On the Brazilian side, the only relevant market for BPI is the US. So, they have to price their product to compete with other exporting countries such as India. But more importantly, they need to keep their delivered price within range of US domestic ferrous scrap. This is setting up a possibly contentious negotiation on the next round of buying for Q4 deliveries.

Since the start of the year, ferrous scrap prices for prime scrap, namely #1 Busheling and #1 Bundles, had dropped $80-100/metric ton (mt). However, imported Brazilian pig iron has traded with a range of $470-485/mt on a CFR US Port basis. So, BPI to date has only dropped $15/mt while prime scrap dropped much more.

With weakness in demand for HRC, BPI has become an expensive addition to the burden of scrap in the EAFs of flat-roll steelmakers in the US. When calculated on a delivered works basis, BPI costs well over $510/mt based on the most recent offers from Brazil of $470/mt CFR. Mills can obtain prime scrap at around $395/mt. They want to narrow this $100/mt-plus spread.

RMU recently reached out to a major BPI buyer based in the US who agreed that pig iron prices were way too expensive compared to a wide variety of ferrous products. He also stated offers as low as $440/mt CFR have been heard from South Asian producers.

RMU also spoke to a Brazilian-based export executive about the expectations of producers there. He said the onset of rainy season next month will increase the price of charcoal, which is the main reductant used in Brazil to produce pig iron. The pig iron trade there was hoping for a rise in the US scrap market in August so they could obtain a price increase for BPI. This has not happened. As a result, they have not attempted to increase their offer price and have kept it at $470/mt CFR. There have not been any reported new sales at this price.

The Brazilians are facing a strengthening in the real vs. US dollar (USD), which negatively affects their production costs. The pig iron trade in Brazil has historically benefited from a strong USD and has made exports to the US profitable.

Brazil domestic consumption

Another factor that could affect future pricing is the amount of Brazilian pig iron bought by the domestic steelmakers. At a recent meeting of the Brazilian Steel Association, there was optimism about the demand in the domestic market. Our source noted, “for the last two to three years, it has been 50/50 [domestic/export], while it used to be 70% sold to the domestic market.” This has not happened yet.

RMU spoke with a US-based pig iron trader and distributor about the situation. He said “pig iron is too tight. US mills wanted to take scrap down in August but couldn’t get it done.” He added, “Brazil is firm at $470/mt CFR for high Phos. BPI and $485/mt for low Phos. material.”

Even though Brazilian producers were expecting a $20/mt increase for Q4 shipments to the US, it doesn’t seem very likely US-based users will agree. US buyers are expecting a decrease in prices.

HBI/DRI?

When asked whether hot-briquetted iron (HBI) could come to the rescue, the trader explained that the main source for HBI has been Venezuela. However, material there is not readily available, and their Fe yield is down to 85%. The other units which produce HBI/DRI (direct-reduced iron) in New Orleans, La., Toledo, Ohio, and Trinidad are owned by steelmakers. The same goes for the HBI plant in Corpus Christi, Texas. Therefore, the material is captive and not sold into the general market. There is also a very weak trade flow of HBI into the US from Africa and Asia.

With eyes back on pig iron, RMU will continue to monitor the progress and keep the community updated as new information unfolds.

Editor’s note: This column appeared first in Recycled Metals Update (RMU), SMU’s new sister publication. Want to meet the author of this article and learn more about RMU? Stop by the SMU/RMU booth at Steel Summit on Aug. 26-28 at the Georgia International Convention Center (GICC) in Atlanta. You can also visit RMU’s website and register for a free 30-day trial.

The Chinese government is also expanding its unfair trade practices beyond its borders by subsidizing its steel producers in building additional export-oriented steelmaking capacity outside of China — particularly in Southeast Asian countries like Indonesia and Vietnam. From 2010 to 2020, crude steel capacity in the Association of Southeast Asian Nations (ASEAN) region doubled, and significant additional capacity expansion is underway, over 80% of which is the result of Chinese cross-border investments.

These cross-border subsidies are helping build new sources of unfair trade that will follow the China model, putting American steel companies, our supply chain, our workers, and the 2 million jobs the steel industry supports at risk.

While China is the largest and best-known perpetrator of these market-distorting practices, it is not the only country pursuing such policies. India is undertaking its own government-driven steel capacity expansion program that is forecast to make that country one of the leading contributors to further increases in excess steel capacity, along with the ASEAN region and the Middle East.

In order to address these growing challenges, we need more effective trade laws. Unfortunately, US antidumping and countervailing duty laws have not been updated since 2015. As a result, they have not kept up with the efforts of many entities to circumvent and evade US trade enforcement measures.

Furthermore, cross-border or “transnational” subsidies like those being used to subsidize offshore Chinese steel production via its “Belt and Road Initiative” are not clearly addressed by our existing trade remedy laws. This means American steel producers do not have a reliable remedy to address the resulting injury from imports benefiting from these subsidies.

AISI, our member companies, and industry partners have been working with Congress on a solution. The “Leveling the Playing Field 2.0 Act” has been introduced in the House by Reps. Terri Sewell (D-Ala.) and Rep. Beth Van Duyne (R-Texas), and in the Senate by Sens. Sherrod Brown (D-Ohio) and Todd Young (R-Ind.). This legislation is critical to addressing the latest efforts by foreign exporters to evade US trade laws through a variety of schemes, including those subsidies that have been enabled by China’s Belt and Road Initiative, and will help US industries fight back with new tools to crack down on repeat offenders and serial trade cheaters.

This legislation is critical to addressing the latest efforts by foreign exporters to evade US trade laws
through a variety of schemes.

Kevin Dempsey
President and CEO of the American Iron and Steel Institute

Specifically, the bill provides the Commerce Department with the authority to use the countervailing duty law to address the growing problem of cross-border subsidies. It would also address the current lack of statutory deadlines for anti-circumvention inquiries, which results in significant delays in industry efforts to obtain relief against dumped and subsidized imports that are routed through third countries for additional minor processing. In addition, the bill makes needed revisions to existing law to ensure the ability of the Commerce Department to make “particular market situation” adjustments in antidumping investigations in all instances where home market costs or prices have been distorted.

The Leveling the Playing Field 2.0 Act has strong bipartisan support in Congress, with 68 House cosponsors, including 37 Republicans and 31 Democrats, and 19 Senate cosponsors, consisting of 10 Republicans and nine Democrats. In addition, last December, the House Select Committee on the Chinese Communist Party released a detailed report that provided several recommendations to address strategic competition between the US and China. Among these recommendations was the enactment of the Leveling the Playing Field 2.0 Act “to update US trade laws by addressing issues such as cross-border subsidies, simplifying investigations into circumvention and repeated product-related inquiries, and strengthening remedies to minimize [People’s Republic of China] predatory economic practices.”

There have been some recent congressional expressions of interest in legislation to address the challenges we face from China, especially during this election season. But to date, one key piece that has been missing is concrete action to update our trade laws to address the latest forms of unfair trade like those mentioned above.

Through our direct advocacy outreach, AISI and the American steel industry continue to work with congressional leadership to request that any legislative package on China addresses the antagonistic trade practices that destroy American jobs and industries. Readers of Steel Market Update should urge their respective members of Congress to support the Leveling the Playing Field 2.0 legislation and send a strong signal that we will not stand by while China and other countries continue to take steps to undermine fair trade and threaten the health of the American steel industry.

Editor’s note

SMU welcomes opinions from across the steel industry. We’re happy to share the thoughts above from Kevin Dempsey, president and CEO of the American Iron and Steel Institute (AISI). If you have an opinion you’d like to express to the broader steel community, please contact us at info@steelmarketupdate.com.

Global steel production averaged 157.6 million mt per month across the first seven months of the year. That’s 1 million mt below the same period of 2023.

On a three-month moving average (3MMA) basis, global production declined 1% from June’s 11-month high to 159.5 million mt through July.

On a 12-month moving average (12MMA) basis, monthly production over the last 12 months averaged 153.3 million st. This rate is identical to the 12MMA in July 2023; it’s remained in this ballpark for the last two years.

On a daily basis, July production averaged 4.93 million mt, 8% below June’s 14-month high and 5% lower than last year.

Regional breakdown

China, the world’s top steel producer, produced 82.9 million mt last month, 9.5% less than June and 9% less than July 2023. Recall that in May, Chinese production reached a 14-month high of 92.9 million mt. China’s year-to-date production averaged 87.1 million mt per month in the first seven months of the year, down from 88.9 million mt in the same period last year.

Chinese production accounted for 54% of the world’s total steel output in July, down from a 57% rate one month and one year prior.

Meanwhile, steel output in the RoW increased 1% from June to July. Production in these regions totaled 69.9 million mt for the month, up less than 1% y/y. RoW production averaged 70.5 million mt per month through July, up from 69.7 million mt in the same period of 2023.

Looking at steel production levels by country, India retained the number two spot last month, producing 12.3 million mt in July. Next up was Japan at 7.1 million mt, followed by the US at 6.9 million mt, Russia at an estimated 6.3 million mt, and South Korea at 5.5 million mt.

SMU’s check of the market on Tuesday, Aug. 20, put domestic HR tags at $675 per short ton (st) on average, up $10/st from last week. (Note that stateside hot band, while up $40/st from a 20-month low, remains $170/st below a recent high of $845/st in early April.)

Domestic HR prices are now theoretically just 0.3% cheaper than imports. They were 2.3% cheaper last week and nearly 12% cheaper just last month.

In dollar-per-ton terms, US HR is now, on average, $2/st cheaper than offshore product (see Figure 1). That compares to $15/st cheaper on average last week. That’s a massive change from late last year, when US HR was often hundreds of dollars per ton more expensive than offshore material.

The charts below compare HR prices in the US, Germany, Italy, and Asia. The left-hand side highlights prices over the last two years. The right-hand side zooms in to show more recent trends.

Methodology

This is how SMU calculates the theoretical spread between domestic HR coil prices (FOB domestic mills) and foreign HR coil prices (delivered to US ports): We compare SMU’s US HR coil weekly index to the CRU HR coil weekly indices for Germany, Italy, and East and Southeast Asian ports. This is only a theoretical calculation. Import costs can vary greatly, influencing the true market spread.

We add $90/st to all foreign prices as a rough means of accounting for freight costs, handling, and trader margin. This gives us an approximate CIF US ports price to compare to the SMU domestic HR coil price. Buyers should use our $90/st figure as a benchmark and adjust up or down based on their own shipping and handling costs. If you import steel and want to share your thoughts on these costs, please get in touch with the author at david@steelmarketupdate.com.

Asian HRC (East and Southeast Asian ports)

As of Thursday, Aug. 22, the CRU Asian HRC price was $429/st, down $20/st vs. the week prior. Adding a 25% tariff and $90/st in estimated import costs, the delivered price of Asian HRC to the US is approximately $626/st. As noted above, the latest SMU HR price is $675/st on average.

The result: US-produced HRC is theoretically $49/st more expensive than steel imported from Asia. That’s up $35/st vs. last week as stateside prices inch up and Asian tags slump. But it’s still a far cry from late December, when US HR was $281/st more expensive than Asian product.

Italian HRC

Italian HR coil prices were flat at $601/st this week. After adding import costs, the delivered price of Italian HR coil is, in theory, $691/st.

That means domestic HR coil is theoretically $16/st cheaper than HR coil imported from Italy. That is down $10/st from last week. Just five months ago, US HR was $297/st more expensive than Italian hot band.

German HRC

CRU’s German HR price moved to $624/st, which is $16/st higher than last week. After adding import costs, the delivered price of German HR coil is, in theory, $714/st.

The result: Domestic HR is theoretically $39/st cheaper than coil imported from Germany, down from a $6/st discount last week. At points in 2023, in contrast, US HR was as much as $265/st more expensive than German hot band.

Notes: Freight is important when deciding whether to import foreign steel or buy from a domestic mill. Domestic prices are referenced as FOB the producing mill, while foreign prices are CIF the port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Inland freight, from either a domestic mill or from the port, can dramatically impact the competitiveness of both domestic and foreign steel. It’s also important to factor in lead times. In most markets, domestic steel will deliver more quickly than foreign steel. Effective Jan. 1, 2022, Section 232 tariffs no longer apply to most imports from the European Union. It has been replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25% tariff. SMU still includes the 25% Section 232 tariff on prices from other countries. We do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.

Lastly, please remember to download the Steel Summit 2024 app! If you haven’t already, go to either the Apple or Android app stores and download it today.

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HARDI’s Sheet Metal/Air Handling Council met virtually for its monthly meeting on Tuesday, Aug. 20. Council members are service centers, distributors, and manufacturers active in the Heating, Air-Conditioning & Refrigeration Distributors International (HARDI) association.

Wait-and-see market

The call’s moderator said the steel market in the US seems to be in a wait-and-see mode after the steady, drawn-out deflationary period that characterized most of 2024.

Another member said this week’s SMU steel buyers’ survey data, shared by SMU Managing Editor Michael Cowden on the call, “pretty much supports everything I’m about to say.” He then said there is plenty of supply in the market, mill lead times are still relatively short, demand is stable, and inventories are slightly above average.

He said he felt the market was nearing a bottom after last month’s council call, so he began building inventory levels. So, “We have a little bit higher-than-average inventory currently,” he revealed.

Another buyer remarked that their inventories are right where they want them to be after one of their best Julys.

The moderator called attention to the fact that “there is more momentum for higher prices” now than there has been all year.

Call it a floor or an inflection point, “however you want to characterize it: prices have leveled off,” he stated.

In SMU’s check of the market on Tuesday, buyers reported an average price of $905 per short ton (st) for galvanized sheet. Galv prices have steadily crept higher over the past month, but are still only $35/st higher than a month ago.

Another HARDI member noted that pricing is “firm” but is not shooting up.

He said his company saw higher volumes in July and August. This could be “related to the steel market potentially bottoming. Or at least it’s getting to a price point where contractors are more comfortable taking a position,” he surmised.

“Is this a dead cat bounce? Is this just a pause? Or is this truly an inflection point?” the moderator questioned.

We’ll have to wait and see…

Strap on your muck boots if you haven’t already

If you’ve never eaten alligator before, “you’re about to, because we’re going to be in a swamp for the next 60 days or so, and it’s going to be murky and sticky,” according to one member on the call.

Demand is far from normal, he said, and folks are waiting – for interest rates to fall, for November’s election results, for any stability.

Once the dust settles after November, we “might get some surge in demand. But for now, it’s going to be pretty, pretty swampy,” the member said.

Another HARDI member agreed that people are sitting on the sidelines and waiting to see what happens with the election.

“I’m just getting a little tired of being in this mush market,” he lamented.

Predictions on galvanized prices

The survey results from this month’s HARDI call were little changed from July’s predictions.

Over half (58%) of HARDI members predicted this month that galvanized prices will be basically flat (+/- $40/st) a month from now. Still, another third (35%) think prices will be $40-80/st higher.

Looking six months out, 64% of members think galv prices will be up by $40-120/st, while 24% think they’ll be flat. Another 12% predict a rise of more than $120/st.

The majority of members (68%) on the call foresee galvanized prices being $1,000-1,199/st a year from now. Still, 16% predict $800-999/st, and 12% say $1,200-1,399/st.

SMU participates in a monthly steel conference call hosted by HARDI and dedicated to better understanding the galvanized steel market. The participants are HARDI member companies, wholesalers who supply products to the construction markets. Also on the call are service centers and manufacturing companies that either buy or sell galvanized sheet and coil products used in the HVAC industry and are suppliers to the HARDI member companies.

“Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout,” CN said in a statement on Aug. 22.

At the same time, CPKC cited “binding arbitration” as the way to move forward. So far, the Teamsters have refused this option.

“At this time, the responsible path forward for the union, the company, our customers, the Canadian economy and North American supply chains and the public interest is for TCRC and CPKC to engage in binding arbitration to resolve all outstanding disputes,” CPKC said in a separate statement on Thursday.

CPKC said its actions are “to protect Canada’s supply chains, and all stakeholders, from further uncertainty and the more widespread disruption that would be created should this dispute drag out further, resulting in a potential work stoppage occurring during the fall peak shipping period.”

CN claims that the the Teamsters have not shown any “urgency or desire to reach a deal that is good for employees, the company, and the economy.”

“We urge the Teamsters to engage in these negotiations with the urgency and importance that this situation requires,” CN added.

Teamsters clap back

The union, which represents close to 10,000 workers at both CN and CPKC, sees the situation through a different lens.

“Despite months of good faith negotiations on the part of the Teamsters Canada Rail Conference, parties remain far apart, and both CN and CPKC have begun their lockout as of 00:01 today,” the Teamsters said in a statement on Thursday.

The union noted that, over the past several days, they have put forward “multiple offers, none of which were seriously considered by either company.”  

“The main obstacles to reaching an agreement remain the companies’ demands, not union proposals,” the union added.  

Additionally, the Teamsters said they remain at the bargaining table with both companies. 

Canadian government responds

Canadian Prime Minister Justin Trudeau said the government will soon announce how it plans to solve the nationwide freight rail interruption, according to a Reuters article.

Speaking to reporters in Quebec, Trudeau on Thursday emphasized the need for a quick solution, the article said.

The merger is expected to close by the end of Q1’25. It is subject to approval by both companies’ stockholders, regulatory approvals, and the satisfaction of other customary closing conditions.

The transaction is anticipated to be “accretive to free cash flow” for both companies in the first full year following the close of the deal.

In 2023, Arch and CONSOL sold an aggregate of ~101 million short tons of coal to steelmaking, industrial, and power-generation customers.

Executives cheer deal

“Our assets are highly complementary, resulting in increased diversification across coal types, end uses, and geographies,” said Jimmy Brock, chairman and CEO of CONSOL.

Likewise, Arch CEO Paul Lang lauded the move.

“This merger will join two proven leadership teams and best-in-sector operating platforms to establish a premier North American coal producer with worldwide reach and world-class mining and logistics capabilities,” he said.

Lang will serve as CEO and as a board member of Core Natural Resources. Brock will serve as executive chairman of Core’s board of directors.

Core Natural Resources details

Core will have mining operations and terminal facilities across six states, and will own 11 mines. The diversified coal producer will serve customers with ~12 million st of met coal and more than 25 million st of thermal coal annually.

The combined company will have access to world markets via ownership interests in two East Coast export terminals. Additionally, it will have “strategic connectivity” to ports on the West Coast and the Gulf of Mexico.

The headquarters of the combined company will be in Canonsburg, Pa., where CONSOL is based. Arch is currently based in St. Louis.

The companies said stockholders from Arch will own ~45% of Core, while CONSOL stockholders will own ~55% on a fully diluted basis. When the transaction closes, Core will trade under a new ticker.

Lifting North Star’s HR capacity – again

The North Star BlueScope (NSBS) mini mill in Delta, Ohio, operates three electric-arc furnaces, the third of which has been ramping up production since its 2021 commissioning. That EAF and a second caster added 850,000 metric tons (mt) of annual hot-rolled (HR) sheet making capacity, increasing the mill’s annual steelmaking capacity to 3 million mt (3.3 million short tons).

The North Star mill is “really settling in nicely at that 3-million-metric-tons run rate,” said BlueScope CEO Mark Vassella on an earnings call with analysts on Monday.

After completing a feasibility study earlier this year, BlueScope’s board approved a $130-million-Australian-dollar (US$87.7-million) debottlenecking expansion plan for the mill.

BlueScope plans to lift the mill’s capacity by another 10% to more than 3.3 million mt (3.6 million st). To achieve this, it has already begun various debottlenecking projects, including upgrades to the hot strip mill (see image below).

“Once at full run rate in financial year ’28, the North Star mini mill will be producing nearly 60% more steel than it did in FY’22, materially increasing our exposure to the consolidated and rationalized US steel industry and the robust steel spreads and returns it offers,” Vassella said in his remarks.

NSBS reported stronger fiscal 2024 results than in the prior year, “predominantly on higher volumes due to the expansion ramp-up, which produced 660,000 metric tons in the year.”

The North Star mill operated at full capacity during the 2024 fiscal year, as demand from end users remained robust, the company said.

Slight change in plans for greenfield coating facility

BlueScope is also advancing its plans to build a greenfield cold rolling and coating facility in the Midwestern US.

“We progressed our feasibility study into the further integration of our US value chain, which presents a compelling medium- to long-term opportunity for BlueScope,” Vassella commented.

The planned midstream coating facility would connect the NSBS mill in Ohio with three BlueScope Coated Products (BCP) paint facilities. Locations are being considered in Ohio, Kentucky, Indiana, Michigan, and Tennessee.

He said the company foresees needing 550,000 mt of cold rolling, pickling, and metal coating capacity in the medium to long term to support its growth plans in the North American pre-paint market.

Plans are for that additional capacity to be phased in over the next five to seven years, Vassella explained. The first phase will install half of that capacity (~275,000 mt), with commissioning slated for 2028. Then the rest will be “added as required.”

He said the updated plan calls for one coating line instead of two, as previously planned. Initially building one line “gives us optionality if other opportunities emerge that don’t require a second metal coating line,” he noted.

BlueScope projects outlays of $800 million in upfront capital for the project will be spread across FY’26 to FY’28.

BlueScope Coated Products

BlueScope established BCP in 2022 after its $500-million acquisition of Coil Coatings, the second-largest metal painter in the US at the time.

That acquisition added 900,000 mt, more than tripling BlueScope’s US coating and painting capacity to 1.3 million mt per year.

BCP is one of the largest toll-processing coil coaters in the US. It has locations in Cambridge and Middletown, Ohio; Rancho Cucamonga, Calif.; Jackson, Miss.; Marietta, Ga.; Memphis, Tenn.; and Houston.

Now two years since the acquisition, Vassella said BCP has “absolutely not” been performing to expectations.

BCP “underperformed on continued operational challenges, compounded by lower foundation customer demand,” said a BlueScope investor presentation. Its contribution to BlueScope’s results were “negligible,” according to Vassella.

“So there’s an enormous amount of effort going into BCP to get it back to our business case,” he disclosed on the call.

And while “conditions aren’t fabulous” for the segment at present, he reiterated that it’s always been a medium- to long-term play.

“We still fundamentally believe there’s going to be a spot for Colorbond in North America. … That’s a very big market,” he noted.

Colorbond is BlueScope’s proprietary pre-painted steel. It’s been refined as a building material in some of Australia’s harshest environments for more than 50 years, according to the company.

Vassella said it doesn’t need to capture a huge amount of market share. The planned initial addition of ~275,000 mt is in an East Coast painted market of ~5 million mt, he pointed out.

“I’m looking through where we are right now, and looking out into the medium and longer term, and still fundamentally believe in the outlook for that economy,” he said.

July marks the 18th consecutive month the ABI has indicated contracting business conditions. This time last year the index was 49.5, whereas two years prior it was 50.6.

“Architecture firms continue to face a billings slowdown,” AIA chief economist Kermit Baker said. “However, the emerging prospects of lower interest rates coupled with a modest uptick in project inquiries suggest that some dormant projects may be revived in the coming months.”

The project inquiries index rose to 52.4 in July, recovering from an eight-month low one month prior. The design contracts index remained weak for the third consecutive month, inching up to 46.5 following June’s four-year low.

Three of the four regional indices continued to show declining billings through July (Figure 2, left). The Northeastern region was the only regional index to indicate improving business conditions, the second consecutive month. The Southern, Midwestern and Western indices all remained dismal in July, though each recovered slightly from June.

Sector indices also indicated less-than-stellar business conditions across the board in July (Figure 2, right).  All four sector indices saw some degrees of growth compared to the month prior but all indicated declines in billings in July.

He will oversee Mill Steel’s financial operations, driving strategic initiatives, and supporting the company’s long-term growth objectives.

“We are thrilled to welcome Scott to the Mill Steel family,” Pam Heglund, CEO of Mill Steel, said in a statement. “His impressive track record, coupled with his deep understanding of strategic growth initiatives, aligns perfectly with our vision for the future.”

Mill Steel is a provider of flat-rolled steel and aluminum products with six stocking locations in Michigan, Ohio, Indiana, Alabama, and Texas.

He will oversee all the Cleveland-based steelmaker’s commercial operations in his new role, including sales, marketing, and customer service.

“His extensive experience, primarily with Cliffs and its legacy companies, ArcelorMittal USA, ISG, and LTV, will play a critical role in driving Cliffs’ strategy forward,” the company said in a statement on Wednesday.

Succeeding Hrosik in his previous role will be Michael Cooney. He was appointed enterprise director of flat-rolled steel sales and was most recently hired from Reliance Inc.

Cliffs said Cooney will oversee the company’s commercial relationships with service centers and non-automotive end users.

Want to share your thoughts? Contact david@steelmarketupdate.com to be included in our market questionnaires.

Steel prices have been inflecting upwards. How do you expect prices to trend over the next three months?

“We are expecting this to be another much ballyhooed ‘dead-cat bounce.’ In other words, it’ll peak here soon and then drift lower. We aren’t putting a ton of credence behind these upcoming outages.”

“Flat with some bounce up and down. Economy and elections are too volatile.”

“I don’t expect much movement up or down – demand average at best and no one is rushing to stock up.”

“Relatively flat…”

“Could go either way. Logic says they should go up, but I am not optimistic as demand is just not there and autumn is near.”

“I think prices bounce along current levels for a while, near term the outages may lead to a bit more price increases, but I would expect buyers to push back quickly.”

“I do expect them to rise but I don’t think it will rise quickly.  Nothing pushing the market right now.”

“Sideways to soft up for coil, sideways to down for plate.”

“Very slight upward movement.”

“I see small steady increases through early October.”

“Yes, because the bottom has been found.”

“Down, slowing economy.”

Is demand improving, declining or stable?

“Demand is OK on contract and is trending down on spot as buyers are still very cautious to not build inventory.”

“Stable at best.  Economy sucks, interest rates are high, and it is an unstable presidential election year.”

“Stable but lower then last year.”

“Stable soft, with a soft lean.”

“Stable, but down from what we expected for the year.”

“Declining, slowing economy, auto inventories growing, and plant shutdowns.”

“Demand seems very soft…”

Is inventory moving faster or slower than this time last year?

“Slower… soft demand and declining prices.”

“Slower based off of prices starting to rebound and no one wanting to invest.”

“Slower with less demand.”

“A bit slower.”

“Slower.”

“Inventory is moving about the same for us, but we’ve kept our levels lower on purpose.”

“About the same.”

“Slightly faster.”

Are imports more attractive than domestic material?

“No, too long to wait to hedge.”

“Not attractive, our customers require domestic.”

“Not really, a mix of lead time, spread, and unstable domestic demand.”

“Imports not attractive.”

“Domestic supply and pricing is preferred.”

“They are not more attractive based on current domestic prices and the uncertainty on what the future holds.”

“Less attractive, market is too unstable.”

“I think import pricing would be comparable, especially with domestics trying to raise things a bit, but the lead times are certainly risky.”

“Not yet for HRC but it could come soon as Europe continues to decline. Euro a bit too strong, though.”

“Yes, imports are lower on galv, roughly 10% below domestic supply chain.”

“Imports are always less expensive.”

What’s something that’s going on in the market that nobody is talking about?

“In normal seasonality trends, the market tends to bottom in October or November. There is no reason August should be projected as the bottom of the market for this year.”

“We’re all talking about the outages and AHMSA is back in the headlines. But from an M&A standpoint, I’m still curious on Evraz NA as well as on the service center side (which has been oddly quiet as of late).”

“Demonstrations that will plague this country over the next five months…”

“Do the outages actually mean anything?”

“Been quiet on US Steel/Nippon deal.”

“Cleveland-Cliffs Steel will continue monitoring several key market drivers and reserves the right to modify pricing prior to opening the spot October booking availability,” the company added.

SMU has updated its mill price announcement calendar to reflect the announcement.

Note that Cliffs’ new price is also $35/st higher than Nucor’s published HR price of $695/st.

Recall that Nucor updates its published price every Monday. Cliffs price is officially a monthly one. But the steelmaker has said it reserves the right to update its price more frequently if it sees fit.

SMU’s HR price stands at $675/st on average, up $10/st from last week and up $40/st from late July. We will next update prices on Tuesday.

Our average HRC price was $675 per short ton (st) as of Aug. 20, up $10 from the prior week.

At the same time, busheling tags increased $20 month over month to an average of $395 per gross ton (gt) in August. Figure 1 shows price histories for each product.

After converting scrap prices to dollars per short ton for an equal comparison, the differential between HRC and busheling scrap prices was $322/st as of Aug. 21, up $17 from a month earlier (Figure 2). Even with the slight bump, the spread remains in low territory not seen since November 2022.

The chart on the right-hand side below explores this relationship differently: We have graphed HRC’s premium over busheling scrap as a percentage. HRC prices carry a 71% premium over prime scrap, flat from a month ago. As with July, that is still the lowest premium since January 2023, when it was 67%.

Here’s what some of our SMU survey participants are saying about the prime scrap situation and September outlook:

“Sideways to slightly up.”

“Could be down slightly to match iron ore market.”

“I have not heard anyone really willing to go out on a limb and predict September pricing yet.”

“With upcoming outages, they could be down.”

Note: By the way, did you know SMU’s Interactive Pricing Tool can show steel and scrap prices in dollars per short ton, dollars per metric ton, and dollars per gross ton?

Well, maybe I’m getting my dates wrong here. Still, there’s a grain of truth in that last one. At last year’s Summit, one of the biggest questions was whether or not the United Autoworkers (UAW) would go on strike against the Detroit-Three automakers. (Spoiler alert: It did.) And less than a week out from Steel Summit 2024, we can quote that old Yogi Berra adage: “It’s déjà vu all over again.”

That is, history is not exactly repeating but rhyming. New UAW President Shawn Fain really turned up the rhetoric last year. The “Stand-Up Strike” against the Detroit Big Three that started last September had no shortage of colorful language against the corporations and the “billionaires.”

Just this week, though, we’ve seen the UAW threatening another nationwide strike, this time targeting only Stellantis. Find more info on that in today’s newsletter here.

Plus, in a video last week, Fain said, “It’s time to put an end to corporate greed at Stellantis.” And, in order to lower the temperature in a contentious presidential election season, Fain wore a “Trump is a scab” t-shirt Monday at the Democratic National Convention in Chicago.

So we’ll be keeping tabs on that.

Trains and ports

Two more large work actions could be coming down the pike soon, potentially affecting shipping and logistics across North America.

One possible work stoppage to watch out for is the International Longshoremen’s Association (ILA), which could go out on strike on Oct. 1 if an agreement is not reached with the US Maritime Alliance (USMX).

The ILA has 85,000 members.

“We will stand strong to win a new contract that adequately compensates our hard-working and dedicated ILA longshore workforce, and simultaneously are preparing to strike at all ports from Maine to Texas come Oct. 1, 2024, if a new agreement is not reached,” International President Harold J. Daggett said in a statement on Aug. 10.

For Canada, work action was looming on Thursday for two of the country’s rail providers.

CN and Canadian Pacific Kansas City (CPKC) have said they will lock out Teamsters Canada Rail Conference workers on Aug. 22 at 12:01 a.m. ET, in the event a negotiated settlement cannot be agreed upon.

Whither USS?

Finally, at Steel Summit 2023, the sale of U.S. Steel was the subject that dared not speak its name. Mainly because nothing was clear, except that USS had rebuffed an initial offer from Cliffs.

A year later, and we know that Nippon Steel became the accepted suitor in a deal valued at more than $14 billion. That deal, although approved by shareholders and the USS board, still needs to pass through some regulatory hurdles.

Ripped from the headlines, former President Trump reiterated his opposition to the deal on Monday, according to a Bloomberg article. (President Biden has also said he opposed the deal.)

Likewise, Pennsylvania Gov. Josh Shapiro, in the same article, repeated that he is against any deal that is not backed by the USW. We’ll see, in Atlanta, if any further clarity has come to the situation or if we will likely have to wait until after the election.

The final countdown

With less than a week until the festivities, over 1,400 people have already said yes to the premier flat-rolled steel event in the country. If you are one of those folks, thank you, and we look forward to seeing you next week! If you’re not already registered, it’s not too late to join us! You can register here. Just a few more registrations and this will be another SMU Steel Summit for the record books. We will see you soon!

The gains, however, appeared to result less from mill increases than from more limited discounting vs. last month. That’s when certain larger buyers, anticipating a bottom, stepped back in at low numbers.

Galvanized base prices also inched higher. They rose $5/st to $905/st on average. But cold-rolled prices were unchanged at $915/st on average while Galvalume was flat at $925/st on average.

Market participants were mixed on the future direction of prices. Some said upcoming and widespread fall maintenance outages should result in prices moving higher and lead times extending in the weeks ahead.

But others said that increased supply, steady/lackluster demand, and a well-inventoried supply chain could offset the outages and keep prices in a holding pattern. They also noted that a potentially soft scrap market next month might blunt any effort to significantly raise tags.

SMU’s sheet price momentum indicator remains pointed upward on predictions that mills will continue to try to push prices higher incrementally – or at least to enforce previously announced increases. But we also note that few expect prices to surge higher as they have in past cycles.

On the plate side, prices fell $25/st to $980/st on average on weak demand. Market participants said deep discounting below some mill list prices was widespread. Because of such feedback, our plate momentum indicator continues to point lower.

Hot-rolled coil

SMU’s price range for HR coil is $650-700/st, with an average of $675/st FOB mill, east of the Rockies. The lower end of our range is up by $30/st week over week (w/w), while the top end is unchanged. The overall average is up $10/st w/w. Our price momentum indicator for HR remains at higher, meaning we expect prices to increase over the next 30 days.

Hot rolled lead times range from 3-6 weeks, averaging 4.9 weeks as of our Aug. 14 market survey.

Cold-rolled coil

The SMU price range is $880–950/st, averaging $915/st FOB mill, east of the Rockies. The lower and top ends of our range were unchanged from last week. Our overall average is also flat w/w. Our price momentum indicator for CR remains at higher, meaning we expect prices to increase over the next 30 days.

Cold rolled lead times range from 5-8 weeks, averaging 6.6 weeks through our last survey.

Galvanized coil

The SMU price range is $860–950/st, with an average of $905/st FOB mill, east of the Rockies. The lower end of our range is up $10/st w/w, while the top end is unchanged. Our overall average is up $5/st w/w. Our price momentum indicator for galvanized sheet remains pointing higher, meaning we expect prices to increase over the next 30 days.

Galvanized .060” G90 benchmark: SMU price range is $947–1,047/st, averaging $997/st FOB mill, east of the Rockies.

Galvanized lead times range from 6-8 weeks, averaging 7.2 weeks through our last survey.

Galvalume coil

The SMU price range is $870–980/st, averaging $925/st FOB mill, east of the Rockies. The lower and top ends of our range were flat vs. last week. Our overall average is sideways w/w. Our price momentum indicator for Galvalume remains at higher, meaning we expect prices to increase over the next 30 days.

Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,164–1,274/st, averaging $1,219/st FOB mill, east of the Rockies.

Galvalume lead times range from 6-8 weeks, averaging 7.0 weeks through our latest survey.

Plate

The SMU price range is $920–1,040/st, with an average of $980/st FOB mill. The lower end of our range is down $20/st w/w, while the top end is $30/st lower. Our overall average is down $25/st w/w. Our price momentum indicator for plate remains at lower, meaning we expect prices to decline over the next 30 days.

Plate lead times range from 2-6 weeks, averaging 4.2 weeks through our last survey.

SMU note: Above is a graphic showing our hot rolled, cold rolled, galvanized, Galvalume, and plate price history. This data is also 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 info@steelmarketupdate.com.

SMU has received multiple reports from various sources of outages slated for the rest of the year at flat-rolled steel mills across North America. SMU contacted all the mills for confirmation but received just one reply: U.S. Steel said they were “looking into this” for us, but still had not responded by our publication deadline. Therefore, note that the outages listed below are all unconfirmed.

While this is not a comprehensive list, it provides some sense that the outages coming through year’s end are not insignificant.

If you know of any other upcoming outages or changes to the list below, please contact laura@steelmarketupdate.com.

Editor’s note: The chart above has been updated with a revised production loss estimate for USS’ Gary Works.

• Busheling at $390-400/gross ton (gt), averaging $395, up $20 from July.
• Shredded at $380-385/gt, averaging $382.50, up $5 from July.
• HMS at $320-340/gt, averaging $330, up $15 from July.

For HMS, one source commented that there are “some lower numbers and some higher ones.”

“That grade was in relatively shorter supply in the Midwest,” he said.

A second source noted that HMS in the Midwest was bought as high as $360/gt.

Exports, outlook

The first source said export pricing has been at a premium to domestic until the last two weeks or so. At that point, it started to come down due to less of an appetite in Turkey

He remarked that Turkish mills still need scrap, but less than they did in Q2 and July.

“Lots of cheap Chinese billets have made and will make their way to Turkey, which reduces Turkish scrap demand, especially in an environment where they have trouble lifting rebar prices,” the source added.

He thinks that, in the medium term, governments will crack down on “cheap” Chinese steel exports.

The source noted this could lead to those mills trying to find other ways to export steel, “but also more scrap demand to feed mills ex-China.”

He said there could be some downside potentially for US scrap in September and October as a result of that, and “continued weak demand here, which will manifest in lots of outages coming up.”

A third source said the “sentiment in the market is pessimistic as mills don’t seem to be needing much scrap due to cutbacks and planned outages.” 

He added that the “export numbers have sharply declined also.”

Looking at the near-term pricing outlook, the first source remarked that scrap prices have been lackluster all year.

“I don’t see much downside but either side of $20 is reasonable over the next 60-70 days in my opinion,” he added.

SMU survey outlook for prime in September

Participants in SMU’s survey last week were asked their outlook for September busheling prices. A majority thought prices would be sideways in September.

Little progress

“Despite negotiations over the weekend, no meaningful progress has occurred, and the parties remain very far apart,” CN said in a statement on Sunday.

Separately, CPKC said the decision to issue a lockout notice came after the Canada Industrial Relations Board (CIRB) issued a decision. The board determined that “no services need to be maintained during a railway strike or lockout in order to protect Canadian public health and safety,” the company said in a statement on Aug. 9. 

Teamsters respond

Acknowledging the CN notice, the Teamsters issued a statement on Sunday saying, “As this situation at the bargaining table develops, we will keep you all as informed as possible in the coming days.”

Earlier on Sunday, the Teamsters had said they would go out on strike at CPKC on Aug. 22.

A Reuters article on Sunday lists the companies as the country’s two largest rail operators.

The union has so far refused to commit to binding arbitration to resolve the labor disputes, according to the CN and CPKC statements.

Raw steel production is in addition up 0.7% from the same week one year ago, when output totaled 1,742,000 st.

The mill capability utilization rate for last week was 79%. That’s higher than the week prior (78.1%) and better than this time last year (76.6%). It the best utilization rate since Feb. 18, 2023, according to AISI data.

Year-to-date production stands at 55,910,000 st at a capability utilization rate of 76.6%. This is down 2% vs. the same year-ago period, when 57,076,000 st were produced at a capability utilization rate of 77.2%.

Weekly production by region is detailed below, with the weekly changes noted in parentheses:

• Northeast – 124,000 st (down 3,000 st)
• Great Lakes – 588,000 st (up 8,000 st)
• Midwest – 218,000 st (up 11,000 st)
• South – 763,000 st (up 11,000 st)
• West – 68,000 st (down 8,000 st)

Editor’s note: The raw steel production tonnage provided in this report is estimated and should be used primarily to assess production trends. The monthly AISI “AIS 7” report is available by subscription and provides a more detailed summary of domestic steel production.

The union said that in the 2023 UAW Stellantis labor agreement, “the union won the right to strike over product and investment commitments.”

The UAW noted that among these was a commitment to the reopen Belvidere Assembly plant in Illinois, which was indefinitely idled in early 2023.

“Since ratification, the company has gone back on its product commitments at Belvidere, and has been unreceptive in talks with the union to stay on track,” the union said.

The UAW clarified that under the current contract, “once an issue has been taken through the grievance procedure, the union may authorize a strike over the grievance.”

Further, the union said that aside from the impact on Belvidere, “this glaring violation of the contract imperils all of the other investment commitments the company has made.”

The UAW listed locals in Ohio, Michigan, and Indiana that could file grievances.

A request for comment from UAW on a possible timeline for the grievance process was not immediately returned.

Recall that workers at all three Detroit-area automakers ratified new labor contracts last November with UAW after a “Stand-Up Strike” that started on Sept. 15.

Stellantis responds

A Stellantis spokesperson disputed the UAW’s remarks in a company statement sent to SMU.

“The company has not violated the commitments made in the Investment Letter included in the 2023 UAW Collective Bargaining Agreement and strongly objects to the union’s accusations,” Stellantis said.

The company noted “it is critical that the business case for all investments is aligned with market conditions and our ability to accommodate a wide range of consumer demands.”

“Therefore, the company confirms it has notified the UAW that plans for Belvidere will be delayed, but firmly stands by its commitment,” Stellantis added.

Regarding the union’s remarks themselves, the company specified that “the UAW agreed to language that expressly allows the company to modify product investments and employment levels.”

The statement continued: “Therefore, the union cannot legally strike over a violation of this letter at this time.”

However, Stellantis said it “is committed to engaging with the union on a productive, respectful, and forward-looking dialogue.” 

Trenton Engine idling

Separately, the spokesperson for Stellantis told SMU the company’s Trenton Engine plant in New Jersey will be down the week of Aug. 19. The reason cited was “to balance engine inventories with production.” 

The plant produces the V-6 Pentastar Classic engine for Rams, Chryslers, and Jeeps, according to its website. It has 672 workers, including 564 hourly and 108 salaried.

However, the worldwide response isn’t uniform, and some countries are taking a more aggressive stance than others. For instance, President Joe Biden proposed raising import tariffs on steel products imported from China. Yet this may be too little too late for most of the industry, and the next few years are set to be fraught with challenges.

Let’s dive into how organizations can tackle these global challenges and future trends to look out for in the industry. 

What’s on the horizon for the global market? 

One crucial emerging trend is the increasing demand for “green steel.” According to Fortune Business Insights, the green steel market will showcase exponential growth over the next decade, with industry value expected to hit $129.08 billion by 2032.

This is no surprise, as decarbonization is a universal priority across most industries around the world. Sustainability will continue to be a crucial defining factor in organizations’ strategies for the short and long term, particularly as regulations become more stringent on carbon reduction. Notably, increased demand for green steel could shift the location of new outputs to places with lower energy costs, such as the MENA region.

Another key trend to keep in mind is weathering supply chain disruptions with technological approaches. A recent report from McKinsey highlights that economies worldwide will continue to undergo supply chain disruptions due to ongoing conflicts, such as those in the Middle East and other crises. 

That same report also underlines the likely risk of continued imbalance and overcapacity for the steel industry across multiple markets and sectors. More specifically, manufacturers and vendors can expect a slowdown in construction demand, but this may be alleviated by increased demand in the energy and transportation industries. 

Combating challenges through collaboration

Primarily, steel is a regional business, with prices differing across markets. For example, hot-rolled coil (HRC) is roughly below $500 per short ton (st) in Asia, $600 in the European Union, and $700 in the US. However, these price gaps are narrowing due to China’s oversupply of cheap steel. 

Rather than operating in isolation between markets and regions, there’s business promise in nurturing cross-collaboration between steel companies. One interesting proposition is joint ventures with other steel companies to expand portfolios without taking on huge additional costs.

Within the steel space, this collaboration could be in the form of cross-licensing contracts between suppliers and sellers across multiple regions. In fact, this approach has been adopted in Japan and some European countries. One example is India’s JSW Steel’s recent joint venture with Japan-based JFE Steel Corp. 

Mitigating the impact with technology

Although policies and regulations such as tariffs and anti-dumping may alleviate the situation in the short term, relying on state action alone is not enough to overcome this massive challenge. Fortunately, there are long-lasting strategies steel companies can adopt to become more resilient. 

According to a recent report from Boston Consulting Group (BCG), one promising solution is for organizations to shift their focus toward driving efficiency in supplying existing inventory. This means organizations should aim for operational excellence and continuous improvement. 

Technological innovation is at the crux of this approach. Investing in and adopting technologies that bolster resilience, efficiency, and productivity on the factory floor and across the supply chain is the way to go.

For instance, minimizing machine downtime is crucial for optimal operational output. The Internet of Things, which provides enhanced visibility into manufacturing processes, is continuously transforming how factory operators improve efficiency. These interconnected technologies create a streamlined operational ecosystem where disruptions are swiftly mitigated while maximally allocating cost resources.

An example of this in action is integrating solutions such as computer vision alongside machine learning (ML) algorithms. This is becoming increasingly popular among manufacturers. That’s because computer vision yields actionable data to inform automated machine interventions when there’s a risk of failure or disruption. 

These automated solutions and this approach take the heat off organizations so they can boost their efficiency and operational quality without breaking the bank—all by leveraging data collection and analysis. This technology is also crucial for allocating human resources intelligently. This includes assessing functions and roles to identify where automations can be implemented to heighten efficiency. 

Based on the current situation and expected trends, the bottom line is that organizations should prepare for continued volatility in the upcoming decade across the global steel market. Honing a future-proof strategy that can weather the instability, disruption, and fierce competition across the industry is non-negotiable. This will require leaders to carefully innovate existing processes in their supply chains through emerging technologies and align business strategies according to shifting demands as green steel becomes more popular. 

HR prices for CSI, the company’s sheet subsidiary in California, also rose. Nucor aims to collect $760/st for HR from CSI, also up $5/st from last week. Note that sheet prices on the West Coast are typically higher than those east of the Rocky Mountains.

Lead times of 3-5 weeks will continue to be offered, but Nucor noted for customers to contact their district sales manager for availability.

SMU’s Aug. 13 check of the market put current HR coil spot prices in the range of $630-700/st, with an average of $665/st. That marked the third straight week of HR prices ticking higher.

Steel Summit 101

If you’re new to the event – which will be held Aug. 26-28 – you might not know that this is not only one of the biggest steel conferences in North America but also one of the easiest to attend too.

The GICC is connected to Hartsfield-Jackson airport by a tram. You can grab your bags, hop on the tram, and be at Summit in a matter of minutes – no rideshare, taxi, or subway required.

We typically start with a bang. This year will be no different. We’ll also seek the wisdom of the opening-day crowd with a few live poll questions. Over the course of the conference, we’ll talk about everything from steel price forecasts and demand trends to trade policy and the state of the economy.

And of course it’s an election year. That means we’re going to be talking about who might win in November and what the outcome could mean for steel. As the negative ads ramp up (especially in “battleground” states), feelings can run high.

Be nice, please

Here’s my ask: We might not agree on everything. But let’s keep it civil. Summit is about the industry we love, that supports us and our families, and about bringing people together.

To that end, I think you’ll really enjoy the opening keynote from Sirius XM radio host and CNN contributor Michael Smerconish. He’ll be talking about his latest creation – “The Mingle Project”.

Smerconish is a great speaker, as those of you who have attended past Summits already know. And I hope his words will set the tone for the rest of the conference. We want you to learn a lot, network a lot, and maybe make a few new friends along the way – even better if they’re ones from outside your usual social bubble.

Survey says

My colleague David Schollaert has a good summary of of SMU’s latest steel market survey here. Those results were released to our premium subscribers on Friday. (If you’re interested in upgrading to a premium account, please contact my colleague Luis Corona at Luis Corona Luis.Corona@crugroup.com.)

Below are a few survey findings that caught my attention too. For starters, most people think sheet prices will continue rising into the autumn months (75%):

That’s what you’d expect following mill price-increase announcements in late July and early August.

But a solid minority (25%) think prices have already peaked or will by the end of this month. I didn’t expect that result. After all, the conventional wisdom (whether that still holds is another question) is that prices tend to rebound after the “summer doldrums”. It’s not often that they fall into the fall.

Here is a sampling of what survey respondents had to say about where and when prices might peak. I’ve divided the responses up into bulls, bears, and centrists.

Bulls:

“Demand is picking up in heavy steel coil, and interest rates are starting to move down.”

“Demand will start to pick in late Q3 – similar to pre-Covid years. And mills will take advantage of the opportunity to push pricing as high as possible.”

“Customers seem to have overreacted in reducing inventory. As the market begins to turn, the domestic mills will push hard and create more upward movement than would have been the case based on fundamentals. Contract season will start soon, and the total focus will be on getting prices up.”

“We won’t see a true peak until late Q1/early Q2 of 2025.”

Bears:

“I do not agree that they are trending up. It’s a glitch to stop the decline.”

“We have definitely set a floor. But we are thinking it’ll be a mostly temporary one and that pricing will level and dip back a bit. Demand is still too slow.”

“This rally seems pretty weak.”

“Dead-cat bounce.”

Centrists:

“This next cycle will be more moderate than previous cycles. There is not enough economic activity to support a big ramp up. The market will be one where moderate returns will be the norm – neither good nor bad.”

“It will remain flat for a while. Then import positions/options change, and mill outages in back half of 2024 play a role.”

“The market will stay flat until elections are over.”

While not everyone agrees on when prices will peak, there is broad consensus that recent mill price increases have at least stopped the bleeding downstream.

Take a look at the chart below:

Among service center respondents, 64% said they were holding prices, 16% said they were increasing them, and only 20% said they continued to lower prices.

That’s a huge change from a month ago. Back then, 84% reported lowering prices, none said they were increasing them, and only 16% said they were holding the line.

If there is a fly in the ointment, it might be the data in this chart:

About two-thirds of service centers tell us that they’re releasing less steel now than they were a year ago. That’s a little better than 75-80% readings we saw earlier this summer – but not by much.

And that result might explain why 30% of respondents to our survey report that they’re not meeting forecast while only 5% say they’re exceeding it.

The good news is that most (65%) continue to meet forecast.

Here is what respondents had to say about their forecasts and what’s impacting them:

“Customers are down across the board. Ag layoffs, parts/productions moving to Mexico, high interest rates hurting automotive and home buying/upgrades is having a major impact.”

“As an OEM, we’re OK. But a lot of our peers certainly seem slow with demand off and internal layoffs are pretty abundant.”

“We will barely meet forecast. But expectations are for a strong September.”

“Yes. But after adjusting down.”

Download the Summit app!

Your feedback helps us make sense of the steel market. And we’ll be asking you a few questions to kick off Summit – just as we have in past years. What will hot-rolled (HR) coil prices be a year from now? How is demand? Who will win the election?

Is there anything else that you’d like us to ask 1,400 or so folks in the steel business? Let us know at info@steelmarketupdate.com. We might include any good suggestions in our live polls at Summit.

Fwiw, you’ll need to the Steel Summit 2024 app to participate in those polls. If you haven’t already, go to either the Apple or Android app stores and download it today.

PS – Thanks again for you continued support. And we can’t wait to see you on Aug. 26 in Atlanta!

Port Talbot closes BFs, shifts to EAFs

Last week, Tata Steel, the UK’s largest steel producer, announced plans to close a major production plant in Wales. That will make nearly 3,000 workers redundant. The union representing those workers, of course, is crying foul. But is it really foul?

The Port Talbot, Wales, plant employs about 5,000 workers. Tata plans to shutter two blast furnaces there, replacing them by 2027 with an EAF plant. The net job loss: about 2,800 workers, or more than 50%.

The changes threaten the town of Port Talbot with the loss of critical (and well-paying) employment. Politicians are understandably worried. The union complains that the transition is too quick. The union and the company also argue about whether certain steel products can even be made with EAF steel.

Both sides have a point about that. But the trend clearly favors EAF steelmaking. In the US and elsewhere, “minimills” have expanded their product offering. No longer can it be said that only long products can be made in scrap-based minimills, while truly high-purity steels for automotive, pipelines, shipbuilding, and appliances must be made in blast furnaces.

How long will the integrated business model work?

The business model for traditional blast furnace companies is changing as a result. Giant steel mills can no longer rely on an indefinite “baseline” demand for products that can only be made in blast furnaces. There are some products where blast furnace steel still predominates, such as automotive steels, plate for ships, and pipelines. But EAFs are making inroads in these product lines as well.

The inconvenient truth: Multimillion-ton blast furnace plants (in Britain and the US) can no longer produce as much steel because the buyers aren’t there anymore. There are, of course, domestic buyers and foreign buyers. In both the US and Britain, foreign suppliers have captured large market shares in both countries. Trade remedy actions have proliferated, especially in the US. But new products that can only be made abroad are an increasing feature of both markets.

To survive over the long term, blast furnace producers must adapt to new market conditions. Serving global markets requires competition with China, which has largely been shut out of the US market. Britain has not been able to do that as effectively. Indeed, the British steel industry is principally owned now by Indian (a delicious irony) and Chinese parents.

Change requires more than trade protections and handouts

Competing in export markets will require US companies to become much more efficient and cost-competitive than they are now. The current protective regime is not going to help the industry get where it needs to be.

Of course, environmental concerns also are increasingly important. The summer of 2024 increased attention to global warming, with heat indexes setting records across the northern hemisphere. While steel is still an important product for modern life, substitutes that are more climate-friendly will continue and increase. And while all steel producers are under pressure to make progress on clean steel, the blast furnace companies must make more progress on that than the minimills.

British companies have chosen to transition away from blast furnace production to EAF production. That hard of a turn may not be right for the US for a variety of reasons. The defense sector, for example, needs armor plate for ships, that still needs to be made from “virgin” steel. It’s a similar story for certain applications in transportation and for the energy grid. But demand volumes for these highly specialized products may require scaling back the companies that make blast furnace steel.

The financial resources necessary to manage even a partial transition away from blast furnace production are huge, and the political challenges are too. Companies that need to transition the most may not have enough financial staying power to handle it. That is why, IMHO, the Nippon-US Steel deal makes sense. Government handouts sufficient to guide this transition don’t seem to be in the cards.

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 info@steelmarketupdate.com.

US CR coil prices averaged $915 per short ton (st) in our check of the market on Tuesday, Aug. 13, up $10/st from the week before. Despite the slight improvement of late, CR tags are still down roughly $390/st from a year-to-date high of $1,325/st in January.

Domestic CR prices are, theoretically, 15.3% more expensive than imports. That’s up marginally from 11.9% last week. While US CRC prices are still higher than offshore material, the US CR premium is down from a 31.5% premium in early January.

In dollar-per-ton terms, US CR is now, on average, $107/st more expensive than offshore product (see Figure 1). That compares to $81/st costlier on average last week. That’s still down from a recent peak of $311/st in mid-January.

The charts below compare CR coil prices in the US, Germany, Italy, South Korea, and Japan. The left-hand side highlights prices over the last two years. The right-hand side zooms in to show more recent trends.

Methodology

This is how SMU calculates the theoretical spread between domestic CR prices (FOB domestic mills) and foreign CR prices (delivered to US ports): We compare SMU’s US CR weekly index to the CRU CR weekly indices for Germany, Italy, and East Asia (Japan and South Korea). This is only a theoretical calculation. Import costs can vary greatly, influencing the true market spread.

We add $90/st to all foreign prices as a rough means of accounting for freight costs, handling, and trader margin. This gives us an approximate CIF US ports price to compare to the SMU domestic CR price. Buyers should use our $90/st figure as a benchmark and adjust up or down based on their own shipping and handling costs. (Editor’s note: If you import steel and want to share your thoughts on these costs, please get in touch with the author at david@steelmarketupdate.com.)

East Asian CR coil

As of Thursday, Aug. 15, the CRU Asian CR price was $535/st, down $18/st week over week (w/w) and down $64/st over the past month. Adding a 71% anti-dumping duty (Japan, theoretical) and $90/st in estimated import costs, the delivered price to the US is $1,005/st. The theoretical price of South Korean CR exports to the US is $625/st.

The latest SMU CR average of $915/st theoretically puts US-produced CR $90/st below CR product imported from Japan. But US tags are still $290/st more expensive than CR imported from South Korea.

Italian CR coil

Italian CR prices were down $12/st to roughly $704/st this week. After adding import costs, the price of Italian CR delivered to the US is, in theory, $794/st.

That means domestic CR is theoretically $121/st more expensive than CR coil imported from Italy. The spread is up $22/st from last week but still $359/st below a recent high of $453/st mid-December.

German CR coil

CRU’s German CR price was largely flat, down just $1/st vs. last week. After adding import costs, the delivered price of German CR is, in theory, $810/st.

The result: Domestic CR is also theoretically $105/st more expensive than CR imported from Germany. The spread is up $11/st w/w but still well below a recent high of $431/st in the first week of 2024.

Notes: We reference domestic prices as FOB the producing mill, while foreign prices are CIF the port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Inland freight from either a domestic mill or a port is important to keep in mind when deciding where to source from. It’s also important to factor in lead times. In most market cycles, domestic steel will deliver more quickly than foreign steel. Note also that, effective Jan. 1, 2022, the blanket 25% Section 232 tariff was removed from most imports from the European Union. It was replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25% tariff. A similar TRQ with Japan went into effect on April 1, 2022. South Korea is subject to a hard quota rather than a tariff.

“This equitable deal with our team at Dearborn is the latest illustration of our strong commitment to a collaborative relationship that benefits our employees and Cliffs as a whole. We are pleased to solidify this partnership with the UAW for another four years,” Cliffs’ Chairman, President, and CEO Lourenco Goncalves said in a statement.

Cliffs’ Dearborn Works in southeast Michigan produces slabs, galvanized steel, and advanced high-strength steels. According to SMU’s Blast Furnace Status Table, the mill’s blast furnace has an annual capacity of approximately 2,190,000 short tons.

Every two weeks, we poll hundreds of steel buyers about their companies’ chances of success in today’s market, as well as business expectations three to six months from now. We use this information to calculate our Current Steel Buyers’ Sentiment Index and our Future Sentiment Index, which we have been tracking since 2008.

SMU’s Current Buyers’ Sentiment Index increased by four points to +38 this week (Figure 1). Recall that Current Sentiment had fallen to +34 in both the first and last weeks of July. Those were the lowest readings recorded since August 2020. Year to date, Current Sentiment has averaged +53. This is significantly lower than the +69 average seen in the same time frame of 2023. This time last year, Current Sentiment was 19 points higher at +57.

SMU’s Future Buyers’ Sentiment Index measures buyers’ feelings about business conditions three to six months down the road. This index fell to +55 this week, its lowest point in over a year (Figure 2). Future Sentiment has averaged +64 since the beginning of the year, down just one point from the same period of 2023. Future Sentiment this week is 16 points lower than the same week last year.

Measured as a three-month moving average, Buyers Sentiment eased further this week, a trend in place for most of the last year. The Current Sentiment 3MMA slipped to +41.60 this week, its lowest reading since August 2020. The Future Sentiment 3MMA declined slightly to a five-month low of +63.72 (Figure 3).

What SMU survey respondents had to say:

“Working through higher-priced inventory … and trying to push price – not much luck yet.”

“We seem to buy well and turn our inventory well.”

“Low raw material prices are below financial forecast.”

“I believe our market will begin to increase, and steel will increase and provide better margins.”

“Spot price increases should help future business.”

About the SMU Steel Buyers’ Sentiment Indices

The SMU Steel Buyers’ Sentiment Indices measure the attitude of buyers and sellers of flat-rolled steel products in North America. They are proprietary products developed by Steel Market Update for the North American steel industry. Tracking steel buyers’ sentiment can be helpful in predicting their future behavior. A link to our methodology is here. If you would like to participate in our survey, please contact us at info@steelmarketupdate.com.

TAB Bank, an online bank focused on serving small businesses, recently announced a $27.8-million credit facility for an aluminum extrusion manufacturer based in Southern California. This financial package, which includes a $20-million revolving line of credit and a $7.8-million term loan, is designed to support the manufacturer through challenging times, particularly after facing difficulties with its previous lender.

Brett Horwitz, TAB Bank’s managing director and head of originations for the Western Region, expressed the bank’s enthusiasm, stating, “TAB Bank is excited about the potential of this partnership, as the leading aluminum manufacturer plays a crucial role in the overall economy and infrastructure of our country.”

He added, “This new credit structure not only provides opportunities for growth but also supports more efficient operations. We look forward to supporting the company’s management team as they continue to scale the business.”

Gulf Extrusions wins Gaia Award


Gulf Extrusions (Gulfex) has been recognized as a winner of this year’s esteemed Gaia Awards. These awards are among the construction and building materials industry’s most prestigious honors, celebrating innovative products and equipment that contribute to a more sustainably built environment. Gulfex received the award for its X-ECO aluminum alloy line.

Alba reports its financial results for Q2 & H1

Alba announced its results for Q2’24 and H1’24. The producer reported an EBITDA of $289 million in Q2, up 42% y/y. For H1’24, EBITDA of $469 million was reported, up 8% y/y amid sales of $1.9 bn, down 2% y/y. This led to a profit of $182 million in Q2’24 and a profit of $247 million for H1’24, up 129% y/y and 20% y/y, respectively.

Commenting on the results, Alba’s CEO Ali Al Baqali said: “The aluminum industry continues to face economic headwinds. However, focusing on the aspects within our control has enabled us to navigate these challenges while positioning ourselves for sustained growth when market conditions improve.”

In terms of operational performance, Alba produced 403,737 metric tons of primary in Q2’24, down 0.5% y/y, with a VAP sales share representing 73% of the mix versus 70% in Q2’23. The company’s top and bottom lines were driven by higher LME prices in Q2’24 and H1’24, which were 11% and 1% higher y/y, respectively. However, lower premiums (down 21% in Q2’24 and 32% in H1’24 compared to the previous year) partially offset these gains.

Alba’s Chairman of the Board of Directors Khalid Al Rumaihi said: “Building on our Q1 performance and despite navigating a challenging market landscape marked by depressed premiums, we are pleased to report another quarter of solid results thanks to our dedication to operational excellence. This performance has enabled us to return value to shareholders through an interim cash dividend of US$70 million. We are confident that if premiums had held steady at Q2’23 levels, our performance would have been even more robust. We remain optimistic about our prospects for the remainder of 2024.”

To learn more about CRU’s services, visit www.crugroup.com.