The source also that noted NLMK in Portage, Ind., will not be buying scrap in June. Normally, NLMK would purchase 30,000-35,000 gt per month. He also noted Charter Steel in Wisconsin has an announced outage from June 18-July 21. Canada’s Algoma Steel’s program will not be strong, either. This doesn’t leave many EAFs in the Chicago region to take up the slack. The only possibility is Nucor Kankakee, but the chances of that happening are slim.

He revealed that he has seen a lack of scrap generation on the part of his larger industrial accounts. This may indicate that the manufacturing sector could be slowing down.

We spoke with a buyer in the Great Lakes region who said demand in his district “is relatively consistent with a few additional outages scheduled for June.” He further added, scrap flows are enough to meet the current demand picture.

All this information points to weakness in June. As the price of HRC tries to find a bottom, the mills collectively are unlikely to show the scrap industry any mercy. So, the market could easily drop $20/gt and even more.

It was a similar story for cold-rolled and galvanized base prices, both of which fell $10/st to $1,035/st on average.

Galvalume notched the steepest declines, dropping to $1,030/st on average – down $50/st vs. a week ago.

The declines on coated prices come against a backdrop of increased domestic capacity and higher import volumes, notably from Southeast Asia.

SMU’s plate price, meanwhile, slipped $5/ton to $1,140/st on average.

The big question now is whether prices will continue to fall or whether mills will manage to turn the tide with price increases.

Some market participants said price hikes could come in June. Others said the time was not ripe for increases. They noted that lead times are in July, typically one of the slower times of the year for the steel market, and the potential for weak scrap settlement next month.

Hot-rolled coil

The SMU price range is $720-780/st, averaging $750/st FOB mill, east of the Rockies. The lower end of our range is unchanged week over week (w/w), while the top end is down $20/st. Our overall average is down $10/st w/w. Our price momentum indicator for HR remains at lower, meaning we expect prices to decline over the next 30 days.

Hot rolled lead times range from 3-7 weeks, averaging 5.0 weeks as of our May 22 market survey.

Cold-rolled coil

The SMU price range is $970–1,100/st, averaging $1,035/st FOB mill, east of the Rockies. Both the lower and upper ends of our range are down $10/st w/w. Our overall average is also down $10/st w/w. Our price momentum indicator for CR remains at lower, meaning we expect prices to decline over the next 30 days.

Cold rolled lead times range from 4-10 weeks, averaging 6.7 weeks through our latest survey.

Galvanized coil

The SMU price range is $980–1,090/st, averaging $1,035/st FOB mill, east of the Rockies. The lower end of our range is up $10/st w/w, while the top end is down $30/st. Our overall average is down $10/st w/w. Our price momentum indicator for galvanized remains at lower, meaning we expect prices to decline over the next 30 days.

Galvanized .060” G90 benchmark: SMU price range is $1,077–1,187/st, averaging $1,132/st FOB mill, east of the Rockies.

Galvanized lead times range from 4-8 weeks, averaging 6.8 weeks through our latest survey.

Galvalume coil

The SMU price range is $980–1,080/st, averaging $1,030/st FOB mill, east of the Rockies. The lower end of our range is down $60/st w/w, while the top end is down $40/st. Our overall average is down $50/st w/w. Our price momentum indicator for Galvalume remains at lower, meaning we expect prices to decline over the next 30 days.

Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,274–1,374/st, averaging $1,324/st FOB mill, east of the Rockies.

Galvalume lead times range from 6-7 weeks, averaging 6.3 weeks through our latest survey.

Plate

The SMU price range is $1,080–1,200/st, averaging $1,140/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 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 4-7 weeks, averaging 5.5 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.

Let’s take a collective deep breath ::in:: and ::out::…

And we’re back. But where exactly are we? Are steel prices going up or down? Is demand really decelerating or is it an illusion? How is the market navigating the new mill pricing mechanisms?

The latest results of SMU’s full steel buyers’ survey can help provide some insight here. Let’s take a look at some of the results and responses in each buyer’s own words.

Starting with the driver of it all—demand. While the majority of buyers reported stable demand, nearly a third of buyers are now reporting declining demand – that’s the highest that metric has been since the end of Q2 last year.

How is demand for your products?

“Summer seems to have started early, still waiting for infrastructure money to trickle down, uncertainty with election.”

“Demand is steady but somewhat down.”

“Seeing things very soft.”

“Declining transactionally due to pricing pressure.”

“High interest rates are slowing our demand.”

“Near-term spot buying is dead and expect June to be a tough month on contracts with buyers knowing July will be cheaper.”

“Stable to declining due to falling prices. It’s killing the plate market.”

“Still good on OEM side; slightly offset by spot buyers being cautious and buying small amounts.”

Are you an active buyer or on the sidelines, and why?

“Slowing down but still buying.”

“If HR gets to $700 with CRU discounts, I think most service centers load up. “

“Actively buying contract tons.”

“Infrastructure growth.”

“Current inventories are in balance and now buying to meet demand.”

“Reorder point.”

“We need to fill the shelves no matter what price.”

“Approaching the sidelines.”

“Preparing for the bottom, which is nearing.”

“No reason to buy, with (1) our focus being on controlling cash and (2) our belief that the market still has room to go down.”

“Riding the decline wave, keeping my Q2/Q3 contracts in my back pocket for later.”

“Demand softening.”

Moving on to the thing that connects us all… steel prices! And where buyers think they are headed in the coming months:

Prices have been moving lower. When do you think sheet prices will bottom, and why?

Already bottomed:

“World prices are starting to increase now. US mills will do the same.”

“I believe we are near the bottom now, and demand should increase for the summer.”

June:

“When the mills announce increases, it will take a few weeks to stop the slide. “

“I don’t think the mills are going to let it get much lower. I suspect (barring catastrophic economic/international issues) that supply will adjust to demand and decrease production to stabilize pricing.”

“Demand is weakening, and then summer doldrums will hit on top of that. Higher interest rates seem to be finally hitting the economy.”

“Demand is weak and supply of inventory is still good.”

“Seems like buyers are still pushing down, and some mills will need to do a deal or two to get through June order book.”

July:

“Still a lot of inventory.”

“Lower prices will influence inventory decisions; anticipation of seasonal incline; what seems to be the common/prevailing industry/economic forecast going into Q4; and it’s an election year.”

“We aren’t expecting anything drastic, but definitely fluttering downward over the next month to somewhere at/slightly below $700/ton.”

“Eventually folks will need to buy more than just what they are to fill holes.”

August:

“Further downward pressure due to economy, will rise ahead of 2025 auto contracts.”

“Slower demand, interest rates slowing purchases.”

September or later:

“Going to be a slower than anticipated summer.”

“Foreign steel is coming in and demand seems relatively stable. Our guess is that prices will bottom in Q4.”

Hot rolled coil prices averaged $775 per short ton in our last market survey. Where will prices be in two months?

$850-899/st:

“Demand will remain soft overall for the remainder of 2024. I don’t see mills getting numbers above $900.”

“Imports will be soft coming to the US over the summer and prices should increase.”

$800-849/st:

“We seem to be hovering at the bottom.”

“Outages and lack of imports. Demand is still solid.”

“That seems to be the new ‘normal.’”

“Although I think Cliffs will aim for a higher number, Nucor may ultimately try to eliminate a large run up with their CSP.”

$750-799/st:

“Labor costs and other operational costs are too high.”

“I think inventories are low enough to keep customers buying, yet supply and demand seem in balance.”

“Seasonality and excess inventory.”

$700-749/st:

“We will be starting to come back up from the bottom due to restocking.”

“Mills will try to make money on volume not margin and will look to buy demand.”

“I see it coming down a bit more before it rebounds.”

“Offshore orders are still coming in and demand is weak.”

$650-699/st:

“Slowdown across the board.”

“Demand has slowed down a bit. “

And like it or not, the industry is still chattering away about the new mill pricing mechanisms announced by Nucor and Cleveland-Cliffs last month. They’ve taken us on quite the ride, and it doesn’t appear to be stopping anytime soon.

What are your thoughts on Nucor’s weekly public HRC price?

Neutral:

“I don’t think it has much of an impact. Other mills have offered lower numbers. “

“Still too early to tell, has seemed to be more of a ‘monthly’ range so far.”

“Not sure how long that will last. Seems to go against the grain. Will service centers reduce inventories to avoid getting ‘caught’ by the CSP rollercoaster? 3-5 week lead times are great, but is it sustainable?”

“We will see if mills start needing to undercut themselves.”

“Too early to tell what their objective is. They have definitely created headlines.”

“Still like it but for it to be successful volume will need to be readily available.”

“’Neutral’ for us, but it has certainly stunted any upward mobility in the coil market.”

“I like that the mill is being transparent with what you can actually buy at, but I am struggling with what their goal is.”

Negative:

“CSP being taken as a price index while it’s a mill price. It is having too much influence on the market. Creating more fluctuation while it was designed to remove it or said to remove it.”

“Been a total decline in prices since it started.”

“This will only further commoditize our market.”

“I believe it is negative because it causes more speculation than certainty among buyers on a weekly basis.”

“This week’s increase seems to be contrary to what everybody is saying, and there is no transparency to how they are coming up with their numbers. If they were trying to be a better market indicator than the CRU, they are failing.”

“It has served to create more volume volatility (not less as they suggested) and more price variability and speculation thus far. And we do not believe that their sales people have effectively communicated to buyers either.”

What are your thoughts on Cliffs’ monthly public HRC price?

Positive:

“I believe a monthly price is more accurate than a weekly price.”

Neutral:

“Still too early to tell, has seemed to be fairly irrelevant so far.”

“It’s a mill price. Nothing new here.”

“We will see if mills start needing to undercut themselves.”

“Assume they will update weekly in the future to stay relevant.”

“I like them being transparent, but a monthly number vs. a weekly number is meaningless most of the time.”

Negative:

“This will only further commoditize our market.”

“Either do it at the same periodicity to Nucor and the CRU or get rid of it.”

“When they do what they say, then maybe we’ll believe it.”

I must express my gratitude to the steel universe, but mostly to the buyers regularly participating in SMU’s surveys. Thanks for sharing your insights and for enlightening the SMU community!

Wednesday’s Community Chat

On Wednesday, SMU Managing Editor Michael Cowden will connect with Spencer Johnson, head of ferrous trading at StoneX, to talk about the steel futures markets. Register here and don’t miss what’s sure to be an interesting conversation.

Join us for steel’s unofficial end to summer

Meditating is the answer for many things, but I’m not sure meditating on steel prices is the answer to where prices are heading. So before you take off and get lost in your summertime fun, remember to secure your spot for the SMU Steel Summit. North America’s largest meeting of the flat-rolled steel industry will provide valuable insight into pricing and the industry as a whole. We hope you’ll join us in Atlanta in August!

As always, thank you for allowing Steel Market Update to be a part of your journey navigating the great mystery of steel!

However, output was down 1.1% from the same time last year, AISI said.

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

• Northeast: 138,000 st (+2,000)
• Great Lakes: 555,000 st (+5,000)
• Midwest: 211,000 st  (+4,000)
• South: 762,000 st  (-3,000)
• West: 69,000 st (-1,000)

Year-to-date production now stands at 35,437,000 st with a capability utilization rate of 76.5%. Output is down 2.7% from the same 2023 period when overall utilization was 77.9%.

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.

One member said there is still a big spread between hot-rolled coil (HRC) and galv. He mentioned the influence of higher zinc prices.

“While not necessarily in carbon steel, it’s certainly a big factor on galvanized steel in terms of delivered price with zinc,” he said.

“Coating extras are likely going up,” he added, noting: “So it’s not a great month to be selling steel that we bought six weeks ago, but it is what it is, and we deal with these kinds of markets.”

SMU Managing Editor Michael Cowden did point out on the call that U.S. Steel’s Big River Steel operations in Osceola, Ark., recently raised the prices of coating extras.

Another call participant said that “demand has eased up a bit and that can be temporary as we get into the late spring and summer with things going on.”

He said that he’s seeing shorter pricing cycles. “And so it really doesn’t give us an opportunity to get momentum going,” he commented.

Galvanized sheet prices

Each month on the HARDI Sheet Metal/Air Handling Council call, a survey is conducted to see where members see galvanized steel prices moving in one, six, and 12 months.

On April’s call, the vast majority of members predicted prices for galvanized sheet would remain flat or fall for the next month. That latter prediction proved to be accurate.

The call moderator said on this month’s call that “we were probably around a $58(/cwt) base price for galvanized and they’ve fallen noticeably.” He estimated the fall at $5/cwt “and (prices) seem to be headed lower,” with the average weekly decline totaling about $1/cwt ($20/short ton).

 SMU’s galvanized coil price averaged $1,045/st ($52.25/cwt) FOB mill, east of the Rockies as of May 21.

This month, 39% of members on the call predicted galvanized prices would fall more than $2/cwt over the next 30 days. More than half (57%) think prices will be flat (+/- $2/cwt), while only 4% expect prices to increase by more than $2/cwt.

Only 17% of members think galv prices will fall over the next six months, while 35% predicted flat pricing. And 48% expect prices to rise at least $2/cwt in the same time period.

Looking out a year from now, 74% see galv prices in the range of $50-59/cwt, while 17% foresee higher pricing.

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.

NLMK USA operates an EAF steel mill in Portage, Ind. That facility, known as NLMK Indiana, makes hot-rolled coil and has capacity of 800,000 tons per year.

The company also runs a hot strip mill and cold reduction mill in Farrell, Pa., as well as a galvanizing facility in Sharon, Pa. Those facilities are known as NLMK Pennsylvania. Unlike the Portage mill, the Pennsylvania facilities do not have have onsite melt capacity.

The sources cited in the Bloomberg article said these assets could be valued at more than $500 million.

A spokesperson for Cliffs said that the company does not comment on M&A speculation. A spokesperson for NLMK said neither NLMK nor NLMK USA would comment on the matter.

100% melted and made in the USA?

NLMK USA has traditionally relied on imported slabs as well as material melted at the Portage EAF to meet its requirements. Section 232 tariffs resulted in the company shifting much of its slab supply away from Russia and toward Brazil, which is subject to quota rather than the 25% tariff.

The company has in the past taken legal actions against domestic mills over issues related to imported slabs and Section 232. A tie up with Cliffs would presumably mean that NLMK USA would no longer have issues sourcing slabs domestically. The Portage EAF would also provide Cliffs with an outlet for its scrap and direct-reduced iron (DRI).

Note that NLMK Indiana is located in between Cliffs’ Burns Harbor steel mill in Northwest Indiana as well as U.S. Steel’s Midwest Plant.

USS deal

Cliffs made an offer for U.S. Steel in August, which was rejected by the Pittsburgh-based steelmaker. A war of words has heated up between the two companies since USS accepted an offer valued at more than $14 billion from Japan’s Nippon Steel Corp. That deal still faces regulatory hurdles.

It was not clear whether or how a potential deal for NLMK USA might impact any deal for U.S. Steel.

This week’s price is an increase of $10/st from the CSP of $770/st set on May 20.

Since stunning the market at the beginning of the month with a $65/st price cut of its published HR coil price on May 6, Nucor has bumped up its CSP by $10/st for a second straight week.

The steelmaker said it will continue to offer lead times between 3-5 weeks but to contact the company for availability.

Despite the increase, Nucor subsidiary California Steel Industries’ (CSI’s) base HR price this week is $840/st – unchanged for a third consecutive week. This price variation is driven by a West Coast market that is quite different from the rest of the country.

To keep track of the latest mill price notices, visit SMU’s price announcement calendar.

But what effect will it have for the recycled metals community? 

If they cause the price of steel to increase or merely maintain, does this really help recycled iron and steel? Granted, if it spurs greater steel production, there will be demand for more scrap. As far as pricing goes, steelmakers have shown over a long period of time their willingness to decouple steel pricing from raw material pricing.  

In 2021, when hot-rolled coil (HRC) started pushing against the $2,000-per-short-ton (st) threshold, did the price of scrap steel follow along? It did go up on a demand/push basis, but ebbed below $535/st. The recycled iron and steel community only modestly shared in the spoils. 

It seems our politicians and select industry leaders have developed a hair-trigger approach to foreign competition, whether fair or unfair. I wonder if imposing tariffs, quotas, or embargoes is a sign of strength or weakness. It’s not the intention of this article to answer or debate political issues. Rather, it’s to point out to the recycling community the potential risks that come with this type of attitude that has been developed by our industrial and political leaders to address trade issues, especially when those industries have an ax to grind with the remedy.  

Regarding embargoes, many of our readers may not know about the scrap metal embargo of 1940. As Japan was gaining strength by invading countries like China and later French Indochina, the US was supplying scrap iron and steel to several countries, including Japan. In fact, Japan was a very large buyer of US scrap. 

That year, a large US-based scrap trader and processor concluded a 250,000-ton order of steel scrap for shipment to Japan. In 1940, this was considered an extremely large order. The trader started to accumulate massive tonnages at ports on both the East and West Coasts. Just prior to the shipments taking place, the Roosevelt administration embargoed scrap metal (and oil) shipments to Japan. No other country except Great Britain could receive scrap from the US.

As you can imagine, with scrap tonnages extremely displaced on both coasts, and companies unable to ship except to mills in the US, the price of scrap plummeted until these displaced tonnages were completely depleted. Needless to say, it cost the American scrap industry dearly. 

I am not saying this was the wrong decision by our government given that the winds of war were blowing at that time. But tariffs, quotas, and embargoes do have a destabilizing effect and can lead to unintended consequences. Only 14 months later, Japan attacked Pearl Harbor.   

The point is that this type of remedy has been used in the past. Could it happen again to recycled metals? As the EAF conversion becomes more pronounced worldwide and demand for scrap intensifies, despite the efficiency of the American recycling industry, there may be calls for the limitation of scrap exports from the US. Whether it’s done for national security reasons, for votes, or as a handout to certain industry interests, it could spell trouble for the recycled metals community. We should think long and hard about these types of actions. After all, those who don’t learn from history, are doomed to repeat it. 

On April 4, Nucor introduced its CSP: Every Monday at 10 a.m. ET, Nucor will announce its spot price for the upcoming week. The CSP is a weekly mill offer price for HR coil, where Nucor offers lead times of 3–5 weeks.

Based on our research, in combination with what Nucor has communicated across various outlets, the CSP is designed to counter the excessive amount of price volatility seen in US Midwest HR coil prices in recent years.

Nucor’s goal – as stated in its initial announcement, multiple interviews, and on its earnings call – can be paraphrased as follows: 

Simply put, the goal is to provide a timely, reliable, predictable, and relevant price on our spot HR coil product. To do this, we will provide a weekly, market-relevant real-time price for buyers on a consistent and shorter lead time window.

Our goal is to support our customers who have been asking us to shrink excessive price volatility and allow them to better plan for the market with prices that allow for our customers and Nucor to be successful.

How does the CSP compare to CRU’s sheet price indices?

CRU’s US Midwest sheet prices for HR, CR, and HDG coil products publishes by 9 a.m. ET on Wednesdays and reflects the following:

• A volume-weighted average of actual transactions from the prior week
• Data providers include the majority of domestic producers, dozens of steel service centers, and multiple manufacturers
• No single data provider can represent more than 20% of the volume weighting
• Base price, FOB a US mill, East of the Rockies
• A view into the competitive landscape where multiple US-based mills compete to sell their products

Based on these points, CRU’s US Midwest sheet prices will lag the CSP as our price avoids market noise and provides insight to our clients of where actual transactions took place. Our transaction-only methodology is the top reason why CRU has been selected by over 95% of companies in the US that use a HR coil price benchmark for physical contracts.

Furthermore, our transaction-only methodology is also a primary reason for being selected as the price that clears CME Group’s HR coil futures contracts. So, while Nucor may offer to sell volume at a specific price, there are other US-based mills competing to sell their products. Inevitably, the Nucor price will not reflect the wider market as much as CRU’s is designed to.

How might the CSP shift Nucor’s commercial strategy?

In its 2023 annual report, Nucor estimated that “greater than 80% of sheet sales were to contract customers.” These contracts typically incorporate monthly or quarterly price adjustments reflecting changes in market-based indices and/or raw material costs. Our research shows that the index-based portion of these contracts is generally transacted with a discount to the underlying index. The balance of its sales were conducted in the spot market.

Nucor may very well try to use the CSP as an adjustment mechanism in these contract sales instead of an index such as CRU. If they do, steel buyers will rightfully be skeptical of allowing a producer to set the price in legally enforceable contracts. Yet, some buyers may allow limited exposure to this so that they can remain close with a key supplier. After all, in the steel market, relationships between buyers and sellers can carry an intrinsic value.  

A second, more likely option may emerge for the strategic use of its CSP. In the first several weeks of utilizing the CSP, Nucor dramatically undercut the spot market and offered prices competitive with discounted contracts. By doing this, we believe Nucor has invested in credibility by bringing a more relevant price to the market.

If Nucor continues to provide competitive prices with typical lead times, we find it likely that Nucor may shift some portion of discounted contract sales into the spot market in 2025, as buyers will no longer need to negotiate add-on sales to these discounted contracts.

This strategy shift is directly related to rising domestic capacity

Over the last 13 years, various sheet mills have started up or gone through significant capacity expansions. During these periods when domestic capacity expands, sheet prices come under pressure when demand growth does not match the growth of production. One result of rising capacity has been mills getting aggressive in offering discounted contracts in lieu of spot sales.

For example, in 2011 and 2012, legacy mills were offering multi-year contracts to guard against new capacity coming online from ThyssenKrupp in Calvert, Ala., and Severstal in Columbus, Miss. More recently, capacity added and/or ramping up from Steel Dynamics Sinton, Nucor Gallatin, North Star BlueScope Delta, and U.S. Steel’s Big River expansions will have a visible impact on sheet prices, particularly as demand in 2024 has been below ideal levels.  

The CSP’s future will be determined by how it maneuvers through the steel market cycle

Nucor’s CSP has disrupted the North American sheet market with what so far has been described as a legitimate offer price. Potentially, the CSP could be the stimulus for US mills to shift marginal contract volumes back to the spot market. Yet the ultimate success or failure of CSP will come as supply, demand, costs, and prices move through the ups and downs of the steel market cycle.

At CRU, we are a market intelligence firm. We provide in-depth analysis, forecasts, prices, and more to clients throughout the supply chain as well as financial and government companies.

One of the core benefits of CRU’s US Midwest price is that it provides a balanced, representative view of the overall market. If Nucor can find success in shifting marginal sales away from discounted contracts and back into the spot market, this will only improve the data CRU captures. We will continue to provide market-leading prices that represent the wider US Midwest market. As always, if you are a mill-direct buyer with spot market exposure, we encourage you to join CRU as a data provider and have your reality reflected in our index.  

Our suite of analysis products provides essential data as well as market-leading analysis. Our analysts add further value for our clients by holding private and confidential discussions about these topics as well as in covering our analysis, costs, and forecasts in more depth. If this type of topic is important to your business, please get in contact with your CRU salesperson to learn more about how CRU can assist you in navigating the physical market.

This article was originally published by CRU. Learn more about CRU’s services at www.crugroup.com.

In the week ended May 24, the number of active drilling rigs in the US fell by four from the previous week to 600. Oil rigs held steady at 497, gas rigs declined by four to 99, and miscellaneous rigs were unchanged at four.

There were 111 fewer active US rigs compared to the same week last year. The number of active oil rigs is down by 73, gas rigs are down by 38, and miscellaneous rigs are unchanged.

Canada rigs

The number of rotary rigs operating in Canada increased by six during the week to 120. Oil rigs rose by seven to 64, while gas rigs fell by one to 56.

Active drilling levels in Canada are up by 33 rigs compared to this time last year, with oil rigs up by 22 and gas rigs up by 11.

International rig count

The international rig count is updated monthly. The total number of active rigs for the month of April rose to a five-month high of 978, up by seven from March and up by 31 from levels 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.

“Cleveland-Cliffs has achieved unquestionable success in reducing GHG emissions, by more than we anticipated and way ahead of our original 2030 target date,” Chairman, President, and CEO Lourenco Goncalves said in a statement. “Our outperformance has given us the ability to further pursue more ambitious and very relevant new challenges.”

As a result, the company has set new goals for reducing emissions. By 2035, relative to 2023 levels, Cliffs plans to reduce GHG emissions intensity per metric ton of crude steel by 30% for scope 1 and 2 emissions and by 20% for scope 3.

Cliffs said the main drivers in the reductions will be the previously announced projects at its Middletown, Ohio, and Butler, Pa., plants. Those undertakings include replacing the Middletown blast furnace with a direct-reduced iron (DRI) plant and two electric melting furnaces (EMFs). At Butler Works, it plans to replace natural-gas fired high-temp slab reheat furnaces with four electrified induction slab reheat furnaces.

Additional reductions will be achieved “by other operational initiatives and energy-efficiency enhancement projects,” the company said.

Additionally, Cliffs set a longer-term goal of reducing scope 1, 2 and 3 emissions to near net zero by 2050.

Table 1 summarizes the price changes of the seven materials considered in this analysis. It reports the percentage change from one month, three months, and one year prior for each product.

Iron ore

Following a 19-month high seen in January, the import price of 62% Fe Chinese iron ore fines had been moving lower up until about a month ago. Since mid-April we have witnessed a rebound in prices, with iron ore reaching a 2.5-month high in early-May of $119 per dry metric ton (dmt) delivered North China. This week’s price is down slightly to $117/dmt. Iron ore prices are 11% higher than levels seen this time last year.

Coking coal

Premium hard coking coal prices have trended downward since the start of the year, somewhat stabilizing across May. The latest weekly price is $238/dmt. Coking coal prices have eased 5% in the last month and are 24% lower compared to levels three months ago. Prices are 7% higher than tags one year ago.

Pig iron

Pig iron prices have been relatively stable since last August. Prices rose 3% from April to May to $460/dmt, now the highest level seen since February. Pig iron prices are down 14% compared to this time last year. Recall that pig iron prices had jumped more than 60% in April 2022 following the invasion of Ukraine by Russian forces, reaching a historic high of $975/dmt.

Note: Most of the pig iron imported to the US had come from Russia, Ukraine, and Brazil. This report uses Brazilian prices and averages the FOB value from the north and south ports.

Scrap

Following their December peak, steel scrap tags have remained relatively steady since March, both nearing seven-month lows as of May. SMU’s busheling scrap index held steady in May at $410 per gross ton (gt). Shredded scrap slightly eased from April to average $390/gt in May. Scrap prices are down 4-11% compared to levels one year ago.

Changes in the relationship between scrap and iron ore prices offer insights into the competitiveness of integrated mills, whose primary feedstock is iron ore, compared to mini-mills, whose primary feedstock is scrap. Figure 5 shows the prices of mill raw materials over the past three years.

To compare these two feedstock materials, SMU divides the shredded scrap price by the iron ore price to calculate a ratio (Figure 6). A high ratio favors the integrated producers and a lower ratio favors the mini-mill/EAF producers. Integrated producers had mostly held the cost advantage from late-2021 through mid-2023. The advantage then briefly shifted to EAF producers, but began trending higher in December. The ratio as of May 21 is currently in relatively neutral territory at 3.33, just slightly favoring EAF producers.  

Zinc and aluminum

Zinc is used in galvanized and other coated steel products. Spot prices had stabilized in mid-2023 after reaching multi-year lows. The LME cash price for zinc has ramped up in the last six weeks, now at $1.36 per pound as of May 23. This has prompted some mills to increase their galvanized coating extras. Zinc prices are up 10% m/m and are up 28% from levels three months prior. Compared to this time last year, zinc prices are up 27% (Figure 7).

Aluminum prices, which factor into the price of Galvalume, had also stabilized in mid-2023. We recently saw a surge in March and April, with prices hovering around $1.12-1.20 per lb. throughout May. The latest LME cash price is $1.16 per lb., down 1% from one month ago but 18% higher than tags three months prior. Prices are up 15% from levels one year ago. Note that aluminum spot prices sometimes have large swings and return to typical levels within a few days, as seen in Figure 7 below.

When reviewing a country’s NME status, DOC must consider six factors: (1) currency convertibility, (2) labor and free bargaining, (3) the presence of foreign investments, (4) the extent of government ownership, (5) government control over resources and prices, and (6) other factors DOC deems appropriate. DOC does not need to find that all these circumstances exist to decide that a country is an NME.

Under the first five factors alone, Vietnam clearly is not a market economy. The US Trade Representative (USTR) has found that Vietnam “manages its exchange rate” to achieve economic goals, which has caused “persistent undervaluation” of its currency. According to the State Department, the only union in Vietnam with any authority is state-controlled. Foreign investments are ultimately subject to government approval, and state-owned companies account for nearly 30% of Vietnam’s GDP. These companies are financed through Vietnam’s near-total control over its banking sector, which provides preferential lending to state-owned companies.

The sixth factor is much more open-ended. Citing this factor, some commenters argue that DOC should consider purported geopolitical benefits of granting Vietnam market economy status. Specifically, these parties believe that greater economic integration with Vietnam would provide a counterweight to China’s influence and decouple American supply chains from overreliance on Chinese producers. This approach is incredibly shortsighted and based on two faulty assumptions.

First, the approach assumes that closer ties with the US will translate to distance from China. So far, this has not been the case. Just months after signing the US-Vietnam Comprehensive Strategic Partnership last September, Vietnam entered a series of 36 agreements with China that promised greater economic, political, and military cooperation. This included agreements to develop railway cooperation between the two countries, designed to facilitate greater cross-border trade as part of China’s Belt and Road Initiative.

Second, this approach assumes that Chinese products and producers will remain in China. Yet Chinese foreign direct investment in Vietnam has skyrocketed in recent years. In 2023, for the first time, China (including Hong Kong) was the largest source of foreign direct investment in Vietnam. China also led all other countries with approximately 700 new investments in Vietnam last year. The US was tenth. The total number of Chinese investments in Vietnam is now more than 4,000, amounting to more than $26 billion, according to Vietnam’s Ministry of Planning and Investment.

Rather than distancing itself, Vietnam has become more reliant on Chinese investment and raw materials. As a result, Vietnam is not so much an alternative manufacturing hub as a processing and assembly platform for Chinese producers. In many cases, upstream inputs produced in China are shipped to Vietnamese subsidiaries for minor processing into downstream products to avoid US duties.

The US government has seen this firsthand. In 2020 alone, US Customs and Border Protection (CBP) prosecuted evasion related to more than $300 million worth of Chinese products—much of which was transshipped through Vietnam. To date, CBP has found on 17 separate occasions that Chinese products were transshipped through Vietnam to evade duties. Likewise, DOC has found that Chinese producers are performing minor alterations to their merchandise in Vietnam to avoid AD/CVD duties on Chinese products.

This is certainly true in the steel industry. Vietnamese producers of downstream steel products—some of which are affiliates of Chinese companies—use imported Chinese steel inputs to produce products that are then shipped to the US as products of Vietnam. DOC has previously concluded that China circumvented US duties on hot-rolled steel, cold-rolled steel, corrosion-resistant steel, circular welded pipes, and light-walled welded rectangular pipes by performing minor processing on these products in Vietnam.

And these trade flows will only swell further. In 2023, Vietnam became China’s top steel export destination for the first time, with imports from China increasing nearly 70% compared to 2022. These imports are sold in Vietnam at unfairly low prices and fabricated into downstream exports. China is outsourcing industrial subsidies and other market distorting practices to Vietnam, while avoiding the AD/CVD, Section 232, and Section 301 duties designed to address these problems.

The same phenomenon is present for aluminum. Chinese aluminum producers ship aluminum to Vietnam to avoid duties. The aluminum is extruded in Vietnam—often by China-linked companies—and exported to the US. This rush of imports has forced US aluminum extruders to file a new antidumping case on imports from Vietnam.

Counteracting China’s unfair trade practices has been a priority for the Biden administration. President Biden recently underlined this point when he requested that the USTR increase tariff rates on certain imports from China—including certain steel and aluminum products. This decision was based, in part, on USTR’s analysis of the role Section 301 measures play in combating market-distorting over-production in the Chinese steel industry.

The administration has also made notable efforts to modernize trade remedy regulations that combat China’s outsourced industrial subsidies. As we previously wrote, the DOC recently removed its long-standing prohibition on countervailing cross-border subsidies (i.e., where country A provides subsidies within the territory of country B). Previously, US companies had little recourse when China provided subsidies to companies in neighboring countries through the Belt and Road Initiative. Now, DOC can correct for these subsidies. This too has direct applications to steel, due to the increasing number of subsidized state-owned and state-supported Chinese steel companies investing in Southeast Asian countries.

Granting Vietnam market economy status would undermine these positive steps. China is increasingly using Vietnam to avoid its own NME status, as well as other defensive US import duties. USTR’s recommendation to increase Section 301 tariffs on certain steel products is intended to “strengthen the effectiveness of the actions by reducing opportunities for circumvention and help ensure the long-term viability of US production.” The administration cannot achieve this goal if Chinese producers can simply funnel steel and other products through Vietnam.

DOC’s decision is currently due July 26, 2024. Numerous elected officials, US producers, and other impacted parties have written DOC to explain how granting Vietnam’s request would not only incentivize larger volumes of unfairly priced Vietnamese goods, but it would also accelerate China’s economic influence in Vietnam. Reversing Vietnam’s NME status is simply not a realistic solution to counteract China and would come at the expense of US industries and workers.

Editor’s note

This is an opinion column. This commentary represents the authors’ individual views and is not intended to represent the views of Wiley Rein LLP or its clients. The views in this do not necessarily reflect those of SMU either. We welcome you to share your thoughts as well at info@steelmarketupdate.com.

The reading – down 17 points from a recent high of 56 in March – may indicate that demand is down even as we move past Q2 outages, while prices and lead times are still trending lower.

Methodology

The index, which compares lead times and demand, is a diffusion index derived from the market surveys we conduct every two weeks. This index has historically preceded lead times, which is notable given that lead times are often seen as a leading indicator of steel price moves.

An index score above 50 indicates rising demand and a score below 50 suggests declining demand. Detailed side by side in Figure 1 are both the historical views and the latest Steel Demand Index trend.

State of play

Repeated declines have swung the index to contraction after a brief stint of growth came from early Q2 buying and mill price hikes. The short-lived boost has given way to a bearish undertone with prices and lead time ticking down.

The trend is accentuated by sheet buyers continuing to find mills willing to talk price, and SMU’s Current Buyers’ Sentiment dropping to its lowest mark since August 2020.

Lead times continue to hover around five weeks on average, while hot-rolled (HR) coil slipped to $760 per short ton (st) FOB mill, east of the Rockies. That’s down $35/st week on week and down $85/st from a recent peak of $845/st in early April, according to SMU’s latest check of the market on Tuesday, May 21.

It’s not all bad news. Despite the lower reading, 70% of survey respondents still report stable or improving demand. However, 30% are reporting declining demand, a five-percentage point increase from earlier in the month.

But recall the only time the index has moved into growth territory since late-April 2023 has been for short-lived bumps when the market responded to mill price hikes in last June, late September, November, and mid-March.

Besides short-lived rallies, SMU’s Steel Demand Index has trended downwards and into contraction territory for significant clips over the past year.

It’s important to note that SMU’s demand diffusion index has, for nearly a decade, preceded moves in steel mill lead times (Figure 2), and SMU’s lead times have also been a leading indicator for flat-rolled steel prices, particularly HRC (Figure 3).

What some SMU survey respondents had to say

“Demand is steady but somewhat down.”

“Summer seems to have started early, still waiting for infrastructure money to trickle down, and uncertainty with the election.”

“Seeing things very soft.”

“Declining transactionally due to pricing pressure.”

“Beginning to decline.”

“High interest rates are slowing our demand.”

“Declining due to falling prices, it’s killing the plate market.”

“Still good on OEM side; slightly offset by spot buyers being cautious and buying small amounts.”

“Near-term spot buying is dead and expect June to be a tough month on contracts with buyers knowing July will be cheaper.”

Note: Demand, lead times, and prices are based on the average data from manufacturers and steel service centers that participate in SMU’s market trends analysis surveys. Our demand and lead times do not predict prices but are leading indicators of overall market dynamics and potential pricing dynamics. Look to your mill rep for actual lead times and prices.

If you need help accessing the survey results, or if your company would like to have your voice heard in our future surveys, contact david@steelmarketupdate.com.

“This project was completed ahead of time, under budget, and most importantly, safely. Plus, it created 250 construction jobs and 33 full-time union and management jobs,” David B. Burritt, U.S. Steel president and CEO, said in a statement on Thursday.

The steelmaker said the $150-million investment is a step forward in its metallics strategy “by supplying the increasingly tight DR-grade pellet market with low-cost iron ore and building on the company’s ability to meet customer needs.”

This facility will be able to produce either DR-grade iron ore pellets or blast furnace iron ore pellets. U.S. Steel said this will allow it to adjust to changes in the market.

The company noted that construction on the facility began in August 2022 and was completed in December 2023. The Minnesota Ore Operations directly employs nearly 2,000 workers.

Burritt was on hand at the celebration along with Minnesota Gov. Tim Walz and other elected officials, as well as USS SVP of raw materials and sustainable resources John Gordon, employees, and members of the community.

If scrap steel was abundant, then using more would be the obvious solution to decarbonize the sector. It isn’t, however. Scrap resources are constrained to around 30% of global steel demand. They are also regionally unequal, with many more developed regions having greater access to scrap due to historically higher rates of steel consumption. Driving demand only for reduced-emissions steel made with scrap will result in ‘carbon leakage.’ We are already seeing scarce scrap resources being shifted to serve the highest paying customers whilst carbon emissions are displaced to other steelmakers that now can’t access that scrap. No net gain for the climate.

What’s more, under a ‘single emissions threshold,’ steelmakers using majority scrap would have no reason to decarbonize further since they may have already met the threshold for lower emissions steel. Given the slow progress the industry is making, and the giant reductions required to meet the Paris Agreement, any global standard must be ambitious for all steelmakers, whether they use scrap or iron ore.

To suggest that the ResponsibleSteel approach of scrap-variable thresholds (dubbed the sliding scale) “applies different emissions levels to steel products” misses the point. ResponsibleSteel’s decarbonization thresholds are designed not to compare products but to enable a fair comparison of every tonne of steel around the world, no matter how it has been produced or for what product it is destined. Notably, the ResponsibleSteel Standard also requires a product’s lifecycle emissions in the form of a Product Carbon Footprint or the Global Warming Potential value of Environmental Product Declarations.

The scrap-variable approach creates an equitable emissions reduction framework, ensuring a level playing field for steelmakers globally. The decarbonization thresholds were designed to accelerate the production of low-emissions steel by individual steelmakers while also driving the decarbonization of the entire global industry and avoiding a dash for scrap that would deliver no net gains for the climate. These thresholds test the decarbonization limits of all steelmakers, compelling them to make the necessary investments to shift energy sources and utilize or develop innovative technology.

The scrap-variable approach was developed through extensive stakeholder engagement and debate with steelmakers (including EAF producers), upstream suppliers, downstream buyers, civil society members, and global institutions. It has provided the foundations for the work of the IEA, the G7, the IDDI, and most recently, the German government and the Chinese Iron and Steel Association. Some scrap-based EAF producers and members of the scrap industry oppose the scrap-variable approach. But we cannot allow commercial or national interests to obstruct our progress towards responsible net zero. ResponsibleSteel’s primary objective has always been to drive down steel industry emissions responsibly on a global scale, regardless of company, country, technology route, or materials used. The momentum behind our Standard will do just that.

Editor’s note

SMU welcomes opinions from across the steel industry. We’re happy to welcome the thoughts above from ResponsibleSteel CEO Annie Heaton. If you have an opinion you’d like to express to the broader steel community, please contact us at info@steelmarketupdate.com.

US Department of Commerce announces new exclusions to Section 232

During the week of May 20, the Bureau of Industry and Security within the US Department of Commerce published a revision to its exclusions process in the Federal Register regarding the Section 232 tariffs. Effective July 1, Commerce will remove six of the general approved exclusions on aluminum. The six HS codes involved are:

• HS 7609.00.0000 (aluminum tube or pipe fittings)
• HS 7604.21.0010 (hollow profiles of aluminum alloy)
• HS 7604.29.1010 (certain profiles of heat-treatable alloys)
• HS 7601.20.9080 (certain slabs)
• HS 7607.11.6010 (boxed aluminum foil weighing not more than 11.3 kg or a thickness exceeding 0.1 mm)
• HS 7604.29.5090 (other aluminum alloy bars, rods, and profiles)

“The revisions to the Section 232 exclusions process underscore our continuous dedication to refining our regulations, all the while prioritizing our national security concerns,” said Thea D. Rozman Kendler, assistant secretary for export administration. “These adjustments are the result of thorough examination and input from the public, aiming to uphold the strength and adaptability of the exclusions process in light of evolving global trade dynamics and domestic production capacities.”

Glencore and Rusal extend aluminum supply contract into 2025

Reuters announced that Glencore and UC Rusal have extended their long-term supply contract into next year, saying the amount traded so far only amounted to a fraction of the agreement’s maximum volumes. Glencore’s contract with Rusal was due to expire this year unless extended.

In 2023, Glencore bought aluminum worth $1.06 billion under the contract compared to a maximum of $3.93 billion worth, Rusal said in its annual report last month. According to Reuters, last year’s purchases by Glencore from Rusal amounted to around 459,000 mt. Furthermore, the article stated that, during the first four years of the contract up to last year, Glencore bought about one-third of the maximum 5.24 million mt, quoting regulatory filings as its source.

Vedanta to focus on renewable energy on any new capacity

Vedanta declared it will no longer add coal-fired capacity to its aluminum business, according to a Reuters article quoting the company’s CEO in a recent interview.

India’s Vedanta Aluminium aims to increase the share of renewable energy it is using to 30% by 2030 from nearly 5% now. The producer currently has 4.8 GW of coal-based power generation capacity but John Slaven, the CEO of Vedanta’s aluminum business, said they were securing supplies of 1.3 GW of renewable energy – a mix of solar and wind power – from India’s Serentica Renewables.

“We don’t want to add additional thermal power. We have got to really increase our renewables, so that’s the focus,” Slaven said. A similar announcement was made by Vedanta’s competitor Hindalco which also aims to rely on renewable power for any new capacity at its smelters.

Vedanta expects to raise its aluminum production capacity to 3 million mt by 2026 from about 2.4 million mt today and boost its refining capacity from 2 million mt to 6 million mt by 2026. Slaven also said the company expects to get environmental clearances for its first wholly-owned bauxite mine in eastern India this year.

Rio Tinto declares force majeure on Australian alumina shipments

A gas shortage has forced Rio Tinto to issue a force majeure on third-party alumina shipments from operations in Queensland, Australia. Supplies of the fuel to the company’s alumina refineries in Gladstone have been restricted since March due to problems with the Queensland Gas Pipeline. It is likely to take significantly longer than previously expected for supplies to again be at capacity, Rio Tinto said.

“The pipeline operator’s current estimate is for a return to normal levels in the second half of 2024. Until then, Yarwun and QAL [Queensland Alumina Limited] will continue to operate at lower capacities,” a company spokesperson was quoted as saying in media reports.

However, Rio Tinto anticipates its aluminum smelters (which source alumina from other producers as well as the company’s own operations) will be able to maintain production until gas supplies return to normal. The disruption began in early March when a fire broke out at the gas line. Rio Tinto said at the time it was monitoring the situation and working with pipeline operator Jemena.

The abrupt momentum shift, and inventory losses resulting from that, are causing some pain. And selling higher priced steel into a falling market is not something anyone enjoys.

I also don’t want to discount the continued impact of higher interest rates, inflation, and a tight labor market. That’s made things hard for a lot of businesses, perhaps smaller businesses in particular.

Why so blue?

But is it really as bad as August 2020 – the scary, early days of the pandemic? Keep in mind that hot-rolled (HR) coil prices hit a 2020 low of $440 per short ton (st) in August 2020. That’s closer to a scrap price now than a finished steel price. (You can track both steel and scrap prices with our pricing tool.)

SMU’s HR price now stands at $760/st on average. Yes, that’s down $285/ton, or 27%, from the beginning of the year. But US mills are still profitable with every ton sold at those numbers. And I stress that’s an average price. Because some of you tell me that prices well below list are available. (Recall that list price for HR is $770/st for Nucor and $800/st for Cliffs.)

Even so, others tell me that $770/st is only available from certain Nucor mills. And still others have suggested that the $10/ton increase we saw from Nucor this week – after a sharp drop at the beginning of the month – might be a sign that a bottom is near. I’ve even heard rumors that mill increases could be possible.

I’m not sure I buy that. It would be a tall order. Lead times for most products are in June/July. It’s never easy to raise prices in the face of something as stubbornly predictable as the summer doldrums. But I wouldn’t be surprised if mills try to “hold the line.”

We saw something similar in June of last year. U.S. Steel led a round of price increases then. The announced increases didn’t actually increase prices. They did, however, slow the slide.

Lower highs and higher lows

Maybe I’m guilty of being “glass half full” here. But there seems to be some reason for optimism – or at least for less gloom than our survey results seem to reflect.

For starters, just take a look at prices over the last three years. You can see an obvious pattern.

True, the peaks aren’t as high. But the valleys aren’t as low. Is that such a bad thing?

Imports still trending high, but maybe not for long

We’ve written a lot over the last few months about how high flat-rolled steel imports have been in recent months.

The US imported 951,174 metric tons (mt) of flat-rolled steel in March, according to Commerce Department data. That figure rose to 977,759 mt in April – the highest level since 1.03 million mt in June 2022.

And the US was licensed to import 771,623 mt through May 21, that last date for which figures are available. That amounts to 36,744 mt per day. If that pace continues, we’re on pace to import another 367,440 mt this month – for a total of 1.14 million mt.

The high import volumes we’ve seen stem from a combination of high US prices late last year and early this year. They also stem from supply chain issues (notably delays at the Panama Canal) resulting in those imports arriving over a long time period than initially anticipated.

But will imports continue to trend up in the face of lower US prices and shorter domestic mill lead times? I have my doubts.

Cliffs opened its order book for July today. Imports ordered at what might be competitive prices now – especially for tandem products – might not arrive until September. That begs the age-old question, will today’s imports prices still be a good deal by the time they hit the docks?

Also, I’ve heard from you that problems with late deliveries when it comes to foreign steel were so bad that you plan to source more domestically – or at least regionally – going forward.

Summer doldrums or slowing demand?

If there is one thing that concerns me it’s that the number of people reporting that demand is declining continues to inch up.

We’ll release results of our full steel-market survey tomorrow. Approximately 70% say that demand is improving or stable. That’s great. But 30% say that demand is declining. That’s up from 25% in our last check of the market two weeks ago.

We saw something similar in the latter half of Q2 last year – when the number of people who said demand was declining peaked at 33%. Things improved from there.

So my question for you is this: Is the drop in sentiment that we’ve seen a reflection of the summer doldrums? Is it a realization that the boom times of the last three years couldn’t last forever? Or has the market really taken a turn for the worse?

I’d appreciate your feedback at info@steelmarketupdate.com.

In the meantime, thanks to all of you for your continued support of SMU.

Memorial Day

SMU will not send out a newsletter on Sunday, May 26. And our offices will be closed on Monday, May 27 in observance of Memorial Day. We will resume our regular pricing and newsletter service on Tuesday.

In dollar-per-ton terms, US CR is now on average $165 per short ton (st) more than offshore product, down $26 week over week (w/w) on average. While the premium is down – largely due to a decrease in stateside prices – the premium is now roughly $146/st off from the recent peak of $311/st from mid-January (Figure 1).

This week, domestic CR tags were $1,045/st on average based on SMU’s latest check of the market on Tuesday, May 21, down $25/st w/w – and down $105/st through six straight weekly declines.

The charts below compare all five price indices in this report. The right side highlights the difference in more recent pricing.

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 per short ton 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-per-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.

East Asian cold-rolled coil

As of Thursday, May 23, the CRU Asian CR price was $626/st, sideways w/w and just $9/st higher from last month. Adding a 71% anti-dumping duty (Japan theoretical), and $90 per ton in estimated import costs, the delivered price to the US is $1,160/st.

The South Korean theoretical price is $716/st. The latest SMU cold rolled average of $1,045/st places US-produced CR theoretically $115/st cheaper than steel imported from Japan. But US tags are still $329/st more costly than cold rolled imported from South Korea.

Italian cold-rolled coil

Italian CR prices were up $8/st to roughly $742/st this week, and up $30/st from a month ago. After adding import costs, the delivered price of Italian CR is in theory $832/st.

That means domestic CR is theoretically $213/st more expensive than CR imported from Italy. The spread is down $33/st from last week and now down $240/st from a recent high of $453/st in mid-December.

German cold-rolled coil

CRU’s German CR price ticked down $6/st vs. the week before’s $724/st. After adding import costs, the delivered price of German cold rolled is in theory $814/st.

The result: Domestic CR is theoretically $231/st more expensive than CR imported from Germany. The spread is down $19/st w/w and $197/st below a recent high of $431/st during 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 too. In most market cycles, domestic steel will deliver more quickly than foreign steel.

Section 232 tariffs are no longer considered in these prices. That’s because, 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 the 25% tariff.

Every other week, SMU polls steel buyers asking if domestic mills are willing to negotiate lower spot pricing on new orders.

This week, 80% of participants surveyed by SMU reported mills were willing to negotiate prices on new spot orders, up five percentage points from our last market check. This is the first time the reading has touched 80% since the middle of March (Figure 1).

Figure 2 below shows negotiation rates by product. The rate for cold-rolled coil was flat at 71% this week. Meanwhile, the rate for Galvalume shot up to 100% (+33), and plate stood at 78% (+2).

Here’s what some survey respondents had to say:

“They (mills) seek volume and will negotiate to get it (on hot rolled).”

“Depending on who and the size of the buy, there are deals to be had (on hot rolled).”

“Negotiations are good if deemed appropriate (on cold rolled).”

“Most mills are active bidders and can still deliver (galvanized) in June last week.”

“Depends on the mill (on galvanized).”

“Somewhat (on plate).”

Note: SMU surveys active steel buyers every two weeks to gauge their steel suppliers’ willingness to negotiate pricing. The results reflect current steel demand and changing spot pricing trends. SMU provides our members with a number of ways to interact with current and historical data. To see an interactive history of our steel mill negotiations data, visit our website.

In dollar-per-ton terms, US HR coil is now, on average, $36/st more expensive than offshore product (Figure 1). That’s down $15/st on average from last week and represents the lowest premium since last October.

This week, domestic HR coil tags were $760/st on average based on SMU’s latest check of the market on Tuesday, May 21.

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 into 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, May 23, the CRU Asian HRC price was $508/st, unchanged for 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 $725/st. The latest SMU hot rolled average for domestic material is $760/st.

The result: US-produced HRC is theoretically $35/st more expensive than steel imported from Asia. The spread is down $15/st vs. last week, and now $246/st from its seven-month high of $281/st in late December.

Italian HRC

Italian HR coil prices were up $4/st to roughly $640/st this week. After adding import costs, the delivered price of Italian HR coil is in theory $730/st.

That means domestic HR coil is theoretically about $30/st more expensive than HR coil imported from Italy. The spread is down $19/st from last week. The domestic hot band price premium over offshore product from Italy is now down $267/st from a recent high of $297/st in mid-December.

German HRC

CRU’s German HR coil price ticked down $4/st from the week before to $627/st. After adding import costs, the delivered price of German HR coil is in theory $717/st.

The result: Domestic HR coil is theoretically $43/st more expensive than HR coil imported from Germany. The spread is down $11/st week over week and $222/st away from 2023’s widest spread of $265/st.

Notes: Freight is important in 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.

Nucor’s lower CSP on May 13,^, at $760/st, weighed on market sentiment but was said to reflect the reality that physical tonnage was trading hands in the low-to-mid $700 range. Lead times were also said to be manageable, with some June capacity still alleged to be available.

A higher Nucor CSP on May 20, at $770/st, provided a brief respite to the bearish futures trend but failed to be a meaningful catalyst to drive futures higher.

Cleveland Cliffs’ July base price, released on May 23 at $800/st, was lower by $50/st from its April price, but early reaction was mixed and inconclusive at the time of this story’s submission.

Overall trading activity in CME HRC futures has been quiet, with daily transacted volumes failing to break 20,000 st since May 9, with the trailing five-day average volume around 15,000 st. Open interest has increased slightly over the course of the month, rising from approximately 500,000 st to 540,000 st. Many commercial participants remain on the sidelines, but financial participants have had interest on both sides of the market.

Base metals, particularly copper and the LME/CME copper arbitrage, have seen historical volatility over the past several weeks. The rally has attracted broader interest from macro- and commodity-focused funds in the metals complex as a whole, including ferrous.

Much of the recent activity has been a large nearby position rolling from June to July, with nominal trading in deferred quarters, though the Q3’24 and Q4’24 succumbed to recent pressure and have declined to flatten the overall futures curve structure, albeit on low volumes.

The beginning of May saw an $80 contango develop from June to December futures, but at the time of this article’s writing, the spread from June to December had narrowed to $50/st and was said to be somewhat unattractive for many cash-and-carry players.

Overall, many market participants are awaiting a catalyst that breaks prices out of their tight, range-bound pattern. 

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 should not be treated as a specific inducement to make a particular investment or follow a particular strategy. Views and forecasts expressed are as of date indicated. They 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.

Venture Steel is a processor and distributor of flat-rolled steel and aluminum products, operating six facilities across North America.

The project is expected to be completed in the first quarter of 2025, the Toronto-based company said in a statement sent to SMU.

“This is a very exciting time for us at Venture Steel. Our expanded footprint in Mexico will enable us to continue to provide industry leading service in support of our growing customer base,” said Venture Steel’s president, Tony Kafato.

Expansion of sister facility

Concurrently, Venture Steel’s sister company, Triple M Metal, is also expanding its metal recycling operations adjacent to Venture Steel’s Ramos Arizpe facility.

Triple M’s expansion will focus on the processing of nonferrous metal and is also anticipated to be compete in Q1 next year.

Triple M Metal is a recycler of both nonferrous and ferrous metal. It operates 44 locations across North America, processing more than 4 million tons of metallic scrap annually.

Venture Steel and Triple M Metal are divisions of Brampton, Ontario-based metal management company, Giampaolo Group. The “collaborative approach” of expanding the two operations simultaneously “is a part of Giampaolo Group’s vision for a sustainable and circular future,” it said.

Table 1 below details current lead times.

Survey results

This week, 17% of survey respondents thought lead times will be contracting two months from now (down from 22% in early-May), 69% believed they will be flat (vs 62% previously), and 14% expect them to contract (vs 16% previously).

Here’s what respondents are saying:

“After summer vacation demand will pick up.”

“Mills would push lead times if they could.”

“Spring outages are done, summer doldrums have arrived early, and the market is as soft as it’s been in a while – a bad combination of factors!”

“Lead times will remain shorter than normal.”

“I would think near term is tough and lead times decrease and then extend as prices run back up.”

Figure 1 below tracks lead times for each product over the past two years.

3MMA lead times

Looking at the three-month moving averages (3MMA) of lead times can smooth out the variability seen in our biweekly readings.

On a 3MMA basis, lead times contracted slightly for all products SMU surveys, a trend seen since February. The hot rolled 3MMA is now at 5.07 weeks, cold rolled at 7.42 weeks, galvanized at 7.31 weeks, Galvalume at 7.44 weeks, and plate at 5.61 weeks.

Figure 2 highlights how lead times have been trending over the past four years.

Note: These lead times are based on the average from manufacturers and steel service centers participating in this week’s SMU market trends analysis survey. SMU measures lead times as the time it takes from when an order is placed with the mill to when it is processed and ready for shipping, not including delivery time to the buyer. Our lead times do not predict what any individual may get from any specific mill supplier. Look to your mill rep for actual lead times. To see an interactive history of our steel mill lead times data, visit our website. If you’d like to participate in our survey, contact us at info@steelmarketupdate.com.

The ABI is a leading economic indicator for nonresidential construction activity, projecting business conditions approximately 9-12 months into the future. Any score above 50 indicates an increase in billings, while a score below 50 indicates a decrease.

“These findings indicate that while there is still caution among clients, there are also positive signs with increasing inquiries into new projects,” said AIA chief economist Kermit Baker.

“Continued high interest rates make it difficult for some projects to move forward, but there is ongoing interest in pursuing these projects once conditions improve. In the meantime, design activity is expected to remain sluggish,” he added.

The project inquiries index eased 0.1 points to 54.8 in April, now down to a three-month low. The design contracts index fell 0.8 points to 49.2, the lowest score since last November.

Results were overall down across the country. The Northeastern, Midwestern and Southern region indices all declined from March to April and remain in contraction territory. The Western region index saw a slight increase in April but continues to indicate declining conditions.

Changes in business conditions varied by sector from March to April, though conditions remained soft across the board. The multifamily residential and commercial/industrial sectors experienced growth month over month, while the institutional and mixed practice sectors witnessed declines.

Recall that Cliffs announced in April that it would publish a monthly HR price. The company’s announcement on Thursday represents a $50/st decrease from its published price of $850/st last month.

Despite that decrease, Cliffs is still $30/st higher than Nucor’s published spot HR price of $770/st.

Note that Nucor, unlike Cliffs, updates its published spot HR price weekly. You can keep track of it all with our mill price announcement calendar, which is here.

SMU’s Current Buyers’ Sentiment Index was +42 this week, diving 13 points from two weeks earlier to almost a four-year low (Figure 1). The last time it fell below such a reading was in August 2020 when it registered +34 and from a Covid-stricken reading of -8 in April 2020.

SMU’s Future Buyers’ Sentiment Index measures buyers’ feelings about business conditions three to six months in the future. The index crashed 12 point points this week to +56 (Figure 2). Future Sentiment has not seen a reading that low since June 2023 when it hit +52.

Measured as a three-month moving average, the Current Sentiment 3MMA dropped to +55.77 from +58.40 two weeks earlier. 

Meanwhile, this week’s Future Sentiment 3MMA fell to +65.31 vs. +67.38 at the last market check (Figure 3).

What SMU survey respondents had to say:

“May not hit forecast but profitable.”

“Cautiously optimistic.”

“Top market participants are being irresponsible on the pricing side.”

“Losing money on inventory due to drop in prices.”

“Increased capacity for us coming on with opportunities to buy low will increase profits.”

“Fair at best given the outlook.”

About the SMU Steel Buyers’ Sentiment Index

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

He was also SMA chairman in 2011 when he served as an executive with Evraz North America. Simon was tapped as CEO for JSW Steel USA in March.

“We put a high value on SMA’s pursuit of policies that ensure the fair trade of steel and raw materials while recognizing and rewarding our efforts to decarbonize the supply chain,” Simon said in the release.

JSW Steel USA is a subsidiary of India’s JSW Steel. It operates an electric-arc furnace (EAF) steel mill in Mingo Junction, Ohio, and a plate and pipe mill in Baytown, Texas, and has ~750 employees.

“The support of JSW Steel USA puts additional force behind our efforts to promote policies that sustain, strengthen, and restore the domestic steel industry,” SMA president Philip K. Bell said.