The mill capability utilization rate for the week was 75.7% vs. 76.3% the week before. The mill capability utilization rate for the same period one year prior was 76.4%
Weekly production by region, with the change from the previous week, is shown below:
Northeast – 134,000 (up 8,000 tons)
Great Lakes – 568,000 (down 7,000 tons)
Midwest – 206,000 (down 14,000 tons)
South – 746,000 (up 2,000 tons)
West – 68,000 (down 2,000 tons)
Adjusted year-to-date production through Sept. 30 was 66,770,000 tons, with an overall mill capability utilization rate of 76%. That is a 1.3% decrease from the 67,683,000 tons produced during the same time last year when the capability utilization rate was 79.4%
General Motors has announced layoffs at its Parma Metal Center in Ohio and at its Marion Metal Center in Indiana.
The Detroit-based automaker said the job cuts resulted from the United Auto Workers (UAW) strike, which is now in its third week.
“The UAW leadership’s decision to call a strike at GM Wentzville Assembly (in Missouri), and now GM Lansing Delta Township Assembly (in Michigan), continues to have negative ripple effects,” a GM spokesman said in a statement to SMU on Monday.
Ohio, Indiana Workers Affected
Beginning on Monday, portions of the Parma Metal Center and the Marion Metal Center had no work available. 130 workers would be laid off at Parma and 34 at Marion, the spokesman said.
“The affected team members are not expected to return until the strike has been resolved,” he said.
Because the UAW members were working under an expired labor agreement, there were no provisions for company-provided supplemental unemployment benefits, he added.
“The decision to lay off workers is not a ‘ripple effect,’ it’s a decision made by the company to put the squeeze on our members to accept a weak contract,” UAW president Shawn Fain said in a statement on Monday.
“GM owns it, and GM owns the fact that they took over a month to respond to our proposals, and have taken over another month to make serious progress,” he added.
The Parma Metal Center employs ~960 people and stamps parts for most GM vehicles built in North America. This includes vehicles built at Wentzville Assembly, Lansing Delta Township, and Fairfax Assembly in Kansas.
United Auto Workers (UAW) president Shawn Fain signaled in a Facebook Live on Friday, Sept. 29, that union-represented members at Mack Trucks could soon walk off the job. But a strike was avoided when a tentative agreement was reached before their labor contract expired at 11:59 p.m. on Sunday, Oct. 1.
Fain said the company took three weeks to respond to the union’s economic demands before coming back with a list of concessions. He made the comments during the FB Live announcing that the UAW was expanding its strike against two of the Big Three Detroit automakers. He commented that union workers were opting to strike across the entire vehicle supply chain.
However, Mack Trucks announced on Monday, Oct. 2, that a tentative agreement had been reached with the union. Mack Trucks is a Greensboro, N.C.-based truck manufacturer and transportation solutions provider.
The new, five-year contract will cover 3,900 employees at Mack facilities in Pennsylvania, Maryland, and Florida. UAW members must ratify the new labor agreement before it takes effect.
“The terms of this tentative agreement would deliver significantly increased wages and continue first-class benefits for Mack employees and their families,” said Mack president Stephen Roy in a statement.
“At the same time, it would allow the company to successfully compete in the market, and continue making the necessary investments in our people, plants and products,” he added.
Despite posting record profits in recent years, the Big Three automakers are concerned that meeting all of the UAW’s demands would not allow them to remain competitive. Among the member demands in this year’s negotiations are: the elimination of tiers, double-digit pay raises, a restoration of cost-of-living adjustments (COLA), defined benefit pensions, the re-establishment of retiree medical benefits, the right to strike over plant closures, working family protection program, more paid time off, and a significant increase in retiree pay.
As of noon on Friday, Sept. 29, 25,000 UAW workers were on strike, according to Fain’s FB Live announcement. At the Big Three, this includes:
Ford: Chicago and Michigan assembly plants
GM: Lansing (Michigan) Delta Township and Wentzville(Missouri) assembly plants
Stellantis: Toledo (Ohio) assembly complex
And 38 GM and Stellantis parts distribution centers in 20 states.
The 2023 NexGen Award winner Daniel Doderer may not consider himself a veteran of the steel industry yet, but he’s eager to make his mark.
Steel Market Update sat down with the award-winning economist from Flack Global Metals (FGM) to hear about what excites him and how the industry can evolve.
Below is a lightly edited version of the interview.
Steel Market Update: How does it feel to win the NexGen award?
Daniel Doderer: It’s really exciting. It’s been awesome to see the outreach that has come from it. You have someone who certainly is not a veteran industry player, but someone who has been watching the market for a while now and learning a lot about it. It’s nice to feel like people are interested in my perspective and what I have to say.
SMU: How did you get started in the industry?
DD: It was certainly by chance. I was working on my undergraduate degree at the time and searching for an internship. At that time, Flack was looking for an economic research analyst to start helping on the weekly report that we produce and it just kind of came together well. I didn’t know there was such a robust steel industry in the US. It was fascinating to kind of have my eyes opened to how meaningful and dynamic it is.
SMU: What do you do in your position at Flack Global Metals?
DD: I have a hybrid position. A lot of what I do is both internal and external facing. We write weekly research reports, which we send to our customers. Then we have a larger research report that dives into the relationships between global and domestic steel, the economy, and other base metals. Outside of that I support our hedging operation by running different scenarios, and work closely with the leadership team about strategic decisions on the physical side.
SMU: FGM says its business is where the physical meets the financial. What does that mean exactly?
DD: We’re trying to mitigate risk and take reasonable risks to earn a profit. So day-to-day that’s hedging physical material, other times it’s making speculative financial or physical decisions. We have all options available and that’s where we feel like we bring the most value. We’re not hamstrung if the physical market is extraordinarily tight and steel isn’t available, and vice-versa.
SMU: How do other companies benefit from what you do?
DD: We want to publish our research. We want to get our research out there and make sure that the market is as informed as possible. Also, we think that we’ve proven that embedding risk management into every aspect of your business through financial futures, and prudent risk-taking on the physical side, really builds more of a sustainable model that is less susceptible to unforeseen events.
SMU: What’s your favorite part of your job?
DD: Finding the application of economics in an industry where there are consequences. It really matters what the numbers say and what the impact is going to be. That’s been really rewarding for me. When you make a forecast, you’re either right or you’re wrong. The ability to make adjustments when you’re wrong, is an ever challenging and exciting part of the work. It’s intellectually extraordinarily stimulating.
SMU: Now that you’re winning awards, what’s next for you?
DD: I think what I’m really excited about is the fact that we’re growing our research department and that we’re investing in it. We have some really sharp minds looking at this industry and I’m excited to be part of that team.
SMU: As part of the NexGen demographic, what are your hopes for the future?
DD: I definitely want to see the group continue to expand. We’re trying to get the next generation of leaders. I’ve observed that there’s a group that has been working in the industry for an extraordinarily long time. It seems like there’s a gap for people to step up into. My ambition for the industry is to see people like myself, people who didn’t know that there was a steel industry, and spread the word. I think reshoring brings a lot of opportunities for people who want to see American manufacturing grow. I think there’s a lot of opportunity! The more eyes we have in this industry, the better the ideas and opportunities are going to be. Diverse perspectives are vital for the evolution of the industry.
Olympic Steel has acquired Conway, Ark.-based Central Tube & Bar (CTB).
Terms of the deal were not disclosed. However, the Cleveland-based national service center said the “all-cash purchase is expected to be immediately accretive.”
CTB’s trailing 12-month revenue for the period ended Aug. 31 was ~$40 million, according to Olympic.
The company will operate as Central Tube & Bar, an Olympic Steel Co. It will continue to be led by CTB president Dustin Ward and his management team.
“The addition of CTB into our tubular and pipe products segment, combined with the existing success of our Chicago Tube & Iron business, provides great opportunities for growth and synergies.” Andrew Greiff, Olympic president and COO, said in a statement on Monday.
CTB serves OEMs and fabricators across the mid-South region from three facilities in Conway and Tulsa, Okla. They total 162,000 square feet of warehouse and production space.
CTB, founded in 1996, offers value-added fabrication services, including tube laser cutting, tube bending, robotic welding, flat laser burning, and brake press forming.
The company services the transportation, agricultural, commercial furniture, and data center construction industries, the statement said. CTB supplies these with fabricated tube and bar products, including round, square, rectangular, and special-shaped tubes.
“Olympic Steel’s tubular and pipe products segment has historically been our highest ebitda-to-sales margin segment, and CTB’s historical financial performance has consistently exceeded our tubular and pipe products returns,” Richard Marabito, Olympic’s CEO, said.
But our latest survey results paint a more bullish picture. They looked surprisingly similar to what we saw in November 2022, when a round of price increases initiated by Cliffs sparked a rally (aided by a surprise shutdown at AHMSA) that stretched deep into Q1.
Before we jump to any conclusions, let’s look at some of the assumptions that underpin the idea that prices are set to bottom and move higher.
UAW Strike Duration Speculation
We asked survey respondents how long the UAW strike would last. Nearly 75% said it would last four to six weeks. The strike started on Sept. 15, which implies that SMU survey respondents think it will end later this month.
Another 15% said it would last three weeks. That implies that strike would end sometime this week – which is all but impossible given the UAW and the “Big Three” automaker haven’t reached a tentative agreement.
Recall that a less acrimonious strike in 2019 also began on Sept. 15 and didn’t end until Oct. 25. In other words, it lasted roughly six weeks, a span that included time necessary for ratification votes.
Only 10% of survey respondents said they thought the strike would last more than seven weeks, or longer than it did in 2019. That suggests the market could be caught by surprise if the strike drags into November.
More Blast Furnace Idlings Predicted
So how can people be generally bullish on prices?
This might explain it: Approximately 70% of survey respondents think that more blast furnaces will be idled because of the UAW strike.
Recall that to date only one furnace – the ‘B’ blast furnace at U.S. Steel’s Granite City Works near St. Louis – has been idled.
Here’s an important note: We collect responses to the mill negotiation question from Monday morning until Wednesday evening. That means our results probably didn’t yet reflect the impact of the Cliffs increase, which was announced Wednesday morning.
It’s also possible that the responses we got reflected pre-increase discounting. Most of you know that play. Mills lower prices in hopes of bringing in big orders. The goal: to stretch out lead times ahead a price hike announcement.
Will Lead Times Stretch?
The evidence is mixed, as we reported on Thursday. But we have seen a steady increase in the number of people predicting that lead times will extend in the future.
Nearly half of survey respondent predicted that lead times would be extending two months from now, up from 12% from our mid-August survey.
Why does that matter? We saw something similar in November of last year, just ahead of the late Q4’22/Q1’23 price rally. Does that mean we’re about to enter another bull market for steel?
Respondents See October Price Bottom
Some of you tell me that we are. You say you’re already looking past the UAW strike.
Our survey results reflect that sentiment: 71% of respondents think HRC prices have bottomed or will bottom later this month.
Meanwhile, nearly 42% of respondents think hot-rolled coil prices will be over $700 per ton in December – in other words, that the Cliffs increase will at least partially succeed.
Another thing that’s notable: We’ve seen a decrease in the number of service center respondents who say that they’re lowering prices.
About two-thirds of service center respondents tell us they are still lowering prices. That’s a change from our last survey, when 83% reported that they were lowering prices.
SMU founder John Packard sometimes called that territory, when 70-80% of service centers were lowering prices, the “point of capitulation.” That’s when service centers want prices to go up again and so are willing to support mill price hikes.
Packard found over time that mill prices hikes typically came shortly after one of those points was reached. We definitely saw that again last week with Cliff’s price increase.
My two cents: I think the renewed bullishness we’re seeing makes sense – if the UAW strike doesn’t drag out and if more capacity is idled. My concern: Those are some big ifs 🙂
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US plate prices have been relatively flat this year, especially when compared to sheet products.
Case in point; SMU’s plate prices stands at $1,455 per ton ($72.75 per cwt) on average, down 7% from a $1,560 per ton peak in April. Our HRC price is at $645 per ton, down 44% from an April peak of $1,160 per ton.
From January to April, US plate mills announced eight price increases, pushing prices from $1,430 per ton on average to a recent high of $1,560 per ton on April 11. And while tags have declined by $105 per ton since there was only one formal mill notice of lower plate prices – Nucor’s $40 per ton decrease on Aug. 31.
The latest plate market pricing is displayed below in Figure 1.
Nucor has been the unofficial top end of the range for the domestic plate of late, market participants said.
The news caught many by surprise. Prices had been trending lower. And many expected Nucor to lower prices, as it did in late August when it cuts prices by $40 per ton.
But others questioned what an increase would have accomplished, especially with little spot demand.
Below is reaction from plate market participants in their own words:
“I was shocked. I was expecting a drop of $80-100 a ton.”
“Lowering prices for the sake of lowering prices would serve no positive benefit.”
“I didn’t think [a decrease] was justified at this time. Lowering prices will not create a market or increase demand.”
“I think Nucor had no choice but to keep prices unchanged publicly. Lowering them just erases profits that they are going to get regardless for those in the market who have to buy in Q4.”
What Comes Next?
With spot activity limited, mills might lean on contract business – which accounts for the bulk of domestic demand.
Another possible support for prices might be a trend of trading among service centers. That might not be a positive for prices in the short term. But it could have the longer term effect of tightening inventories ahead of restocking in Q1, some market participants said.
And while HRC sheet and plate prices might have decoupled in recent years, price trends in one product can still impact the other.
“Cliffs drawing a line in the sand on HRC I’m sure also played a role in (Nucor’s) decision to hold the line on discrete plate prices,” one source said.
It’s been nearly two years now since plate prices decoupled from HRC (Figure 2). We saw the spread between plate and HRC reach as high as $970 per ton in the summer of 2022. It currently sits at $810 per ton.
As a percentage basis, plate’s premium over HRC has ballooned to 126% (Figure 3), a 10-month and not far from the all-time high of 152% in November 2022.
“I am not sure if plate prices will reach the historic premium over sheet prices in 2024. But it’s funny to think that not that long ago we saw price inversion for several months,” said a source.
With plate demand spotty, mills are focused on controlling order books, market participants said. This probably reflects a desire to keep prices steady and to maintain a big premium over HRC.
Also, imports remain attractive. Offshore product is running between $1,280-1,360 per ton at depots. And plate for early Q1 delivery from South Korea and Thailand is sub-$1,200 per ton, according to several sources.
It will be important to watch discrete plate lead times. They have slipped below the five-week mark for the first time since mid-January. They stand on average at 4.86 weeks as of Sept. 28, down from roughly 5.50 weeks just a few weeks ago.
Last week the World Trade Organization (WTO) held its periodic retreat for members to discuss the future of the organization. Many issues, including proposed reform of the dispute settlement system and addressing climate change, roil the future path of the WTO.
There are existential threats to the global trading system, which some claim should doom the system, while others think will damage the global economic, geopolitical, and environmental order.
Emblematic of these divisions are major gaps between democracies and autocracies, developed and developing nations, and resource-rich and resource-poor economies. There is not much in the way of consensus.
In 1995, the WTO was launched. That remarkable consensus helped create the illusion of stability in trade. There were more than twenty new agreements, with promises of further agreements to be reached with time limits for reaching these further agreements (for example, the Agreement on Rules of Origin was to arrive at permanent standards by 2000).
The general failure to adhere to these deadlines created a climate of division and dissension that doomed the Doha Round to stagnation and eventual irrelevance. Over the years since 2001, when the Doha Round was launched in the wake of 9/11, it became clear that continued progress in trade negotiations would be extremely difficult.
Then, the news got worse.
The current WTO environment features a lot of discussion but very little in the way of agreement, other than very low-hanging fruit (such as regulation of fisheries subsidies). But harvesting even the low-hanging fruit seems increasingly difficult.
The sad state of affairs at the WTO was precipitated by the United States’ decision in 2018 to disable the Appellate Body. That organ of the WTO was created as a “court of appeals” for resolving disputes on trade issues. The United States in 2018 refused to consider the appointment of new members of the seven-member Appellate Body, who served set terms.
When the terms of the existing members expired, there was no one left to decide cases. While the Appellate Body theoretically still exists, cases appealed to it just sit.
When the Biden administration took office in 2021, the new administration decided to continue the refusal to approve new members. Because one of the hallmarks of the WTO is “consensus” in procedural matters, the failure of the United States to approve new members has paralyzed the Appellate Body.
That tees up the issue of the Appellate Body for reform. So far, there is little progress on that front. The US, along with Britain a bastion of the “common law,” wants the Appellate Body to decide each trade case anew with no reliance on precedent in decision-making.
At its core, the US essentially argues that reliance on precedent is incompatible with the WTO agreements. One might expect that this argument would be more likely championed by countries that do not have a common law tradition, rather than the US, where common law is a fundamental feature of the legal system.
Tackling climate change is another key issue for the WTO. As Ambassador Katherine Tai pointed out in a speech last week, climate change was not on the WTO agenda when it was created nearly 30 years ago. Some of the proposals for action on climate matters appear to be inconsistent with basic WTO principles, including “national treatment” (no discrimination between imports and domestic producers) and “most-favored-nation” (treating all WTO members equally) doctrines.
Tariff rates are bound in the 1995 agreements. A carbon tariff, and many other actions to address climate change, could violate the current WTO agreements.
The US also complains about “certain” WTO members (notably China) that use their strong position in critical materials (e.g., rare earths) to leverage their strength into “economic coercion”.
The US is also claiming that “second-guessing” national security decisions of WTO members is beyond the authority of the dispute settlement system. This is a case where speaking firmly is largely a substitute for critical analysis.
The recent decision of a WTO panel holding that the US Section 232 determinations violated the organic WTO agreement (the General Agreement on Tariffs and Trade or GATT) earned the ire of Ambassador Tai and her predecessor, Ambassador Robert Lighthizer.
The text and history Article XXI of the GATT, however, did not bar review of all decisions allegedly based on national security. It spoke instead to actions by a country “which it considers necessary for the protection of its essential security interests… taken in time of war or other emergency in international relations.” The Section 232 actions were not taken in time of war or other emergency in international relations.
The US appears to want a blanket rule against review of national actions invoking “national security” regardless of the context. That could weaken the impact of any multilateral agreement, past or future, on trade matters. Clearly, there are difficulties with such a position.
All the issues listed here put the WTO in a very precarious position. As a champion of global rules that govern all or nearly all nations, creating loopholes in otherwise binding agreements could lead nations to make agreements with regional neighbors, or like-minded regimes, rather than setting global rules. That would leave many smaller developing nations without meaningful options if larger nations discriminate against them.
Other countries are also exploring issues that affect them. In the first 20 years of the WTO dispute settlement regime, the United States lost a series of decisions involving antidumping and countervailing duty measures. Because steel products are one of the leading subjects of these measures, and Ambassador Lighthizer was a long-time trade attorney representing US Steel, these adverse WTO decisions stung. (Full disclosure: I was involved in several WTO steel and other cases arguing that US trade remedy measures violated trade rules.)
There is reason for pessimism about the future of the WTO, based on the above factors. There may be reason for some optimism too. For now, that optimism must be found in issues that are not being decided in the WTO. The US-EU negotiations on steel and aluminum are still in process and may result in a lessening of tensions. The US and China are continuing discussions, but so far without resolution of serious issues on trade, tariffs, and geopolitics (such as Taiwan and the militarizing of the South China Sea) remains elusive.
The US and its major trading partners continue to explore ways to narrow their differences. But progress is slow. Our divisions at home, which could lead to a government shutdown, are reflected in our international relations too. We can hope that cooler heads prevail, but one event out there could change everything.
Editor’s note: This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at email@example.com.
Algoma Steel Inc. plans to ramp up production at its modernized plate mill toward the end of the year.
The Canadian sheet and plate producer said it in the meantime continues hot commissioning at the upgraded facility and has begun cold commissioning as well.
The company said it has also run trials through the plate mill’s heavy-gauge inline shear.
Algoma CEO Michael Garcia said the development was a “key milestone” in a press release providing both fiscal Q2 earnings guidance and operations updates.
Work on that transition “has advanced as expected” during the company’s fiscal second quarter. The two EAFs, which will replace Algoma’s two blast furnaces, are on track to be commissioned late in 2024, Garcia said.
Fiscal Q2 Earning Guidance
All told, Algoma expects to ship 450,000 to 550,000 tons of steel in its fiscal Q2.
The company also projects that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in Q2 will be Canadian $75 million to $85 million ($55 million to $63 million USD).
Algoma said recent steel shipments had been hit by “lower than expected” prices resulting from the UAW strike at Ford, GM, and Stellantis operations in the US. The company is “closely monitoring” the expanding strike, Garcia said.
Unlike in the US, auto workers in Canada did not go on strike. But closely interlinked North American supply chains mean that the impact of the UAW strike is being felt outside of the States.
The US scrap market for October is a bit unsettled as the UAW strike against the Big Three automotive companies has expanded and shows scant signs of an imminent settlement. There is only speculation on how the strike will affect both the amounts of steel needed and of scrap produced.
The September market saw #1 busheling shockingly fall $50 per gross ton after NorthStar and Nucor entered the market, the UAW potential strike notwithstanding. A few mills in the southeast only dropped $40 per gross ton. However, shredded, HMS, and P&S all traded sideways from August levels. This divergence raised a few eyebrows in the scrap (our) community.
So, for the coming month, will the mill buyers attempt to take down the obsolete grades they were unable to last month? If so, will the trade support this move, especially when the export markets for these grades have held rock-solid in Turkey? Can they take busheling down further without creating dealer resistance? After all, flows have been waning lately, and the winter months are on the horizon.
A scrap executive in the Chicago area believes #1 grades, like busheling and #1 bundles, will remain weak in October. Shredded and HMS are not as weak. But he sees all grades falling by $10-20 per gross ton.
It seems the events concerning the strike will be the main determinant. Do the mills need prime scrap, like #1 busheling and #1 bundles? I spoke to a retired GM executive about the state of the strike. He said the parts distribution centers were not active, but the parts manufacturing centers were working. This could mean a certain amount of scrap would be generated. Likewise, steel would be needed for these centers. The question is: How much?
On Friday, Sept. 29, it was announced the UAW expanded its strike to more assembly plants at Ford and GM. It’s unclear as to how this will affect production at the stamping plants in Chicago and the Detroit area.
It is noted various flat-rolled mills have scheduled outages in Q4, and they’ll need less prime scrap than they normally would. Apprehension about continued shipments to automakers is also weighing on buying decisions. But the scrap community has faced obstacles like this before. Once the outages are behind us and the strike is settled, the scrap buyers will come back into the market all at once. If this happens, say in November, the price of all grades of ferrous scrap will severely escalate. What the mills save by dropping prices now may not outweigh the increases they could face in December and January. We’ll see what happens shortly.
ArcelorMittal said it expects to produce less steel than previously forecast in Brazil. Gerdau has hinted at potential layoffs as imports surge. The Brazil Steel Institute is asking the government to raise import levies to 25% from the existing 9.6%. Meanwhile, Mexico has applied levies to some steel imports.
Jefferson De Paula, who heads ArcelorMittal’s operations in Brazil, said the company now expects to produce 1.3 million metric tons less steel this year than the previously projected range of 15-16 million metric tons.
Gerdau’s CEO Gustavo Werneck backed the Institute’s call for tariffs, saying the company is close to laying off workers because of under-utilized capacity.
“We now have a plant in Ceara state that is fully idled, plants from north to south of the country that are not operating. People are sitting at their homes waiting for a government decision,” he was quoted as saying by Reuters news agency.
Around 600 Gerdau workers have already had their contracts temporarily suspended, he added.
“The alarm was sounded in July, and the scenario gravely intensified by August. We are in the midst of a true deluge of incoming steel, predominantly from China,” Brazil Steel Institute CEO Marco Polo de Mello Lopes was quoted as saying by local financial newspaper Valor.
Brazil’s import volume in August was 496,000 metric tons, well up on the 252,000-metric-ton monthly average of the past ten years, he added. Last month, China shipped in 302,000 metric tons, equal to 61.3% of the total, with the rest chiefly coming from South Korea and Russia.
“The globe has been under siege by unscrupulous trade behaviors, and this is not recent,” he added.
The import surge comes against a background of apparent consumption in Brazil declining 0.6% in the first eight months of the year and 0.9% in August, Lopes noted.
The Institute would like to see 25% antidumping (AD) tariffs on thick coils, three categories of hot-rolled coils, two categories of cold-rolled coils, galvanized sheets, aluminum-zinc coated sheets, wire rod, rebar, hot-rolled stainless steel, three categories of cold-rolled stainless steel, cold-rolled stainless steel bar, and three categories of seamless tubes.
Elsewhere, trade authorities in Mexico have imposed preliminary AD tariffs of between 12.77% and 81.06% on cold-rolled steel from Vietnam. Under Mexican trade law, interested parties have 20 days from the preliminary findings to comment, the Vietnam News Agency reported.
The number of active oil and gas drilling rigs in the US dropped this week while Canada’s count increased by one, said oilfield services company Baker Hughes in its weekly report.
There were 623 active rigs in the US for the week ended Sept. 29, down seven from the previous week. Oil rigs decreased by five, gas rigs were down by two, and miscellaneous rigs were unchanged.
Active rigs in the US were down by 142 from one year ago when there were 765 rigs in operation. Compared to the previous year, there are 102 fewer oil rigs, 43 fewer gas rigs, and three more miscellaneous rigs.
Active rotary rigs in Canada totaled 191 in the last week of September, up by one from the week prior. Oil rigs remained flat, while gas rigs increased by one.
The Canadian rig count is down by 22 year-over-year, with 29 fewer oil rigs and seven additional gas rigs.
The international rig count is updated on a monthly basis and is therefore unchanged from last week’s report.
The Baker Hughes rig count is important to the steel industry because it is is a leading indicator of demand for oil country tubular goods (OCTG), a key end market for steel sheet.
A rotary rig rotates the drill pipe from the surface to either drill a new well or sidetrack an existing one. Wells are drilled to explore for, develop, and produce oil or natural gas. Baker Hughes’ rotary rig count includes only those rigs that are significant consumers of oilfield services and supplies.
For a history of the US and Canadian rig counts, visit the rig count page on our website.
Pessimism grew among metalformers in September’s business report from the Precision Metalforming Association (PMA). The leading factor in the growing negative sentiment: the possibility of a prolonged United Auto Workers (UAW) strike.
Half of the surveyed metalforming companies expect a downturn in business conditions in the coming months. That figure is up from 29% the month before. Still, 42% are anticipating no change in activity. Just 8% expect better business activity.
Nearly half (47%) of metalformers also predict a decline in incoming orders, up notably from 28% in August.
More metalformers reported higher average daily shipping levels in September – 23% vs. 16% in August. The number reporting no change in shipping levels was unchanged month to month at 42%, PMA said.
“PMA has many members who supply the automotive sector, and the prospects of a prolonged labor strike against the major automakers certainly is reflected in this month’s Business Conditions Report,” PMA president David Klotz in a statement.
“PMA members hope that both sides reach an agreement as soon as possible to avoid further disruption to the economy,” he added.
The PMA represents stampers, fabricators, roll formers, and other value-added processors. Its monthly Business Conditions Report samples 98 metalforming companies in the US and Canada. The report serves as an economic indicator for manufacturing.
The LME aluminum 3-month price was up 4.7% during the last week of the month to close September trading at $2,325 per metric ton – its highest price since early August. Several correlations appeared to have broken down in the short term given the weakness in the US stock market, a weaker copper price, and, critically, the resurgent dollar.
Meanwhile, the SHFE was closed on Friday, Sept. 29, as the Golden Week holiday began. SHFE aluminum prices were also up, extending their recent robust performance. The cash SHFE contract settled at RMB19,710 per metric ton, a gain of 0.7% on the day. Optimism around future Chinese demand and the strong SHFE aluminum rally in recent weeks were seen as important reasons supporting the gains in the LME price.
The US Midwest premium is being offered below the $0.19.5–0.20 per pound mark CRU last cited. There is very little physical demand nearby and the offer may be just a wishful bid. CRU does have evidence of a 2024 position being booked at $0.205 per pound following the forward curve seen in the year ahead. The CME has shifted to $0.19 per pound into 2024 but a larger contango has started to build in 2024. The current level would be difficult to sustain without any uptick in demand, putting most of the risk in the market to the upside as the current rate is near actual costs for freight, warehousing, and insurance. Any large jumps are unlikely, and the expectations are for the premium to continue to float between $0.19-20 per pound for the remainder of 2023.
UAW Goes for the Jugular to Constrain Parts Supply
In the second week into the UAW strike against the Big 3 US auto OEMS – Ford, GM, and Stellantis – the union leadership layered on phase two of the stand-up strike ordering their rank-and-file at 38 parts centers off the job at noon on Friday, Sept. 22. The 38 parts centers, located in 20 different US states, are part of the GM and Stellantis supply chain. Ford was not targeted in the second wave of strikes as the UAW indicated that there had been substantial progress in negotiations with the company, while GM and Stellantis had not yet made sufficient concessions.
While negotiations are ongoing, the move by the UAW aimed at GM and Stellantis will challenge the parties’ willingness to continue the collective bargaining process affecting 145,000 employees and their 40% share of the North American car and light truck market. Things turned even more political the last week of September as President Biden spoke to striking workers.
Constraining parts supply will have a twofold impact on the auto value chain. New car production will be interrupted, further stalling the appetite of US buyers, and putting repair and maintenance work at risk as the parts supply dwindles. Through the first week of the strike, projected economic losses were pegged at $1.6 billion, and losses are expected to escalate exponentially in the next phases of the stand-up strike against the supply distribution network. On Friday, Sept. 29, the strike was expanded to two other Ford and GM assembly plants.
Chinese and Russian Aluminum Associations Sign MoU
The China Nonferrous Metals Industry Association and the Russian Aluminum Association signed a memorandum of understanding during the last week of September. The agreement focuses on enhancing cooperation in alumina, aluminum processing, and other industries, as well as promoting the greater uptake of aluminum in all industries.
Fan Shunke, deputy secretary of the Chinese association, met with Irina Kazovskaya, chair of the Russian association, in China to sign the document. Shunke noted the importance of China as a consumer and the growth in demand for aluminum in photovoltaics, new energy vehicles, and battery energy storage. The application of aluminum materials in urban furniture and daily household products was also highlighted as an important growth area.
Kazovskaya expressed her interest in expanding aluminum consumption and promoting the sustainable development of Russia’s aluminum industry. The state of geopolitics and the changing trade flows, increasing between China and Russia, give this MoU more context.
Electrode producer GrafTech International announced on Thursday, Sept. 28 that its president and CEO would be stepping down.
Marcel Kessler will depart as leader of the Brooklyn Heights, Ohio-based company effective Nov. 15 due to family reasons, the company said in a statement.
Kessler will officially resign as an employee of GrafTech effective Dec. 31 but will continue to serve on the company’s Board of Directors.
Effective Nov. 15, Timothy K. Flanagan, the company’s current CFO and treasurer, will step up to serve as interim CEO.
Current VP and corporate controller Catherine Hedoux-Delgado will take over as interim CFO and treasurer, the company said.
The latest SMU Market Survey results are now available on our website to all Premium members. After logging in at steelmarketupdate.com, visit the Pricing and Analysis tab and look under the “Survey Results” section for “Latest Survey Results.”
Historical survey results are also available under that selection.
If you need help accessing the survey results, or if your company would like to have your voice heard in our future surveys, contact firstname.lastname@example.org.
Ford’s Chicago assembly plant, which employs 5,700 hourly employees, produces the Ford Explorer, Lincoln Navigator, and Ford Police Interceptor Utility vehicles.
GM’s Lansing Delta Township is one of the automaker’s newest plants in the US, manufacturing the Buick Enclave and Chevrolet Traverse, according to the company’s website.
“Our courageous members at these two plants are the next wave of reinforcements in our fight for record contracts.”
– UAW President Shawn Fain –
GM’s Lansing regional stamping plant will continue working, Fain emphasized.
Fain added that the union was not calling on any additional members at Stellantis plants to go on strike. Just before his Facebook Live announcement, “Stellantis made significant progress” toward meeting some union demand – including restoring the 2009 Cost-of-Living Adjustment (COLA), the right not to cross the picket line, and the right to strike over product commitments, plant closures, and outsourcing moratoriums.
“We are excited about the momentum at Stellantis and hope it continues,” Fain stated.
Fain said that as of noon Friday, 25,000 UAW workers would be on strike.
GM’s Gerald Johnson, EVP of global manufacturing and sustainability, released a statement just moments after the UAW’s Facebook Live video.
“We still have not received a comprehensive counteroffer from UAW leadership to our latest proposal made on Sept. 21. Calling more strikes is just for the headlines, not real progress,” Johnson said.
“Our current, record proposal that is on the table offers historic wage increases and job security while not jeopardizing our future,” he added.
Ford said in a statement that “the UAW is holding up the deal primarily over battery plants that will not come online for another two to three years.”
The automaker said the UAW was demanding billions of dollars in costs beyond the billions it has already offered the union. The UAW’s demands “would have devastating implications” for the company and its union jobs, Ford said.
“There is still time to reach an agreement and avert disaster – but not much time given the fragile supply base,” the company said.
“If the UAW’s goal is a record contract, they have already achieved this. It is grossly irresponsible to escalate these strikes and hurt thousands of families,” Ford president and CEO Jim Farley said.
The UAW began its “stand up” strike on Friday, Sept. 15, choosing to strike at one plant of each of the Big Three automakers. A GM plant in Wentzville, Mo.; a Jeep plant in Toledo, Ohio (Stellantis owns the Jeep brand); and a Ford plant in Wayne, Mich.
Last Friday, Sept. 22, the strike was expanded to GM and Stellantis parts distribution centers, impacting 38 locations across 20 states. At that time, the strike was not expanded against Ford, as “real progress” had been made in contract negotiations.
Editor’s note: This is a breaking news story. Please check back for updates.
SMU’s Current and Future Steel Buyers Sentiment Indices both increased this week despite the United Auto Workers (UAW) union strike expansion, based on our most recent survey data.
Every other week we poll steel buyers about sentiment. The Steel Buyers Sentiment Indices measure how steel buyers feel about their company’s chances of success in the current market, as well as three to six months down the road. We have historical data going back to 2008. Check our interactive graphing tool here.
SMU’s Current Buyers Sentiment Index stood at +61 this week, up five points from two weeks prior (Figure 1). Although the UAW strike has been expanding, and shows no sign of ending soon, this hasn’t impacted steel buyers’ bullishness on current market conditions.
SMU’s Future Buyers Sentiment Index measures buyers’ feelings about business conditions three to six months in the future. This week, the index increased to +74 from +71 at the previous market check (Figure 2). This is the highest reading recorded since early March.
Measured as a three-month moving average, the Current Sentiment 3MMA dipped to +58.83 vs. +59.33 two weeks earlier. (Figure 3).
This week’s Future Sentiment 3MMA increased to +67.83 from +65.67 two weeks prior (Figure 4).
What SMU Respondents Had to Say:
“Current market pricing is below cost.”
“We will (be successful in today’s market), but we love low HRC pricing, so that probably isn’t a fair answer.”
“Will move to ‘Good’ once auto strike is over.”
“We hope to continue with the demand for the projects promoted by the federal government in Mexico.”
“We expect a higher more sustainable sales price in 2024.”
About the SMU Steel Buyers Sentiment Index
The SMU Steel Buyers Sentiment Index measures the attitude of buyers and sellers of flat-rolled steel products in North America. It is a proprietary product developed by Steel Market Update for the North American steel industry. Tracking steel buyers’ sentiment is helpful in predicting their future behavior.
Positive readings run from +10 to +100. A positive reading means the meter on the right-hand side of our home page will fall in the green area indicating optimistic sentiment. Negative readings run from -10 to -100. They result in the meter on our homepage trending into the red, indicating pessimistic sentiment. A reading of “0” (+/- 10) indicates a neutral sentiment (or slightly optimistic or pessimistic), which is most likely an indicator of a shift occurring in the marketplace. Sentiment is measured via SMU surveys twice per month.
Nucor Corp. is keeping plate prices unchanged with the opening of its November order book. The sideways move by the steelmaker comes after it lowered plate prices in August, according to SMU’s steel mill price increase calendar.
The Charlotte, N.C.-based steelmaker said the move was effective on Sept. 29, according to a letter to customers, adding that it would be maintaining the prices set in its Aug. 31 price letter.
The notice applies equally to rolled, normalized, and quench & tempered plate products. Published adders and extras will continue to be applied, and the company reserves the right to review and requote any unconfirmed offers, the letter said.
“We reserve the right to review and requote any offers that are not confirmed with either a Nucor sales acknowledgment or written acceptance by both parties,” the company said.
SMU’s latest check of the market on Sept. 27 put discrete plate prices at an average of $1,455 per ton ($72.75 per cwt), FOB mill. The price was down $10 per ton vs. the prior week.
The top end of our range continues to reflect Nucor’s published price.
The news comes as a surprise to many in the market especially given tighter lead times, easing demand, and souring sentiment. But others argued that a lower price point would have little positive impact on demand, only devaluing inventories and lowering replacement costs.
But even more bullish sources expected a marginal decrease given bearish dynamics on the heels of Q4 – a generally slower period when destocking takes precedence.
I didn’t see the Cleveland-Cliffs price increase coming on Wednesday. And I didn’t expect to see a target base price of $750 per ton ($37.50 per cwt) for hot-rolled coil.
But I’ve since heard that other mills, even if they hadn’t publicly announced anything, had been quietly raising prices before Cliffs publicized its increase.
Are they all targeting $750 per ton? Not necessarily. Are some trying to hold the line at $700 per ton? Yes.
It’s a similar thing when it comes to cold-rolled and coated base prices. Cliffs didn’t announce a target price for those products. But market contacts have told me some mills are now seeking base prices as high as $900-950 per ton.
Bears Say It Won’t Stick
Some of you are already telling me that none of this makes any sense. How can you increase HRC prices by ~$100 per ton in the face of a UAW strike – one that is set to expand as soon as tomorrow? (UAW president Shawn Fain will announce the union’s next steps on Friday at 9 a.m. ET on his preferred medium, Facebook Live.)
If the goal was to stabilize the market and get buyers off the sidelines, why not stop at up $100 per ton? Why not set a target of $1,500 per ton? In short, there is no shortage of cynicism about this increase and its chances of success.
But, again, it’s notable that other mills are following, even if they haven’t announced anything yet. And I don’t think it’s wise to brush off the increase as simply mill bluster and wishful thinking.
Bulls Say Strike Price Declines Already Baked In
I’ve spoken to market participants who said the price declines resulting from the UAW strike were already baked into the market – that in fact they’d been mostly baked in even before the strike began.
How does that make sense? Consider this: SMU’s galvanized base price hit a recent peak of $1,035 per ton in mid-July, following a round of price hikes announced by domestic mills in June. Prices have since fallen $170 per ton, or nearly 14.6%, since then, per our pricing tool.
SMU’s lead times for galvanized product have been roughly 6.5-7 weeks on average since then. In other words, prices started falling in July as lead times were pushing into September – the month when the strike began.
Our galvanized lead time now is approximately 6.5 weeks, which is in mid-November – just ahead of Thanksgiving. Also, keep in mind that that’s an average. Some mills are into December, and certain lines are booked out for the balance of the year.
I’d written before that mills had readied price increases of as much as $100 per ton. And that they would unleash them as soon as there was an inkling that the UAW strike might be resolved.
I’m not aware of any firm evidence that the strike will be over before the holidays. But some market participants seem to think lead times are now past the date when a deal (or at least a tentative agreement) might be in hand.
Domestic sheet prices don’t typically stay at parity or below prices abroad for long. Typically, US prices shoot above the rest of the world again. Are we about to see that liftoff?
I’ve talked to some mills who say they’ve seen a big increase in bookings – that buyers were already getting off the sidelines before the Cliffs increase, and that the company’s price increase only accelerated that trend.
But what happens if the UAW strike broadens to hit more assembly plants and extends past Thanksgiving? That would be beyond current coated lead times. In that case, could we see prices pop now and then drop again? (And if they did pop and drop, would the rebound only be sharper in Q1?)
Let me know your thoughts.
Steel 101: Oct. 24-25 in Charleston, S.C.
It’s no joke that space is limited for the SMU’s Steel 101 workshop. We can only take as many people as will fit on the bus for the tour of Nucor Steel Berkeley.
It’s a great experience. Students will learn about how steel is made in the morning of the first day, and then see (and feel the heat of) it being made in the afternoon. They’ll also get to network with each other and with SMU’s instructors.
Register here if you or someone you know is interested – before the seats on the bus are gone!