Nucor’s profits dropped precipitously in the third quarter on lower prices in its steel mills segment, and the company expects a continued earnings slide for Q4’24.

The Charlotte, N.C.-based steelmaker posted net earnings of $249.9 million in the quarter ended Sept. 28, off 78% from $1.14 billion a year earlier. Net sales slid 15% to $7.44 billion in the same comparison.

“Nucor’s market leadership, product diversity, and strong balance sheet enable us to provide meaningful returns to shareholders and execute our growth strategy even in the face of market uncertainty,” Leon Topalian, Nucor’s chair, president and CEO, said in a statement after market close on Monday.

Steel mill segments hurts profits

The company cited a decline in average selling prices in its steel mills segment as the primary driver for decreased earnings quarter over quarter.

The average sales price per ton in Q3’24 fell 6% vs. the previous quarter and was off 15% from a year earlier.

The company shipped 5,719,000 short (st) in the quarter in its steel mill segment vs. 5,746,000 st in Q3’24, roughly level. However, Nucor said shipments were down 3% from a year earlier.

Finally, the segment had earnings before income taxes and noncontrolling interests of $309,123 million in Q3’24, off 65% from a year earlier.

Scrap prices also declined in the quarter, the company said. The average scrap and scrap substitute cost per gross ton used in Q3’24 was $378. This is down 5% from $396 in Q2’24 and a 9% decrease from $415 in Q3’23.

Earnings also dropped quarter over quarter in both the steel products and raw materials segments, respectively.

Outlook

Nucor expects net earnings in Q4’24 to fall vs. earnings per diluted share of $1.05 in Q3’24.

The primary reason: Anticipated weaker earnings in the steel mills segment caused by lower average selling prices and declining volumes.

The company expects a similar scenario in its steel products segment.

However, Nucor predicted that earnings in its raw materials segment would increase quarter over quarter (excluding an impairment charge).

“The government is ensuring Canadian workers and businesses are not unduly burdened by surtaxes on imports from China,” it added.

It further noted that remission won’t be granted for goods intended for resale in the same condition in the US.

Circumstances where remission would be considered include:

• “Situations where goods used as inputs, or substitutes for those goods, cannot be sourced either domestically or reasonably from non-Chinese sources;
• Where there are contractual requirements, existing prior to Aug. 26, 2024, requiring Canadian businesses to purchase Chinese inputs into their products or projects for a specified period of time; and,
• Other exceptional circumstances, on a case-by-case basis, that could have significant adverse impacts on the Canadian economy.”

Collection of the 25% tariffs on Chinese steel and aluminum products begins on Oct. 22, while the 100% tariffs on EVs started on Oct. 1.

Recall that earlier this month, China challenged the tariffs at the WTO.

Last week’s production was 4.8% lower than the year-to-date weekly average of 1,714,000 st. Weekly production is 2.0% less than levels recorded one year ago, when mill output totaled 1,664,000 st. 

The mill capability utilization rate last week was 73.4%. This is up from 72.9% one week prior and higher than the 72.4% rate at this time last year.

Year-to-date production has reached 71,069,000 st at a capability utilization rate of 76.4%. This is 1.8% less than the same time frame last year, when 72,337,000 st had been produced at a capability utilization rate of 76.4%.

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

• Northeast – 115,000 st (up 7,000 st)
• Great Lakes – 581,000 st (up 11,000 st)
• Midwest – 198,000 st (down 15,000 st)
• South – 686,000 st (up 5,000 st).
• West – 51,000 st (up 3,000 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 operation will use an electric-arc furnace (EAF), and there will be equipment for secondary metallurgy and a caster.

The EC’s support is expected to accelerate the project by three years, with the new project slated to start producing “green steel” by 2029. The mill will have an annual capacity of 2.5 million metric tons of green slabs.

“This will contribute to the greening of the steel value chain, in line with the EU’s target of climate neutrality by 2050. At the same time, the measure ensures that competition is not distorted,” Margrethe Vestager, EVP in charge of competition policy, said in a statement on Oct. 20.

A CSP of $720/st puts Nucor’s HR price at the top of SMU’s range. Our Oct. 15 market check placed HR coil prices at $660-720/st, with an average of $690/st.

Nucor said it will offer lead times of 3-5 weeks, but customers should contact their district sales manager for availability.

West Coast CSP

Nucor also said it was keeping the CSP for HR coil from its West Coast joint-venture subsidiary, California Steel Industries (CSI), unchanged vs. last week at $780/st.

You can track this and other moves on SMU’s steel mill price announcement calendar on our website.

Last month I was in Stockholm, Sweden for the 2024 CRU Steel Decarbonisation Summit. I got to rub elbows with a lot of CRU folks I otherwise wouldn’t see siloed here in Austin, Texas. (I wrote about it here.)

One of those was Paul Butterworth, research manager at CRU Sustainability, a team formed in 2021. He gave a presentation titled “Energy Transition Session—Powering Transition: Energy, Technology, Infrastructure.” I was able to have a far-reaching conversation with him afterward, but one of his insights regarding the Carbon Border Adjustment Mechanism (CBAM) really struck me.

As we know, CBAM is one of the main sticking points to The Global Arrangement on Sustainable Steel and Aluminum between the US and EU. And although the can has been kicked on negotiations, there does not seem to be much daylight on this issue. For the US it’s a non-starter. For the Europeans it goes into effect next year.

When I asked him what he thought a compromise would look like, his response was, “Well, does, does there have to be a solution?”

While his further response will be explored in an upcoming article, the answer really woke me up.

The road to 2050 is not going to be a straight line. New technologies will emerge. Perhaps different climate roadmaps as well. I feel an advantage the American steel industry has is the ability to be nimble, and change quickly in response to the market if so required. The overarching solutions may in fact change based on small-scale initiatives taken by individual companies.

Likewise, challenges in global trade (such as in the USMCA at the moment), could lead to unique reorganizations in trading blocs. It remains to be seen.

Sometimes the lack of a solution can lead to something to else entirely. In this era of wait and see before the election, perhaps trusting the process, and knowing that something larger can grow organically from something small – rather than be arrived at by committee – can give some peace. Or relieve a little bit of stress. Ah, who am I kidding? Just crank up the Fox, the CNN, the MSNBC (whatever your poison), and enjoy the show.

Scanning the available literature, there are seven industries that lead the concerns for impact on Western economies:

1. Electrical machinery (electricity generation, semiconductors, solar energy)
2. Autos (electric vehicles, components)
3. Medical equipment and supplies (personal protective equipment, pharmaceutical inputs)
4. Textiles, apparel, and footwear (long a strong export sector for China, showing growth post-pandemic)
5. Steel and aluminum products
6. Chemicals and plastics (fertilizers, industrial goods)
7. Food and agriculture products (especially processed foods)

I have written many times about the policy mistakes that have caused this export boom, including the housing bubble and the one-child policy that distorted the Chinese economy. The Chinese government has changed course on those issues, but the after-effects will persist for a long time. With an aging and declining population, China risks losing its momentum as the “workshop of the world.”

The big problem is how to get through the next few years with minimum damage to Western economies. Right now, Western participants in the seven sectors listed above are concerned that they will be overwhelmed by Chinese exports before China can be reined in. I think that is a legitimate concern. 

What can reasonably be done to preserve Western manufacturing sectors without damaging consumers and industries that participate in global markets? 

There are three major categories of action. In some measure, all should be looked at. These are tariffs, quotas, and subsidies for domestic production.

Right now, most candidates and commentators are focusing on one:  trade restrictions on China. Trade restrictions generally take two forms: taxes (Section 232 and 301 tariffs, antidumping, countervailing duties and safeguards) or quantitative restraints (absolute quotas or tariff-rate quotas). 

There are obvious shortcomings to this approach. Trade restrictions protect domestic producers from foreign competition. That’s why domestic producers prefer tariffs. Consuming industries that depend on vigorous competition in the markets that supply them will be hurt. This could be perhaps irretrievably if trade restrictions in upstream markets diminish competition, which is why consumers don’t like tariffs. 

Controversy persists about who pays for tariffs, although there is really no room for doubt. Consumers in the importing country pay most of the cost of tariffs, and all the cost for quotas. Tariffs and quotas make goods more expensive, and that price increase is passed on to the customer. Like it or not, consumers in the United States and other Western countries are dependent on Chinese participation in our markets. Terminating that access suddenly will cause inflation, dislocation of manufacturers depending on Chinese materials and components, and a reduction in living standards. Tariffs and quotas are both regressive taxes, affecting lower-income consumers more than affluent ones. 

One difference between tariffs and quotas is who benefits from them. Tariffs are collected by governments, swelling their coffers. 

On the other hand, quotas reduce the quantity of goods in the importing market, forcing up the price of all goods, whether imported or domestically produced. Foreign exporters will make higher profits on the products they can sell, so that extra income will go offshore. 

The third course of action, subsidies, is also being tried, especially in Europe and the US. The clearest use of this strategy in the United States is in semiconductors, where the federal government has made big payouts to attract new semiconductor manufacturing to the United States. Taiwan is generally recognized as the leading source for the most advanced semiconductors. The strategic vulnerability of Taiwan to attack is one reason that Taiwanese manufacturers have looked overseas, and especially to the United States, to build new capacity. But less advanced semiconductors are also very important to US manufacturers. 

The key to subsidies is to create industries or producers that are competitive in free markets over the long haul. Major private investments will not be made if government support does not result in truly competitive companies. 

With all the shortcomings of the available remedies, there remains the considerable problem of China flooding world markets with more and more goods. No one in the West, with its democratic institutions, is able to counsel inaction. Our presidential campaign is one important example of this. 

One strategy that I hesitate to mention is negotiation to give China something and get something in return. Western unity of action could help make this idea more practical. China has some important comparative advantages in many of their growth sectors. Managed trade could help keep competition going, while making sure that Western industries are not devastated, perhaps for a long time, by China’s expansion. 

But negotiation requires compromise, and compromise requires recognition that both sides have merit. Coercive tactics, such as tariffs, quotas, and subsidies can help convince the Chinese and others that negotiation is a better approach than economic or military compulsion. 

At this point, neither major party candidate is showing commitment to compromise. We will have to wait until after Jan. 20, 2025, to see that. 

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.

“This conversion will enable Nucor Steel to significantly increase its production capacity and get ready to meet future challenges in the steel industry,” SMS group said in a statement on Wednesday.

The conversion will allow Nucor to produce specifically engineered high-strength thin strip products.

The existing entry and exit-side furnaces will be replaced with state-of-the-art closed-type furnaces to better maintain material temperature.

The upgrade will add an additional mill stand downstream of the existing stand. Both stands will operate in tandem for reversing roughing passes and finishing passes, SMS group said. A looper will be positioned between the stands to optimize strip tension and speed control.

The electrical and automation systems in the mill will also be modernized by SMS group.

Nucor has an annual plate production capacity of approximately 3 million tons of cut-to-length and discrete plate. It produces plate for several military and manufacturing applications including construction, heavy equipment, mining, energy, infrastructure, oil and gas, and transportation. The steelmaker has plate facilities in Cofield, N.C., Brandenburg, Ky., and Tuscaloosa.

Four out of five ITC commissioners voted on Oct. 4 to conduct full reviews, according to a notice from the agency. The duties were first put in place in 2001; this is the fourth time they are up for review.

Domestic producers acting as ‘interested parties’ in the review include Nucor, SSAB, Steel Dynamics Inc. (SDI), U.S. Steel, AM/NS Calvert, and Cleveland-Cliffs.

The Commission said it didn’t receive any responses from interested parties in China, India, Indonesia, Taiwan, or Thailand. Responses from Ukraine were inadequate.

“Notwithstanding the inadequate respondent interested party group responses in each review, the Commission found that other circumstances warranted conducting full reviews,” the ITC said in an explanation of its adequacy determination.

Background

Sunset reviews, conducted every five years, decide if the import duties should continue or be allowed to expire.

In a full review, the ITC will hold a public hearing and issue questionnaires to HR producers, both foreign and domestic.

Full reviews will take longer than expedited reviews as the Commission doesn’t conduct a hearing or investigate further. It relies solely on facts available from prior reviews and the Commerce Department.

The full sunset review that is the focus of this story concerns ADs on HR imported from China, Taiwan, Thailand, and Ukraine, and CVDs on HR from India, Indonesia, and Thailand.

ITC will determine if removing the duties (i.e. allowing them to ‘sunset’) would be likely to injure the domestic market.

They cover certain HR carbon steel flat products, including high-strength low alloy (HSLA) steel and the substrate for motor lamination steel.

Sunset reviews in recent years

It could be argued that sunset review cases generally result in the continuation of import duties.

But as SMU has mentioned before, it’s become a trend in recent years to see the removal of duties on Brazilian steel while simultaneously upholding duties on the same imports from other countries.

In 2022, the ITC voted to allow duties to expire on Brazilian HR coil and cold-rolled coil. And in 2023, duties were allowed to expire on Brazilian cut-to-length plate and welded pipe.

In the review of duties on HRC finalized two years ago, ADs and CVDs on Brazilian product were allowed to expire. At the same time, the ITC voted to continue the duties on HR steel from Australia, Japan, the Netherlands, South Korea, Turkey, the United Kingdom, and Russia.

There were 585 active drill rigs in the US in the week ending Oct. 18, one less than the prior week. Oil rigs counts were up by one to 482, gas rigs fell by two to 99, and miscellaneous rigs were unchanged at four.

There were 39 fewer active US rigs last week compared to the same week one year prior, with 20 fewer oil rigs and 19 fewer gas rigs.

Canada rigs

Last week there were 217 drilling rigs operating in Canada, two fewer than the prior week. Compared to the previous week, oil rigs declined by one to 153, gas rigs fell by one to 64, and miscellaneous rigs were unchanged at zero.

There are currently 19 more Canadian rigs in operation this week than there were one year ago, with 32 more oil rigs and 13 fewer gas rigs.

International rig count

The international rig count is a monthly figure updated at the beginning of each month. The total number of active rigs for the month of September rose to 947, up 16 from August and seven more than one year prior.

The Baker Hughes rig count is important to the steel industry because it 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. For a history of the US and Canadian rig counts, visit the rig count page on our website.

Terms of the deal were not disclosed.

According to Zekelman, the JV with the Rantoul, Ill.-based PVC pipe and strut channel producer will improve its electrical industry capacity within the Midwest and central Plains.

“We’re excited about this joint venture and new relationship,” said CEO Barry Zekelman. “This partnership will allow our electrical division to better serve our key accounts in the central United States.”

“This partnership not only enhances our capabilities but also amplifies our ability to innovate and deliver exceptional products and value to our customers,” added Maverick Pipe CEO Scott Johnson.

Chicago-based Zekelman Industries is an independently owned pipe and tube producer. Its operating divisions include Atlas Tube, Picoma, Sharon Tube, Wheatland Tube, Western Tube, and Z Modular.

In Europe, the market is slow to recover. Scrap supply remains sufficient to meet demand, which has not picked up from the summer lull. The downward pressure on scrap prices persists as steel mills continue to ask for reductions in price and postpone deliveries.

The exception to this gloomy short-term outlook is the US market, where the end of mill maintenance outages and seasonally slow inbound of scrap into yards are expected to push prices up again in November.

Pig iron prices are also expected to increase in the short term but will be capped by the current wide premium over scrap prices. Supply to the US will remain focused on Brazil, as Ukraine will continue to focus on raising finished steel production using domestic pig iron. Meanwhile, Russian material will likely go to Turkey and Asia as the export quota to the EU has been exhausted.

Editor’s note: This article was first published by CRU. To learn more about CRU’s services, click here.

This initial injury decision by the ITC allows the probe into the imports to move forward.

Recall that Steel Dynamics Inc. (SDI), Nucor, U.S. Steel, Wheeling-Nippon Steel, and the United Steelworkers (USW) filed extensive trade petitions in early September seeking relief from what they claim are unfairly traded imports.

The petitioners are seeking the imposition of antidumping duties (AD) on CORE imports from Canada, Mexico, Brazil, the Netherlands, Turkey, the United Arab Emirates, Vietnam, Taiwan, Australia, and South Africa. They’ve also requested countervailing duties (CVD) for CORE from Canada, Mexico, Brazil, and Vietnam.

(Note that Nucor is not a part of the petitions seeking duties on CORE from Mexico, while SDI and Nucor are the only ones seeking duties on Canadian CORE.)

The petitions allege average dumping margins ranging from as low as 12.7% for the Netherlands to as high as 195.23% for Vietnam. A table showing the full scope of the asserted dumping margins can be found here.

Commerce will set actual AD margins in its preliminary decision, which will be issued on Feb. 12, 2025.

Subsidy margins won’t be revealed until the Department of Commerce issues its preliminary CVD determination on Nov. 29.

The next big date to watch for is Nov. 29, when Commerce will issue its preliminary CVD determination. Subsidy rates above de minimis (less than 1% for developed countries and less than 2% for developing countries) have been purported, but we won’t know the degree of the CVD margins until that date.

SMU has compiled a full timeline of the investigations, which can be found here.

US CR coil prices averaged $940 per short ton (st) in our check of the market on Tuesday, Oct. 15, unchanged vs. the prior week. Despite some recent gains, CR tags are only $50/st above a recent bottom in late July, and still roughly $385/st from the year-to-date high of $1,325/st in January.

Domestic CR prices are, theoretically, 21% more expensive than imports. That’s up from 20% last week and still well removed from a 31.5% spread in early January.

In dollar-per-ton terms, US CR is now, on average, $161/st more expensive than offshore products (see Figure 1). That’s up $8/st from last week but is still well below 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 shows prices over the last two years. The right-hand side zooms in to highlight 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, Oct. 17, the CRU Asian CR price was $544/st, down $5/st w/w and ~$50/st higher than a month ago. Adding a 71% antidumping duty (Japan, theoretical) and $90/st in estimated import costs, the delivered price to the US is $1,021/st. The theoretical price of South Korean CR exports to the US is $634/st.

As noted above, the latest SMU CR price is $940/st on average, which puts US-produced CR theoretically $81/st below CR product imported from Japan but $306/st above CR imported from South Korea.

Italian CR coil

Italian CR prices were down $4/st to ~$646/st this week. After adding import costs, the price of Italian CR delivered to the US is, in theory, $736/st.

That means domestic CR is theoretically $204/st more expensive than CR coil imported from Italy. The spread is up $4/st from last week and still more than $249/st below a recent high of $453/st mid-December.

German CR coil

CRU’s German CR price was down $16/st vs. the previous week. After adding import costs, the delivered price of German CR is, in theory, $727/st.

The result: Domestic CR is theoretically $213/st more expensive than CR imported from Germany. The spread is $16/st higher w/w but still well below a recent high of $428/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.

Alcoa reported net profit of $90 million vs. a year-ago loss of $168 million. It’s net profit also improved sequentially from $20 million in Q2 despite lower shipments, thanks to lower raw material costs and the higher alumina price.

Adjusted EBITDA, excluding special items, increased to $455 million from $70 million last year. Sales revenue was 11.5% higher at $2.90 billion, with aluminum shipments marginally up at 638,000 tons from 630,000 tons.

Alumina production was down 4% sequentially to 2.44 million tons primarily due to the full curtailment of the Kwinana refinery completed in June 2024. In aluminum, production increased 3% sequentially to 559,000 tons, primarily due to continued progress on the Alumar smelter restart.

“During the third quarter, we maintained our pace of delivering on strategic actions. We gained flexibility after closing the Alumina Limited acquisition and announced the sale of our interest in the Ma’aden joint ventures,” said Alcoa President and CEO William F. Oplinger. “Positive markets and our focus on continuous improvement led to stronger results for the third quarter, while we continue to execute initiatives to further enhance our operations.”

Hydro signs long-term power contract with Skellefteå Kraft

Hydro Energi AS has signed a long-term power purchase agreement (PPA) with Skellefteå Kraft AB for the accumulated delivery of 2-terawatt hour (TWh) to Hydro’s Norwegian aluminum plants in the period of 2025-2032. The PPA secures a total of 2 TWh from Skellefteå Kraft’s SE2 portfolio over an eight-year period to Hydro’s aluminum smelters in Norway.

The power contract will be part of Hydro’s Nordic power portfolio, which consists of captive power production of 9.4 TWh per year and a long-term contract portfolio of around 10 TWh. Long-term agreements start to expire at the end of 2030 and Hydro is actively pursuing alternative sourcing options to meet the need for renewable power.

Ups and downs in Rio Tinto’s production

Rio Tinto increased its output of bauxite in Q3 by 8% year-on-year (y/y) to 15.1 million tons but suffered an 11% fall and lowering of guidance for iron ore output from IOC in Canada. The global miner’s other commodities returned mixed results.

On bauxite the company said: “The improvement continues to be driven by higher plant availability and utilisation rates owing to the implementation of the safe production system [SPS], especially at our Amrun mine at Weipa, which is operating above nameplate capacity. “We shipped 11.1 million tonnes of bauxite to third parties in the third quarter, 16% higher than the same period of 2023.”

SPS was introduced to two more sites during Q3, taking the total to 28. CEO Jakob Stausholm described the system as a step change for the company’s Australian bauxite mines. Introduced in 2021, SPS is designed to improve how Rio Tinto operates its assets, manages performance and helps employees innovate. By drawing on data to better understand asset health, maintenance scheduling and bottlenecks, the company says it has seen improved production efficiency, safety and engagement where SPS is deployed.

During Q3, alumina production was 1.8 million tons (down 7% y/y) because of the ongoing impact on the Gladstone operations in Queensland of a gas pipeline breakage back in March. Gas supplies are currently meeting around 95% of requirements and are expected to return to normal by year-end. Aluminum output fell 2% to 800,000 tons because a power supplier to New Zealand Aluminium Smelter (NZAS) asked the Tiwai Point plant to reduce electricity usage from early August. A Ramp-up back to usual run rates began in late September and is anticipated to continue to Q2.

On the iron ore side, IOC production declined 11% to 2.12 million tons because of an 11-day site-wide shutdown following nearby forest fires in mid-July. “This resulted in a revised mine plan and maintenance schedule, leading to a reduction in our full-year iron ore pellets and concentrate production guidance to 9.1 to 9.6 million tons (previously 9.8 to 11.5 million tons),” Rio Tinto said.

At Pilbara in Western Australia, iron ore output was up 1% to 84.1 million tons (company share 71.0 Mt) thanks to productivity gains offsetting ore depletion. Shipments also rose 1%, to 84.5 million tons (company share 72.5 Mt). Rio Tinto commented: “We continue to deepen the maturity of SPS and are on track to deliver a five million tonne year-on-year production uplift at Pilbara iron ore.” Consolidated mined copper production fell 1% to 167,800 tons, while refined output went up 59% to 54,300 t thanks to last year’s rebuild of the smelter and refinery at Kennecott in the US.

Editor’s note: This article was first published by CRU. To learn more about CRU’s services, click here.

Our average HRC price was $690 per short ton (st) as of Oct. 15, down $5 from the previous week.

At the same time, busheling tags increased to an average of $405 per gross ton in October, up $10 from September. 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 $328/st as of Oct. 17, off $4 from a month earlier (Figure 2). While the spread has widened in the past two months, it hasn’t touched $400 since May.

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 70% premium over prime scrap, down from 73% a month ago.

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?

Could there be any more October surprises in store for us and for the steel market?

Tariffs and duties galore

If you listened to some recent campaign rhetoric, it might sound like there could be a series of them. Former President Donald Trump has said that, if re-elected, he might impose 50% tariffs on all imports. And perhaps three- or even four-digit tariffs on vehicles imported from Mexico. That would come on top of sweeping tax cuts.

Can he do that? We learned in Trump’s first term that the king-like powers US presidents have in trade matters can be used not only to create trade deals, as was originally envisioned. They can be used to break them too. We also learned that Trump wouldn’t hesitate to catch even the domestic market by surprise. That’s what he he did in the spring of 2018, when he hit US allies and foes alike with Section 232 national security tariffs.

Zekelman, like Trump, thinks that such measures will promote growth by bringing manufacturing jobs back to the US. And that the growth from that, combined with revenue from tariffs (even if they’re eventually negotiated lower), should fill in any budget holes left by tax cuts. More than a few mainstream experts would disagree with that calculus. But I think one thing we can all agree on is that such measures are not riding to steel’s rescue in the short term.

On a basic level, the next US president won’t be inaugurated until Jan. 20. And even more standard trade measures – like the AD/CVD case on coated sheet – probably won’t have a big impact until late Q4’24 or early Q1’25.

What happens in the meantime?

One theory: Prices remain sticky

I’ve heard from some buyers who are fishing for hot-rolled coil (HR) around $600 per short ton (st). And I’ve also heard from mills who have received those offers but aren’t willing to go that low.

Part of this is a regional story. In general, we’ve seen lower prices from certain mills in the Midwest and Canada. That comes even as EAFs in the South are trying to hold roughly around Nucor’s published price of $720/st.

One mill source told me that prices were sliding from the $700s/st to the $600s/st and that volumes were less robust than just a couple of weeks ago. But if there is one area where volumes are up, it’s the number of buyers “coming out of the woodwork” and angling for year-end deals, he said.

“They are looking for $30-31 (per cwt), skipping everything in between. There seems to be an expectation that domestics mills do, or will have, availability for late November and all of December,” he said.

Such buyers think that the market has gotten softer. He said his company couldn’t support such low numbers. “My sense is actual demand is the same as it was the last month. And inventories are being drawn down a bit. But the perception is that mills will be hungry. Because they will come out of maintenance and have more tons available,” the mill source said.

One end-user source was on roughly the same page. Certain mills have been slow to come out of maintenance. And he reasoned that while prices might continue to come down, they won’t collapse as they have in past cycles.

“You can’t have a crash. We’re not at some crazy high number where a couple of hundred come out of it,” he said.

And what comes down will eventually rise again. “Everyone is getting out at the same time. Everyone will come back at the same time. It’s the herd,” the end-user source said.

Another theory: The year-end deals cometh

But not all buyers are on the same page. One Midwest service center source said it’s not just perception that mills are hungry. “The North has been cheaper for a while. … And what’s going to change? Outages are complete. Lead times are at year end. And demand is not better – it’s significantly worse.”

As for $600/st, he said, “We’re all fishing for it. And someone is going to blink. It’s a (healthy) margin. And it keeps turning the wheel turning on your mill.”

Another Midwest service center source agreed. He ticked through the markets his company served. He said automotive (at least among some Detroit-area automakers) was slow, as was agriculture, and truck trailer. He described construction as a “mixed bag” – strong in some sectors, weaker in others.

Turning to the galvanized market, the second Midwest service center source said base prices as low as $860-870/st were readily available for even smaller spot orders. And he questioned whether prices in the low $800s or even high $700s might soon be in the market. That would track roughly with the $200/st spread mills have tried to maintain between HR and base prices for tandem products.

He wasn’t personally aware of spot numbers like that. But he said he’d seen revised contract terms that achieved roughly the same effect. “With some of the mills, rather than lower the (spot) number, they are saying, ‘OK, you have a max of X (contract tons). And you can now have X+ with a 6-8% discount.”

Note that 6-8% is a standard contract discount to spot prices.

“But who wants to load up on steel in November or December unless you’ve got a great deal?” he asked. “We are pretty convinced that this party is over.”

Tampa Steel Conference

Speaking of the winter months, don’t forget to reserve your spot away in the Florida winter sun. The Tampa Steel Conference, which SMU does together with Port Tampa Bay (PTB), will be back and better than ever on Feb. 2-4, 2025. You can learn more and register here.

Flat-rolled steel segment

SDI’s Q3 shipments of flat-rolled steel inched 1% higher from the previous quarter to just under 2.4 million short tons (st). Compared to the year-ago quarter, flat rolled shipments were 7% higher.

During the quarter, the company shipped 942,000 st of hot-rolled steel, 118,000 st of cold-rolled sheet, and 1,335,000 st of coated products.

Sinton sheet mill

The Sinton, Texas, sheet mill has faced numerous challenges and outages. But it’s also seen significant improvements in reliability and utilization, executives on the call said.

SDI President and COO Barry Schneider said that, early in Q3, the Sinton team experienced some difficulty ramping back up after a four-day outage.

Sinton operated at 72% utilization in Q3. SDI expects that rate to increase to 75% in Q4 and to reach full production capacity in 2025.

New coating lines

SDI’s four new coating lines – two each at the mills in Sinton, Texas, and Terre Haute, Ind. – were successfully commissioned and have commenced operations.

All four of the new lines are operating at 65-75% of capacity, Schneider said on the call.

CEO Mark Millett added, “The volume throughput on those lines is a little inhibited right now because of the hot side not (being) at full capacity.”

At Sinton, “The additional lines really allow us to have a more efficient operation between our galvanized coatings and our Galvalume coatings,” Schneider said.

The new lines in Terre Haute are improving the facility’s reach into more markets. The Galvalume and prepaint offerings there have opened relationships with new, as well as existing, customers in that region, he said.

Aluminum – a new market for SDI

Next year, SDI will officially become a producer of flat-rolled aluminum products.

Millett said the company’s new facility in San Luis Potosi, Mexico, will start producing slabs in Q1’25.

And at the greenfield rolling operations in Columbus, Miss., SDI plans to commission the casthouse in Q1’25 and two downstream lines in Q2’25.

SDI expects commercial shipments at the facility, also known as Aluminum Dynamics Inc. (ADI), to begin in mid-2025. The company expects the rolling mill to reach 75% of its 650,000-metric-tons-per-year capacity by the end of 2026.

“The excitement within our company, and particularly at the ADI sites, continues to grow as our teams recognize their ability to help revolutionize the US aluminum industry, as they did in steel,” Millett said.

Earnings Results

In its latest quarterly earnings statement, CMC reported solid demand despite increased headwinds from uncertainty regarding interest rates and the outcome of US elections.

CMC’s fiscal fourth-quarter sales dropped 9.6% from a year earlier, while net income plummeted 43.6% (see chart). For fiscal year 2024, sales were down nearly 10% from the prior year, while net income dropped 43.5%, the Irving, Texas-based longs producer and metal recycler said on Thursday.

President and CEO Peter Matt noted that the company “felt the impact of increased macroeconomic and political uncertainty.”

In North America, Q4 finished steel volumes totaled 759,000 short tons (st), down 0.7% sequentially but up 0.3% year over year (y/y). Average selling prices were down by $89/st, while the cost of scrap utilized dropped by $17/st. This resulted in steel product margins over scrap declining by $72/st compared to last year.

Rebar and merchant bar products had average selling prices of $667/st in the quarter, down 2.1% vs. the previous quarter and 2.2% lower than the year-ago quarter.

Raw material shipments in North America were 3% lower sequentially but 5% higher y/y at 360,000 st. The average selling price of raw materials was $866/st in Q4’24, a 10.7% decrease from $970/st in the prior quarter but 3.3% above Q4’23.

In Europe, where CMC operates a mill in Poland, the steel group faced challenges from increased imports and supply discipline among domestic producers. Net sales for the region improved 6% quarter on quarter but were down 19% y/y to $222.1 million. Steel shipments of 391,000 st were 32% higher sequentially and 0.5% better than the year-ago quarter.

Outlook

Matt expressed excitement about the strategic path forward despite anticipating a sequential decline in fiscal Q1’25 earnings. “Current market conditions represent a transient period of softness created by uncertainty regarding important factors that influence any major capital investment – the cost of funding and future government policy,” he commented.

He added that “clarity will emerge in the coming months,” with expectations of renewed strength in CMC’s core markets.

Expansions updates

The ramp-up of CMC’s Arizona 2 (AZ2) micro mill continues, with merchant bar quality (MBQ) commissioning progressing, the company said. It previously disclosed a full run rate target of 500,000 st, 350,000 st of rebar, and 150,000 st of merchant bar.

“We continue to feel good about our progress in increasing operating levels,” Matt said, adding that they expect to be “at or near” the targeted full run rate at the end of 2025.

Meanwhile, construction continues on CMC’s fourth micro mill in West Virginia. It remains on target to commission the 500,000-st-per-year facility late in 2025.

The November future traded down to a new low of $720 on Aug. 16 before rebounding to $780 only six trading sessions later. The November future traded back down once again testing the $720 low on Sept. 4 and 5 before rebounding one more time, ultimately trading to as high as $799 on Sept. 25. On Oct. 9, the November future tested the $720 low for the third time. It printed as low as $714, but then settled that day at $725, back above what was looking to be a decent support level. However, the $720 level failed to hold with the November future, having settled below $720 in each of the past four trading sessions. At 5:14 am CT on Thursday, it fell to a new intraday low, trading one lot at $666 before trading back up to settle the day up $7 at $702.

November CME HRC future $/st

Similarly, the December future had found support around the $730 level, but like the November future, the support level failed. The December future has settled below $730 the past three sessions, trading as low as $690 late last night before moving back to about unchanged, settling at $710.

December CME HRC future $/st

The fizzle heard round the world. One reason for this morning’s early aggressive selling was a much anticipated announcement out of China’s government with hopes it would provide concrete details with respect to their latest round of economic stimulus measures. As you can see in iron ore’s response below, the actual stimulus was ‘underwhelming.’ For now, you can cross a global Chinese stimulus led commodity rally off the bullish factors list. 

Rolling 2nd month SGX iron ore future $/mt

Back on the home front, perhaps the HRC market is not as bad as the futures make it seem. The initial determination in the CORE trade case is scheduled for Monday. There was a massive increase in imports of tandem products in the first half of 2024, but imports of HRC remained flat as exhibited by the three-month moving average in green. Moreover, it seems a reliable assumption that 2025’s flat rolled imports will be down notably on a year-over-year (y/y) basis due to weak market sentiment, relatively unattractive spreads for months, and uncertainty related to the CORE trade case. If that assumption proves correct, then those swing tons should move back into the hands of the domestic mills. 

Imports – HRC sheets

We are less than three weeks away from the 2024 presidential and congressional election and how the market has slowed. How much of the slowdown is due to members of the supply chain sitting on their hands waiting to know the outcome of the election?

Consider how much energy surrounds each and every Federal Open Market Committee (FOMC) meeting. Financial markets slow down a week or a few days ahead of the meeting. On the day of the announcement, the financial market news channels are packed with commentary and expectations of what the Fed will do. Then at 1 pm CT, the FOMC announces their decision with Mike McKee of Bloomberg or Steve Liesman at CNBC revealing the news. Financial markets react violently and then calm ahead of the 1:30 press conference. Every word of Fed Chair Jerome Powell’s comments are scrutinized as the markets swing in response to each answer. Finally, Powell wraps up the Q&A while the markets continue to react into the close as financial pundits comment on the day’s events well into the evening. All of this over whether the Fed moved interest rates by 25 basis points or 50 basis points, and what they might do at the next meeting 30 to 60 days out.

Now put the magnitude of a Fed decision in the context of what is going to happen over the next four years as determined by the winner of the US presidential race, and to a lesser extent control of congress. Regardless of who wins, there will be massive winners and losers as a result. For instance, if the Republicans win, the oil and gas industry will benefit. However, if the Democrats win, solar and wind will undoubtedly be favored. Those are easy examples, but the list of industry winners and losers depending on the outcome runs deep. Thus, it is no surprise that the steel industry and economic decision-making writ large slows down weeks before the election just like financial markets slow hours before the FOMC decision.

Furthermore, irrespective of the winner, simply knowing the outcome of the election and pushing the uncertainty aside triggers a wave of business planning and decision making. Thus, how much of the current malaise in the steel industry is due to the uncertainty surrounding the election? More importantly, how will the market react three weeks from now once that uncertainty is resolved? Will it unleash pent-up demand? 

The steel price saw a pop following the past two elections in 2016 and 2020. On Nov. 8 of 2016 (election day), the rolling 2nd month Midwest HRC future settled at $515, before shooting up $120 to $635 on Nov. 30.

Rolling 2nd month CME HRC future $/st – 2016

On Nov. 3, 2020 the rolling 2nd month future settled at $698. While it was Democrat Joe Biden that  won this time, steel prices still jumped $143 to settle at $841 on Nov. 30.

Rolling 2nd month CME HRC future $/st – 2020

Look folks, I was born into a middle class family. Now we can debate which candidate is better for the steel industry, perhaps whether one of the candidates could be the greatest president of all time for the steel industry. Regardless of who is better for steel and regardless of who wins, we do know that human beings do not like uncertainty, that businesses do not like uncertainty. We do know that a tremendous amount of uncertainty about the next four years will be lifted on Nov. 5.

Disclaimer: The content of this article is for informational purposes only. The views in this article do not represent financial services or advice. Any opinion expressed by Mr. Feldstein should not be treated as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Views and forecasts expressed are as of date indicated, are subject to change without notice, may not come to be and do not represent a recommendation or offer of any particular security, strategy or investment. Strategies mentioned may not be suitable for you. You must make an independent decision regarding investments or strategies mentioned in this article. It is recommended you consider your own particular circumstances and seek the advice from a financial professional before taking action in financial markets.  

Trends

To smooth out the variability seen month to month, we can calculate supply levels on a three-month moving average (3MMA) basis to better show long-term trends. As shown in Figure 2, supply on a 3MMA basis has generally trended downward over the past three years, following the late 2021 peak of 9.87 million st. The 3MMA has eased each of the past three months, following May’s 11-month high of 8.70 million st. The August 3MMA is now down to a six-month low of 8.46 million st. Compare this to the 2023 monthly supply average of 8.49 million st and the 2022 average of 8.83 million st.

Looking across the last four months, August apparent supply is on the lower side of recent rates. Over this period we have witnessed a recovery in domestic mill shipments, fluctuating finished imports, and strengthening exports. The decline from July to August was primarily due to a 183,000-st (9%) decline in finished imports and a 24,000-st (3%) increase in exports, more than half of which was negated by a 132,000-st (2%) rise in domestic shipments.

Figure 4 shows year-to-date (YTD) monthly averages for each statistic over the last four years. The average monthly supply level for the first eight months of 2024 now stands at 8.43 million st, 3% less than the same period last year. The highest YTD monthly average in our recent history was for 2022 at 8.91 million st. In this time we have seen consistent growth in finished imports, while domestic shipments and total exports have fluctuated.

To see an interactive graphic of our apparent steel supply history, click here. If you need any assistance logging into or navigating the website, contact us at info@steelmarketupdate.com.

A second source said he forecast that if November goes sideways, December will be up. On the other hand, “if November goes up, most likely December will go sideways.”

The first source noted there is a sense that US demand will be better as we move past fall outages. 

“It is possible that several large mill group buyers did not buy all they wanted in October,” he added. “And Turkish demand could improve between now and then.”  

Regarding the Chicago and Detroit markets in October’s trade, he surmised there was enough supply in those Midwest areas to satisfy what seemed to be still lackluster demand. (See RMU’s Stephen Miller’s column here for more on October market dynamics.)

SMU’s October scrap pricing stands at:

• Busheling at $390-420 per gross ton (gt), averaging $405, up $10 from September.
• Shredded at $380-400/gt, averaging $390, up $15 from September.
• HMS at $330-350/gt, averaging $340, up $17.50 from September.

After the settle

The first source noted that after the October trade he has seen more supply of scrap, particularly from Europe, offered to Turkish mills. He added that as a result, prices for 80/20 have fallen now $12-15/gt in just the last week.

“Waning excitement over that time about Chinese fiscal and monetary stimulus have accelerated this drop in global scrap prices,” he said. “What this means for the November ferrous trade in the US remains to be seen.”

A second source remarked that the expectation for the November/December market is to be a 60-day market as opposed to two 30-day markets.

“Suppliers are expecting another $20 increase between now and the end of the year, primarily because of lack of supply,” he said. “Consumers will most likely counter with sideways and point to lower finished steel prices and export market stalling.”  

SMU’s check of the market on Tuesday, Oct. 15, put average domestic HR tags at $690 per short ton (st), down $5/st from the week before. US hot band did rebound from July’s 20-month low, but prices have since varied little, with average prices rising just $55/st over the past nearly three months.

Domestic HR is now theoretically 4.7% more expensive than imported material. That’s nearly flat, just a touch above last week’s reading of 4.6%. While the gains have been negligible at times, prices are still up from late July, when stateside products were ~12% cheaper than imported HR.

In dollar-per-ton terms, US HR is now, on average, $32/st more expensive than offshore product (see Figure 1). That’s flat compared to last week. Prices are still up $104/st from late July when US tags were ~$72/st cheaper 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 weekly US HR assessment to the CRU HR weekly indices for Germany, Italy, and East and Southeast Asian ports. This is only a theoretical calculation. Import costs can vary greatly, and that can influence 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, Oct. 17, the CRU Asian HRC price was $480/st, a $4/st decrease 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 $690/st. As noted above, the latest SMU US HR price is $690/st on average.

The result: US-produced HR is theoretically even with steel imported from Asia. Despite the sideways week-over-week (w/w) margin move, it’s a far cry from late December, when US HR was $281/st more expensive than Asian products.

Italian HRC

Italian HR prices declined $3/st to $547/st this week, according to CRU. After adding import costs, the delivered price of Italian HR is, in theory, $637/st.

That means domestic HR coil is still theoretically $53/st more expensive than imports from Italy. That spread is unchanged w/w as both markets edged lower. Recall that US HR was $297/st more costly than Italian hot band just five months ago.

German HRC

CRU’s German HR price moved down $7/st to $556/st this week. After adding import costs, the delivered price of German HR coil is, in theory, $646/st.

The result: Domestic HR is theoretically $44/st more expensive than product imported from Germany, up $2/st w/w. Stateside hot band was at an $18/st discount just about a month ago. At points in 2023, in contrast, US HR was as much as $265/st more expensive than imported 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. 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.

SMU Managing Editor Michael Cowden led the conversation, with SMU Senior Analyst David Schollaert stepping in to pinch-hit for part of the call. Hundreds of SMU community members tuned in to listen and ask questions of the steel industry titan.

Zekelman is a long-time champion for domestic steel and manufacturing and recently launched a campaign of his own, “Demand Domestic.” He encourages pride in using domestically produced products in local projects to support American workers and their communities.

Read on for some highlights of Wednesday’s conversation.

Steel prices

Chicago-based Zekelman Industries is North America’s largest independent steel pipe and tube manufacturer and, thus, a huge consumer of hot-rolled steel substrates. This gives Zekelman a unique view of the hot-rolled sheet market.

Commenting on steel prices on the chat, Zekelman believes “steel’s going to trade in a fairly narrow band for the balance of this year and for most of next.” Prices shouldn’t get “too high or out of whack” but will still be “decently profitable for the mills,” he predicted.

He pointed out that greed can sometimes drive prices higher. If companies become arrogant about their pricing, it can invite import competition that can disrupt the market, he said.

“I want to see a trade in a healthy band range, where the mills can make money, where we can produce more domestic product, where we can take care of our customers, where we can take care of our teammates and our communities, and run our plants at an efficient rate,” he stated.

“And I think we’re going to trade in that healthy range for 2025,” he added.

Reshoring manufacturing

Zekelman expressed his continued concern about the growing trade imbalance with Mexico, primarily in the steel pipe and conduit sectors.

He was critical of US companies that have relocated manufacturing to Mexico solely to take advantage of lower costs rather than to serve the Mexican market.

Talking about the need for manufacturing to return to the US, Zekelman got fired up.

He lamented that General Motors, John Deere, and other steel consumers have moved manufacturing operations to Mexico to take advantage of cheaper labor, fewer environmental regulations, and lower taxes.

But if they’re selling the products they make into the US market, they should return to the US and employ Americans to make those products using American-made materials, he said heatedly.

The 2024 election

Zekelman noted that the US must provide a good business environment for manufacturing to return. He believes raising taxes will stifle investment; growing the tax base is needed, which means getting the companies to return here and putting more Americans to work.

Never one to shy away from politics, Zekelman wasn’t mum on who he’ll be voting for in next month’s presidential election: the candidate offering lower taxes and more business-friendly policies encouraging investment and expansion to boost domestic manufacturing.

He believes that if Republican nominee Donald Trump wins the election, his first order of business will be to bring manufacturing back here. He said that would be a great jumpstart regarding the economic engine the US desperately needs.

The chief executive drew an analogy, comparing political decisions to choosing a sports coach. Rather than focusing on party lines, he believes practical solutions to personal and national concerns are needed.

“I can tell you right now: If Trump wins, I’m more bullish. If Harris wins, I’m way more cautious,” he stated.

Bright spots in demand

Looking ahead to 2025, Zekelman commented on the demand outlook for various industries. He highlighted oil, gas, and solar as key growth areas driven by increasing energy demands.

Additionally, he mentioned steel-intensive mega-projects like data centers and AI-related technology infrastructure as bright spots for steel consumption.

An audience member prodded the executive for his thoughts on nuclear energy and small modular nuclear reactors (SMRs). Zekelman said he sees both opportunities and challenges with their adoption in the manufacturing industry.

One opportunity is the reliable, efficient, clean power SMRs can provide for large industrial power consumers.

He mentioned several challenges for SMRs, including overcoming the historical stigma around nuclear power related to waste and safety, the regulatory environment, and integrating the technology into existing facilities and processes.

Nucor’s investment in SMR technology should help demonstrate the potential benefits and will help scale it for use in other industries and other areas of the economy, he said.

“I think Nucor investing in NuScale is brilliant,” he commented. “I love what they’re doing, and I applaud it.”

There’s a lot more to the conversation with Barry. SMU subscribers can access a full replay of the chat on our website.

On Wednesday, Nov. 13, Timna Tanners, managing director of Wolfe Research, will join us for another Community Chat. Her popular talks are lively and incredibly informative, so be sure to tune in! You can register here.

Steel Dynamics Inc. (SDI) reported a drop in third-quarter profits driven largely by lower flat-rolled steel prices.

The Fort Wayne, Ind.-based electric-arc furnace (EAF) steelmaker also saw scrap prices slip. That happened because of softer demand from domestic mills taking planned maintenance outages.

But the company noted that prices recovered at the end of the quarter while demand remained stable. And it said it expects better times in 2025, according to commentary released with Q3 earnings results after the close of markets on Wednesday.

All told, SDI reported net income of $317.8 million in Q3’24, down 45% from $577.2 million in Q3’23 on sales that slipped 5% to $4.34 billion over the same comparison. The company shipped 3.18 million short tons (st) of steel in Q3’24, up 1% from 3.15 million st in Q3’23.

The outlook

“Based on domestic steel demand fundamentals, we are constructive regarding the outlook for 2025 metal market dynamics,” SDI Co-founder, Chairman, and CEO Mark Millett said in a statement.

“We expect steel pricing to recover with an anticipated lower domestic interest rate environment, coupled with continuing onshoring of manufacturing businesses, and the expectation of significant fixed-asset investment,” he added.

That investment comes thanks to government programs – including US infrastructure spending, the Inflation Reduction Act (IRA), and Energy Department initiatives, Millett said.

The bullish outlook for 2025 also comes thanks to a sprawling trade petition against imports of coated flat-rolled steel.

SDI noted that it is the largest producer of non-automotive coated steel. The company also pointed out that as much as 65% of its steel revenues come from value-added products such as coated sheet.

“We believe current trade actions could … reduce volumes of unfairly traded steel imports into the United States, especially for coated flat-rolled steel, which could have a significant positive impact for us,” Millett said.

Recall, too, that SDI is ramping up four new coating lines – two each at its mills in Sinton, Texas, and Terre Haute, Ind. “We have had limited benefit from these new lines so far this year, as we have been increasing production, and expect to realize the additional earnings potential in 2025,” Millett said.

Also on the operations side, Sinton, which has struggled with outages, operated at 72% of its rated capacity (outside of planned downtime), SDI said. The mill is capable of producing 3 million st per year.

Turning to nonferrous, Millett said that SDI’s new aluminum flat-rolled mill in Columbus, Miss. – where the company already operates a steel mill – remains on track to start up in mid-2025.

If you need help accessing the webinar replay, or if your company would like to have your voice heard in our future webinars, contact info@steelmarketupdate.com.

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

Steel prices remain largely steady. How do you expect prices to trend over the next three months?

“Will be steady until 2025 due to demand, and supply levels will keep pricing from spiking.”

“Should stay flat throughout the balance of the year. Fourth quarter is historically slow, and the election won’t be settled until November.”

“Steady/soft. Demand is not sufficient to impact.”

“We’ve been pretty outspoken about this rally having run out of steam. We think hot rolled will be back in the mid-to-high $600s this month.”

“Mostly flat until mid Q1.”

“Flat.”

“Steady.”

“Steady to slightly up.”

“Flat to slightly up. Probably nothing happening until January.”

“I think buyers try and press down in the next month, but prices in the two months following will increase on the strength of raw material prices, lower inventories, pent-up demand, and lack of imports.”

“Expecting them to gradually increase.”

“Plate will be up.”

“Down, slowing economy and still too much capacity.”

“Down slightly.”

Is demand improving, declining, or stable?

“Stable, but not at a pleasant level.”

“Stable/soft. Pending election, softer manufacturing demand.”

“Stable even though it is down from last year.”

“Stable due to supply levels are still good.”

“Demand remains stable, at best.”

“We haven’t talked to a single service center or mill who is touting an improvement in demand.”

“Stable to declining, buyers are dumb and just driving down inventories because they expect prices to plummet.”

“Declining, slowing economy.”

“Slight decline.”

“Improving.”

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

“Slower, slowing economy.”

“Slower than last year.”

“Slower because election season.”

“Slower, with so much uncertainty and the election.”

“Slightly slower.”

“About the same.”

“Steady.”

“Inventory is moving faster for us, but only because we are purposefully keeping little-to-no stock.”

“Appears faster because we are carrying less.”

“Faster as demand has improved from last year.”

Are imports more attractive than domestic material?

“For the most part, no, the price gap is not sufficient in a soft price environment.”

“They are not attractive as prices are increasing and lead times are long.”

“Import pricing is just fine, but the lead times are a problem, especially with 2025 right around the corner now.”

“Not yet, and prices in Europe appear to be turning the corner – so even less attractive.”

“No.”

“Pricing is relatively the same as domestic, but domestic is only six weeks vs. 14 weeks from offshore.”

“Import prices are always more attractive.”

“Yes, but more narrow spread.”

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

“Inventories are plummeting and imports are not on order.”

“I think there are whispers out there, but I am very concerned with general supply>demand once all of the fall outages unwind. Scary stuff really.”

“Chinese stimulus isn’t lifting their domestic demand and exports from China are down. This will keep global demand muted.”

“Hurricane steel replacement estimates.”

“Evraz North American potential sale of operations.”

“Scrap going up.”

• Dealers try to build inventory for the winter months and do not want to sell much at lower prices.
• Winter weather slows inbound flows of obsolescent grades into dealer yards.
• Mills try to buy less for year-end accounting reasons in November and December.
• Industrial generation slacks off due to plant closures during the holidays.

This should happen this year as well, even though scrap demand, especially in the flat-roll sector, isn’t very pronounced. This is because the October market was the first increase in pricing since January. This market was prone to have an off-the-bottom bounce at some point. If you couple this with the points above, it makes sense a firmer scrap market lies ahead even in the face of stifled demand. Usually, most mills will look to make a full buy after the new year.

Another bullish factor is the strength of the export market off the North American eastern seaboard. Prices have risen for cargoes into Turkey. The billet run from China has slowed and the stimulus there may stop it altogether soon. Rebar prices are up and so is the demand for scrap. Will it last? Not sure how much prices could rise, but Turkey will need to continue buying scrap and a significant portion of that will come from North America.

It is hard to assess what effect the damage of the recent hurricanes will have on the scrap markets. Truly, there has been a great deal of unprepared and unsorted scrap created by these storms. In the Southeastern states of Georgia, South Carolina, North Carolina, and Tennessee, the problem will be logistical. Many of the roads and bridges washed away, so it will be difficult to deliver this material to processing facilities. In Florida, this may not be as much of a problem after the flood waters recede. So, shredded may be abundant there in a shorter period of time.

Editor’s note: This column appeared first in Recycled Metals Update (RMU), SMU’s new sister publication. RMU is devoted entirely to the ferrous and nonferrous recycled metals markets. If you’d like to learn more, visit RMU’s homepage and register for a free 30-day trial.

We had roughly 40 attendees converge on the Courtyard Starkville MSU at The Mill. Hailing from all over North America, the diverse group represented the breadth of the steel industry. Some industry veterans were getting a refresher on different aspects of the market, while newbies in areas like sales and marketing wanted to familiarize themselves with all things steel.

Like our conferences, our workshops engage the supply chain from top to bottom. In Mississippi, the course was no different. It included producers, service centers, OEMs. Even the US International Trade Commission was present and eager to learn.

In the classroom

As much as I’d like to say that it’s a great course with an overview of the steel industry and steelmaking, it’s really a two-day intensive and immersive workshop.

Those attending got a front-row seat to the entire life-cycle of steel: from raw materials like scrap and ore all the way to downstream applications like automotive — and everything in between. And it’s not hard to do when you have an amazing group of instructors, who together have nearly a century of experience in the steel industry – from sales to electrical and metallurgical engineering.

A special shout-out and huge thanks to our outstanding instructors: Roger Walburn, Chuck McDaniels, Mario Briccetti, and Chris Shipp. Acquainted with just about every facet of the industry, they possess a wealth of knowledge, and a passion for sharing it.

Thank you for helping craft an immensely valuable and highly educational course.

From the basic differences between an electric-arc furnace (EAF) and a blast furnace (BF), different grades of steel, or the intricacies of steel pricing, the instructors covered it all. And, of course, there was always enough time to walk through questions and ensure the course was a dialog.

Beyond the course, there were ample networking opportunities, including happy hour and meals where attendees could mingle and get to know each other. Perhaps share a business card or LinkedIn invite. And maybe even have a little fun in the process — I heard the Starkville nightlife is rather impressive.

At the mill

A major highlight and incredibly practical part of the course was our guided tour of SDI’s Steel Flat Roll Steel Group, Columbus Division in Columbus, Miss. They produce flat-rolled products. A quick 20-minute bus ride, and we were there. After donning our PPE, listening to a safety talk, and eating a boxed lunch, we were ready to go.

SDI metallurgists split us up into groups of 10 and took us on a two-hour guided tour. Workers explained to us the nature of their jobs as they took us upstairs, across hot rolling lines, and into pulpits. All the theoretical knowledge we learned in class turned real.

We walked the hot strip mill – from molten steel through a continuous caster, descaling, and finally to a hot-rolled coil. We walked the cold mill too! From uncoiling a cold-rolled coil to a continuous anneal, and finally through a coating pot.

It’s one thing to see a PowerPoint slide but another to be in the pulpit and to stare out the window as an EAF gets charged. Nothing quite prepares you for the sight of tons of molten metal. A pickling line might not sound impressive until you see one at work in front of you.

A huge thank you to all the SDI staff who made this awesome experience possible!

Don’t take my word for it

I won’t bore you with review after review from Starkville, but here are just a few from those who attended:

“The SMU Steel 101 Workshop was wonderful. The industry is always changing, and SMU does a great way of refreshing and incorporating new and exciting things in the industry.”

“This is the type of class I wish I had when I first started! Each section of the course was so in-depth and gave me a wealth of knowledge that will be used daily as a customer service rep. Highly recommend participating in this course if you want to have a better understanding of steel and everything that goes into production.”

“Great training for the experienced and the new additions within the steel industry. If it would be possible, I would like to attend at least once a year. Great job all!”

What’s next?

Tomorrow, Barry Zekelman, executive chairman and CEO of Zekelman Industries, sits down with SMU’s own Michael Cowden for our latest Community Chat, of course, Tampa Steel Conference is just around the corner on Feb. 2-4, 2025, but I’d like to draw your attention to our next Steel 101 workshop. 

We typically hold a live Steel 101 two to three times a year. Our next one is set for Spring 2025 in Charleston, S.C.

We will once again converge on Hyatt Place Mount Pleasant Towne Centre, with the date set for March 11-12, 2025. The workshop includes a guided mill tour of Nucor Steel Berkeley. You can get more details here. You can register here.

Space is limited, so don’t delay! I promise you, it is “worth its weight in steel.”

And, as always, from all of us at SMU, we thank you for your continued support.

Some buyers expect prices to continue to drift lower as fall maintenance outages linger and mills entertain year-end deals. As we reported last week, mill lead times remain historically low, and most buyers report that mill prices are negotiable for new orders. Also supporting lower prices are seasonally high service center inventories, as we reported to Premium members earlier today.

SMU’s hot-rolled steel index decreased $5/st from last week to $690/st, while cold rolled held steady at $940/st. Our galvanized and Galvalume indices both slipped $20/st to $900/st and $920/st, respectively. Average plate prices eased $5/st to $915/st, a level not seen since the first week of 2021.

SMU’s sheet price momentum indicator remains at neutral following our Sept. 10 adjustment. Our plate price momentum indicator remains pointing lower.

Hot-rolled coil

This week’s SMU price range is $660-720/st, averaging $690/st FOB mill, east of the Rockies. The lower end of our range is unchanged w/w, while the top end is down $10/st. Our overall average is down $5/st. Our price momentum indicator for hot-rolled sheet remains at neutral, meaning we see no clear direction for prices over the next 30 days.

Hot rolled lead times range from 3-7 weeks, averaging 5.0 weeks as of our Oct. 9 market survey.

Cold-rolled coil

SMU’s price range is unchanged from last week at $900–980/st, with an average of $940/st FOB mill, east of the Rockies. Our price momentum indicator for cold-rolled steel remains at neutral, meaning we see no clear direction for prices over the next 30 days.

Cold rolled lead times range from 4-9 weeks, averaging 6.9 weeks through our latest survey.

Galvanized coil

The SMU price range is $880–920/st, averaging $900/st FOB mill, east of the Rockies. The lower end of our range is unchanged w/w, while the top end is down $40/st. Our overall average is down $20/st. Our price momentum indicator for galvanized steel remains at neutral, meaning we see no clear direction for prices over the next 30 days.

Galvanized .060” G90 benchmark: SMU price range is $977–1,017/st, averaging $997/st FOB mill, east of the Rockies.

Galvanized lead times range from 5-10 weeks, averaging 7.1 weeks through our latest survey.

Galvalume coil

The SMU price range is $880–960/st, with an average of $920/st FOB mill, east of the Rockies. The lower end of our range is down $20/st w/w, as is the top end of our range. Our overall average is down $20/st w/w. Our price momentum indicator for Galvalume steel remains at neutral, meaning we see no clear direction for prices over the next 30 days.

Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,174–1,254/st, averaging $1,214/st FOB mill, east of the Rockies.

Galvalume lead times range from 6-9 weeks, averaging 7.5 weeks through our latest survey.

Plate

This week’s SMU price range is $860–970/st, averaging $915/st FOB mill. The lower end of our range is unchanged w/w, while the top end is down $10/st. Our overall average is down $5/st. 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 latest 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.