“His vision and leadership allowed our nation to strengthen workers’ access to collective bargaining, grow the middle class, and embark on a path to widespread prosperity,” McCall added.

The union said the endorsement comes after a months-long process. This included surveying USW members’ priorities and submitting questionnaires to candidates in both parties to gauge their positions on key labor issues.

Nucor said that by using Econiq-RE — a category of Econiq that certifies Nucor steel or steel products are made with 100% renewable energy — greenhouse-gas emissions can be cut to less than half that of “extractive blast furnace-based steelmaking.”

“Our Econiq brand is helping steel end users meet their growth and sustainability goals, and we are proud that it is going to be a key piece of Mercedes-Benz’s path towards a net carbon-neutral new car fleet along the entire value chain,” Dan Needham, Nucor’s EVP of commercial, said in a statement on Wednesday.

So why do I float the idea of higher prices? Some big buys have been placed. It reminds me a little of what we saw last fall when people restocked in anticipation of higher prices once the UAW strike was resolved.

And look at HR futures. They’ve been gaining ground and continued to do so on Tuesday.

Restock underway

Also, as SMU reported last week, service center inventories moved lower in February. And shipments increased modestly – despite continued concerns in some corners about future demand.

We won’t have March service center inventory data available until April 15. But results from our latest steel market survey indicate where things might be headed.

Namely, we’re seeing the early signs of that restock I mentioned:

That might not seem like a big shift from late February to mid-March.

But compare that to what we were seeing a month ago:

I can say a restock is underway. You might or might not agree with that. But it’s fair to say that the destock we saw earlier in the year is coming to a close.

A second increase, imports, and scrap

With that in mind, I would not be surprised if we see another round of mill price announcements. You know the playbook: Mills make one price hike to stop the bleeding. And if conditions are right, they announce another to actually increase prices. In fact, rumors of a second increase are arguably what spurred increased buying activity of late.

Then there is the matter of imports. License data indicate that imports of flat-rolled steel were down modestly in February from a 17-month high in January. We’ll see whether that trend continues into March.

I would not be surprised if imports slide more meaningfully in Q2. Why? Because high US prices in Q4 led to higher import volumes in Q1. Falling US prices in January/February probably spooked people from buying heavy on the import side for spring/summer delivery.

Some of you might point to scrap prices, which were down in March, to say that talk of another price hike is premature. That makes some intuitive sense. Many of us who have been in steel for a while were conditioned to think that steel and scrap move in tandem.

But at least since Section 232 was rolled out in 2018, that relationship isn’t as tight as it used to be. Recall that the Trump-era trade policy continued under the Biden administration, placed tariffs and quotas on finished and semi-finished steel but not on scrap.

Trade action against Mexico?

Finally, and perhaps related to that, here is a wildcard to keep an eye on: There are persistent rumors that a trade action could be announced by the US against Mexico on steel. It’s no secret that the two sides have been trading barbs.

Some sources say an announcement is imminent and raises the prospect of Section 232 tariffs of 25% being re-imposed on the US’s southern neighbor because of an alleged “surge” in exports. Others say that talks between the two countries are ongoing, that the data do not support a surge from Mexico – and that the numbers instead show that it is the US that has surged steel exports to Mexico.

I’m not going to weigh in out what might happen, or even whether anything will. But, again, it’s something to watch and it’s something that appears to be, at least on the margins, providing another support for US sheet prices.

SMU Community Chat

Don’t miss our next Community Chat on Wednesday at 11 am ET with Barry Zekelman, executive chairman and CEO of Zekelman Industries, one of the largest independent steel pipe and tube manufacturers in North America.

Zekelman is known for his straight talk and, because his company is one of the largest steel buyers in North America, his expertise in steel market trends.

You can register here.

SMU’s HR price slipped to $795 per short ton (st) on average, down $20/st from last week, and down $250/st from the beginning of the year. Tags for cold-rolled (CR) and tandem products saw similar dynamics week over week (w/w). Galvalume, however, saw a small bump.

SMU’s CR price is at $1,100/st on average (-$5/st w/w). Our galvanized base price is at $1,090/st on average (-$20/st w/w). And our Galvalume price stands at $1,140/st on average (+$10/st w/w).

The market is still “feeling it out” since Cliffs, Nucor, and ArcelorMittal all “officially” set new target minimums for HR nearly two weeks ago between $825-845/st, in an apparent “hold-the-line” move.

Reviews remain mixed. While some sense a price floor might be within reach, others note that scrap prices are still pointing lower as we near April. But like last week, big buyers were still able to secure product at lower levels, a trend that ties up order books ahead of more planned outages.

“I hope the announcements help create a floor but sense another round of decreases before a real bottom,” an OEM executive said. “But not much good out there for flat products at the moment.”

But there is a sense that the tags moved lower due to lingering “last minute” deals. New prices will be more strictly enforced going forward, sources said.

And then there are rumors of potential trade action against Mexico. Depending on who you speak with it’s either imminent, or others say brinksmanship. Regardless, something is poised to change – not necessarily a full re-imposition of 232, but it could still be a shock like we haven’t seen for a while.

SMU’s plate price now stands at $1,260/st on average, down $10/st from last week as the market is still reeling from Nucor’s publicly announced $90/st plate price cut at the end of February.

SMU’s sheet price momentum indicators remain at neutral as we’re unsure how prices will move over the next 30 days. Our plate price momentum remains pointing down.

Hot-rolled coil

The SMU price range is $760–830/st, with an average of $795/st FOB mill, east of the Rockies. The bottom end of our range was down $30/st vs. one week ago, while the top end of our range was down $10/st w/w. Our overall average is down $20/st from last week. Our price momentum indicator for HR remains at neutral, meaning SMU is unsure where prices will move over the next 30 days.

Hot rolled lead times: 3–6 weeks

Cold-rolled coil

The SMU price range is $1,020–1,180/st, with an average of $1,100/st FOB mill, east of the Rockies. The lower end of our range was flat w/w, while the top end of our range was $10/st lower vs. the prior week. Our overall average is down $5/st from last week. Our price momentum indicator for CR remains at neutral, meaning SMU is unsure where prices will move over the next 30 days.

Cold rolled lead times: 5-9 weeks

Galvanized coil

The SMU price range is $1,030–1,150/st, with an average of $1,090/st FOB mill, east of the Rockies. The lower end of our range was $10/st lower vs. last week, while the top of our range was down $30/st vs. the prior week. Our overall average is $20/st lower w/w. Our price momentum indicator for galvanized remains at neutral, meaning SMU is unsure where prices will move over the next 30 days.

Galvanized .060” G90 benchmark: SMU price range is $1,127–1,247/st with an average of $1,187/st FOB mill, east of the Rockies.

Galvanized lead times: 5–10 weeks

Galvalume coil

The SMU price range is $1,100–1,180/st, with an average of $1,140/st FOB mill, east of the Rockies. The lower end of our range was $20/st higher w/w, while the top end of our range was up flat from the prior week. Our overall average was up $10/st when compared to the previous week. Our price momentum indicator for Galvalume remains at neutral, meaning SMU is unsure where prices will move over the next 30 days.

Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,394–1,474/st with an average of $1,434/st FOB mill, east of the Rockies.

Galvalume lead times: 6-9 weeks

Plate

The SMU price range is $1,220–1,300/st, with an average of $1,260/st FOB mill. While the lower end of our range was down $30/st vs. the prior week, the top end of our range was $10/st higher w/w. Our overall average is down $10/st vs. one week ago. Our price momentum indicator for plate remains lower, meaning SMU expects prices will move lower over the next 30 days.

Plate lead times: 4-7 weeks

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

I recently had the chance to sit down with Nucor’s Tabitha Stine at the South by Southwest Festival (SXSW) in Austin, Texas, where she moderated a panel on energy. Stine is the Charlotte, N.C.-based steelmaker’s general manager of energy solutions services. The SXSW festival bills itself as “the convergence of tech, film, music, education, and culture.” Talking about energy, sustainability, and decarbonization with her, Nucor is showing that steel definitely has a place at the table and is more relevant than ever.

Personal journey

Having started out of college as a structural engineer designing power plants, Stine has now been in the steel industry for 25 years.

She worked at the American Institute of Steel Construction (AISC), eventually serving as vice president of market development for the domestic fabricated structural steel industry, of which Nucor is a member.

“There’s a lot of collaboration between steel producers and trade associations,” Stine told me.

She has been with the steelmaker for four years now, but she recently transitioned from construction to focus on Nucor’s role in the development and transition to clean energy.

“Everything leads back to energy. We realized that this was going to be a focal point for the next decade of Nucor’s continued growth: how we help our customers decarbonize,” Stine said.

Why SXSW?

While some may think SXSW is not a natural fit for a steelmaker, Stine disagrees.

“Energy, electrification, and decarbonization — they are being woven into everything that is happening for consumers and industrial users in North America and the rest of the world right now,” she said.

Traditionally, many of Nucor’s conversations have been with its customers.

However, Stine said, “We have to step out of our traditional audiences. … We need to reach the people who are influencing our customers, and they’re here (at SXSW).”

Net zero?

Nucor has set 2050 as its net-zero emissions target date.

“It’s not just a date in the sky. We weren’t willing to make that commitment until we had a full-scale plan in place,” Stine said.

“It includes things we can do today, as well as things we’re going to have to do in the future,” she added, noting that the plan includes Scope 1, 2, and 3 emissions.

“So, we need customers and suppliers on board as well,” she added.

Stine cited carbon sequestration as an example of something the steelmaker can do currently.

“All divisions have been tasked with what they can do now, but the big steps will come with clean energy,” she said.

Besides the emissions targets, Nucor has an overarching goal: “We want to be a thought leader and a first mover in industrial decarbonization,” according to Stine.

Green premium?

Stine said that many of Nucor’s customers are demanding ‘green steel’ and are willing to pay a premium for it.

Still, she noted the variety among steel buyers. “You’re not going to get every audience that puts the same value for all products in all end-market segments,” she noted.

However, there is a subset looking at carbon intensity. “There will be an end-group that continues to demand that we abate carbon compared to what we did a year ago,” she said.

Stine said that Nucor produces Environmental Product Declarations (EPDs) on its products. Thus, customers can see the carbon intensity of the steel they’re buying.

“We’re being as transparent and up-to-date on that data-sharing with customers as we can. Every couple of years, we republish that data,” she said.

EPDs tell you things like what power is used to produce each product. Therefore, the carbon intensity of the same product could vary depending on where it was made.

Stine said Nucor foresees that more and more of the company’s conversations with customers will be around sustainability.

“You’re seeing a steady progression of interest,” she noted.

Nuclear

Something most can agree on is that the future is going to be energy intensive. One of the routes Nucor is investing in is with nuclear energy. Specifically, small modular fission reactors with NuScale Power, and fusion technology with Helion Energy.

Stine called Nucor’s vision “the new nuclear,” meaning: “The progression of nuclear energy that can be used on-site … through either fusion or fission technology.”

“How do we leverage this technology to power our mills and our expansions moving forward?” Stine said.

She noted that Nucor is “technologically agnostic, but we’re having conversations with many different companies that are investigating in this technology.”

“At the end of the day, whichever one becomes technologically viable and can be used at scale, we’re going to be using to power our steel mills going forward,” she added.

Regarding regulatory hurdles, Stine said, “At a federal and state level, we’re looking at the permitting process, and asking, ‘How can we demystify this?’”

She noted that Nucor is forging relationships with technology companies like Microsoft and spending a lot of time in Washington.

Of course with talk of Washington, the subject turns to the fast-approaching 2024 election. But Stine says Nucor’s focus remains the same no matter who the future occupant of the White House is. “Questions on sustainability won’t change with the election in Washington,” she commented.

As the United Steelworkers (USW) union continues to question the interests of the Tokyo-based company, NSC’s letter says that it wants all employees, including the unionized workforce, to share in the American company’s success.

“The best of U.S. Steel is here to stay,” NSC stated in the letter, reiterating that the transaction will not result in job cuts, facility closures, or the outsourcing of production overseas. As previously stated, U.S. Steel will keep its recognizable name and brand.

Additionally, NSC said it plans to move its existing US headquarters from Houston to Pittsburgh, where U.S. Steel’s headquarters will also remain. NSC added that other bidders would not have been able to do this.

“We want to invest in all of U.S. Steel,” NSC promised.

“There is great value to be realized across the company’s iron ore, blast furnace, and electric-arc furnace facilities,” it noted, adding that, “Every corner of the company will benefit from our sizeable R&D budget and our world-leading technologies related to product, operational, and decarbonization.”

NSC also said it will support research institutions in Pennsylvania and is already in discussions with Pittsburgh’s Carnegie Mellon University to further develop green technology in steelmaking.

The Industrial Production (IP) Index

The IP Index is a gauge of output from factories, mines, and utilities. Figure 1 shows the IP Index over the last five years, graphed as a three-month moving average (3MMA) to smooth out some of the monthly variability. As a 3MMA, the IP Index has mostly remained strong over the past two years, hovering in the 102-103 range. The latest reading is 102.4 through February, one of the lower levels seen over the past year, but up 0.2% from this time last year.

Manufacturing capacity utilization

Manufacturing capacity utilization through February was measured at 77.0% as a 3MMA, now down to a 32-month low. In 2023 we saw an average rate of 77.8%, down from 79.2% in 2022, but up from 77.1% in 2021. Capacity utilization continues to remain above recessionary territory, as it has done since late-2020. For reference, capacity utilization had hovered around 74–78% for most of the 2010s, stalling in April 2020 to reach a low of 66% in June 2020 (Figure 2).

New orders for durable goods

New orders for durable goods are an early indicator of consumer and business demand for US manufactured goods. Levels continue to recover from the 2020 shock, with positive annual growth occurring each month since. As a 3MMA new orders rose to a record-high of $291 billion last June (Figure 3). New orders are at $289.2 billion as a 3MMA through January, up 4.2% annually. Recall the 3MMA had reached a 10-year low of $188.4 billion in May 2020 but returned to normal levels by the end of the year.

New orders for manufactured products

As reported by the Census Bureau, the growth rate of new orders for manufactured products was historically strong in 2021 and 2022, but stabilized as we entered 2023. Factory orders remain historically high, having reached a 3MMA of $589.9 billion in November, the highest level in our 30-year data history (Figure 4). The 3MMA through January is down slightly to $584.7 billion, up 1.0% compared to levels one year earlier.

New orders for products manufactured from iron and steel

Within the Census Bureau M3 manufacturing survey is a subsection for iron and steel products. Figure 5 shows the history of new orders for iron and steel products as a 3MMA. The 3MMA new order level remains strong at $14.9 billion through January, a level it has remained in since late-2021. New orders had reached a 30+ year high 3MMA of $15.3 billion in July 2022. The 3MMA year-over-year growth rate through January is 2.2%. This rate has remained near zero since late-2022, having steadily declined from the 11-year high of 81.8% in June 2021.

Inventories of products manufactured from iron and steel

Inventories of iron and steel products broke their multi-month increase streak in mid-2022, gradually easing since and now down to a two-year low. The latest iron and steel inventory levels totaled $26.6 billion on a 3MMA basis through January, down 2.9% compared to the same period the year prior (Figure 6).

“Without question, current market conditions remain challenging as cyclical headwinds are creating tighter supply flows and compressing metal spreads,” Chairman and CEO Tamara Lundgren said in a statement on March 14.

In its second quarter, the company said it introduced a plan to reduce selling, general, and administrative expense by 10% and to boost production “efficiencies.”

These measures include “reductions in headcount and other employee-related expenses, as well as decreases in non-trade procurement spend, transportation and logistics, and other outside services,” Radius said.

The company said these are expected to deliver $40 million in aggregate annual benefits. This is in addition to the $30 million in annual benefits previously announced and “substantially implemented in the second quarter.”  

Radius noted tight supply flows for recycled metals and “unusually wet winter weather” hit sales volumes and metal spreads for both recycled metals and finished steel.

Ferrous sales volumes are anticipated to fall sequentially by 15%, while nonferrous sales volumes are expected to be down 3% in the same comparison, Radius said.

The company will report financial results for its fiscal Q2’24 on Thursday, April 4.

The mill capability utilization rate was 77.2% in the week ended March 16, down from 78.1% a week earlier and from 76.9% a year ago.

Year-to-date production through March 17 was 18,307,000 st at a capability utilization rate of 75.9%. That was off 3.1% from 18,886,000 st in the same period a year earlier when capability utilization was 77.7%.

Production by region is shown below, with the week-over-week changes shown in parentheses:

• Northeast – 134,000 st (down 3,000 st)
• Great Lakes – 580,000 st (down 6,000 st)
• Midwest – 181,000 st (down 4,000 st)
• South – 760,000 st (down 2,000 st)
• West – 59,000 st (down 5,000 st)

Editor’s note: The raw steel production tonnage provided in this report is estimated. The figures are compiled from weekly production tonnage provided by approximately 50% of the domestic production capacity combined with the most recent monthly production data for the remainder. Therefore, this report should be used primarily to assess production trends. The AISI production report “AIS 7”, published monthly and available by subscription, provides a more detailed summary of steel production based on data supplied by companies representing 75% of U.S. production capacity.

Further terms of the deal were not disclosed.

Eastern Metal said the brands will continue to operate in present locations with their familiar names, but the overall company will increase product diversification and the area it serves.

Additionally, Eastern Metal said it will serve as the parent entity for all subsidiary companies, with Ryan Filion continuing as CEO of EB Metal US. The existing management teams of all companies will remain in their current roles.

Eastern Metal is the parent company of EB Metal US.

“I am excited to be able to combine our EB family with the experienced, talented, and well-led team at the Super Stud affiliated companies,” Filion said in a statement on Monday.

The company said EB Metal will serve New England and Super Stud will serve the Tri-State and Mid-Atlantic regions, while both will serve the South.

Super Stud has facilities in Edison, N.J., and Hattiesburg, Miss.

A supermajority of Volkswagen workers at the plant have signed union cards in just 100 days, according to the union.

Recall that UAW president Shawn Fain outlined a plan for non-union auto workers to unionize. This followed the conclusion of the UAW strike with the “Big Three” Detroit-area automakers that resulted in new, and significantly more lucrative, labor contracts.

“I come from a UAW family, so I’ve seen how having our union enables us to make life better on the job and off,” Yolanda Peoples, a production team member in assembly at Chattanooga, said in a statement.

A spokesman for Volkswagen Group of America said the company received notice today that the UAW has filed a petition with the NLRB to hold an election to determine representation at the Chattanooga plant.

“We respect our workers’ right to a democratic process and to determine who should represent their interests,” the spokesman told SMU in an email.

He said that VW fully supports an NLRB vote, “so every team member has a chance to vote in privacy in this important decision.”

The spokesman noted that the election timeline will be determined by the NLRB.

The plant in Chattanooga is Volkswagen’s only US assembly plant, employing more than 4,000 auto workers, UAW said.

The plant manufactures the Volkswagen ID.4, Atlas, and Atlas Cross Sport, according to Volkswagen’s website.

Additionally, the Pittsburgh-based steelmaker said it expects adjusted earnings before interest, income taxes, depreciation, and amortization (ebitda) of ~$425 million. The company reported adjusted ebitda of $330 million in Q4’23.

U.S. Steel President and CEO David Burritt noted that the company’s Big River Steel dual coating line in Osceola, Ark., comes online in Q2’24, followed by its Big River 2 minimill later in 2024.

Big River 2, an EAF sheet mill, is slated to double capacity at Osceola from three million tons per year (tpy) to six million tpy once it is fully ramped up.

Flat-rolled and minimill guidance

U.S. Steel expects higher adjusted ebitda in Q1’24 vs. Q4’23 in its flat-rolled segment. The company cited higher spot steel prices and the “favorable impact” from fixed-priced contracts negotiated for 2024.

Burritt said “balanced and diverse markets are keeping the order book strong” in this segment.

But “typical seasonal mining operations headwinds” in Q1 are expected to partially offset these tailwinds,” according to U.S. Steel.

Like other integrated steelmakers, U.S. Steel stockpiles iron ore pellets near its mines in Minnesota during the winter. The material is then transported across the Great Lakes to its mills once navigation resumes in the spring.

Recall that U.S. Steel’s flat-rolled segment includes its unionized, integrated sheet mills – facilities like Gary Works in northwest Indiana and Mon Valley Works in the Pittsburgh area.

Meanwhile, the company said its minimill segment’s adjusted ebitda is anticipated to nearly double in Q1’24 vs. the previous quarter.

U.S. Steel said higher average selling prices would support earnings despite higher raw materials costs and ~$20 million in construction costs related to Big River.

Note that U.S. Steel’s minimill segment comprises Big River Steel, a non-union EAF sheet.

Nippon Steel acquisition

“We remain focused on running our business as we make progress towards closing our transaction with Nippon Steel Corp.,” Burritt said in a statement on Monday.

The guidance comes as questions swirl around U.S. Steel’s $14.1-billion sale to Japan’s Nippon Steel. Last week, President Biden said it was “vital” for U.S. Steel to remain an American company.

“Opposition to the Nippon takeover from President Biden seems tough to surmount, in our view,” Timna Tanners, managing director of equity research for Wolfe Research, said in a research note on Monday.

Recall that former President Trump has said that, if re-elected, he would also oppose the deal.

Nippon provided a response to Biden’s comments last Friday.

In your own words, with minimal editing, here’s what some of you in the SMU community shared with us this past week. We’ve also included some of the slides from our steel buyers’ survey.

These slides and comments only touch on a portion of the information you share with us in our weekly surveys. The survey results are available to Premium subscribers and data providers. If you’re interested in upgrading to a Premium subscription, reach out to luis.corona@crugroup.com for more information. To participate in the survey and become a data provider, you can contact david@steelmarketupdate.com.

Thank you to everyone who participates in our surveys, chats with us each week, and is an active member of the SMU community!

When do you think sheet prices will bottom, and why?

Already bottomed:

“HR futures moved massively ahead of the published mill increases.”

“Difficult question at this point. Mills will fight further softening, but can they fight the market? We’re in a period of increased activity as some customers feel we have hit a bottom.”

“For now but feel there will be another downturn for the summer slowdown.”

March:

“Inventories need to be replenished and buyers are realizing Q2 will see supply weakened by mill maintenance outages and fewer imports arriving in May and June.”

“Close to a temporary bottom for now, at least for HRC. Inventories are on the lower side and people need to buy so mills will get orders and lead times move out. Watch to see if any larger tubers make spot speculation buys or not. This might signal a floor.”

“April domestic mill outages.”

“Prices already rising.”

April:

“Demand is still correcting.”

“Still some room to move.”

“These latest increases will only ‘pause’ the market dip; not enough demand to stop them from getting down to $680/ton.”

“Scrap is lower, plenty of imports, service center inventory okay, mills’ lead times are short.”

“We are factoring a bottom in late March or early April. We don’t believe the recent hikes will really stop the slide.”

“Construction will pick up, and automotive will increase.”

May:

“Low demand leading into automotive model year changeovers.”

“Imports are coming in April and May.”

June or later:

“Uncertain demand.”

“Dead cat bounce.”

Hot-rolled coil prices averaged $815 per short ton (st) in our last market survey. Where will prices be in two months?

$900-949/st:

“Demand will be higher, supply will be lower, and mills will have momentum (and then take pricing too high again).”

$850-899/st:

“High end likely around $880-910 per ton.”

“After bottoming out, they will increase.”

$800-849/st:

“With some of the planned outages and better automotive numbers, we could get a contained bounce before summer. That would take HR a notch higher.”

“Prices will begin to climb back up through April/May, peak in June before another decline.”

“Mills trying to stop the bleeding but don’t see a run.”

“I think the rise and then fall again for the summer slowdown.”

“With the recent announcements, I think we are close to the bottom.”

$750-799/st:

“Buyers have revenge in mind.”

“Demand is softening, service centers have restocked, and mills are begging for spot orders.”

“Pricing should bottom in early Q2, but I don’t think it’ll spike up anytime soon.”

Prime scrap prices in April will be:

Down:

“Down another $20 with idling inevitable.”

“Short-term trend is down.”

“Following the HRC market.”

Sideways:

“We’ll say the usual ‘soft sideways’ here, but I don’t think there is a ton of clarity out there right now.”

How is demand for your products?

Declining:

“Caution from our customers.”

“Demand for coated is softer.”

Stable:

“Demand hasn’t changed much, just price fluctuations in the sell price.”

Improving:

“Spot has become active vs. nothing the previous two months.”

“Could be very short term.”

“Power grid and electric vehicle charging infrastructure growth is continuing.”

“Strong automotive is overcoming shortcomings.”

Upcoming SMU Community Chat

We’ll touch on some of these topics and much more in our next Community Chat with Barry Zekelman, CEO of Zekelman Industries, one of the largest steel buyers in North America, on March 20. Don’t miss the conversation; you can register here.

As always, thank you for your continued support of SMU!

Interested parties, in and out of government, raise their voices in support of the goals they consider most important. One trend I’ve seen in recent years is the tendency to claim that a particular goal (e.g., reducing global warming to 1.5 degrees Celsius, securing the border, etc.) is so important that it subordinates all other considerations.

The news cycle seems to resonate with every protest, or statement by political candidates. All these claims are challenged by prerogatives that some other issue is critical to the survival of humanity.

When faced with these pressures, democracies can be paralyzed. A candidate who hopes to earn a majority of the vote needs to pay attention.

Paradigms to consider

• Climate change advocates want to reduce or eliminate fossil fuel use, starting now and resulting in zero net emissions by 2050, such as massively increasing the use of renewable fuels. On the other hand, solar panels, wind turbines, and electric vehicles can lead to environmental harm.
• Another is the push to secure the southern border. To reduce or eliminate illegal immigration, Republicans are holding up critical assistance to Ukraine. When two objectives, both of which may be laudable, clash, what’s a leader to do?
• A third example is the proposed acquisition of U.S. Steel by Nippon Steel. President Biden on Thursday signaled his opposition to the deal.

Wherein lies the rub?

The President said that it is “vital” for the “iconic” U.S. Steel to maintain its status as a US-owned and operated company. He did not say why it was “vital.” As he must know, US Steel is hardly the economic and industrial colossus that it was when created in 1901.

The United Steelworkers (USW) union has come out strongly against the acquisition. Several members of Congress have backed this stance. And now, President Biden himself, who may be able to block the deal, has added his voice to the chorus. So has former President Donald Trump.

On the other hand, the US economy that relies on steel does not make steel but buys it. The purchases exceed the productive reach of domestic producers. Imports of steel are “vital” because the domestic industry does not make enough and hasn’t for several decades.

Nippon Steel, a far larger producer than U.S. Steel, has the wherewithal to make the Pittsburgh-based steelmaker a more effective competitor. U.S. Steel as a stand-alone company is less likely to be able to raise the capital to increase production or modernize its plants. So, some other company may need to acquire the steelmaker. Who is out there?

What else could go wrong?

If we have the critical imperative of keeping U.S. Steel American-owned, a rather remarkable assertion (there are numerous examples of steel mills being acquired by foreign companies—Arcelor Mittal, National Steel, AK Steel, and Japan is not an adversary of the United States), the only alternative might be Cleveland-Cliffs (joined by the USW).

But that would not be good for competition in such industries as food packaging, electrical equipment, or automotive production (estimates are that U.S. Steel and Cliffs control about 80% of the automotive market for steel sheet). Antitrust issues!

This one seems a pretty easy choice. But the President appears to have chosen the less attractive alternative. Why? Politics, that’s why.

But there’s more to solve

Another choice: between modernizing the electric infrastructure as electricity demand is surging; and reducing (or, to some, eliminating) reliance on fossil fuels for electric generation. For years, our electric grid has been losing its efficiency. Power lines are old and becoming obsolete. Transformers are in short supply. New generating capacity must be paired with improved transmission.

Electricity does not travel well. To send it over long distances, current technology wires are necessary, with current technology. Currently, high-voltage lines sending electricity to end users lose an average of 5 percent of the electricity generated. Better power lines will cut this number.

In the meantime, efforts to curtail fossil fuel use because of climate change are pressuring utilities to close power plants relying on fossil fuels. And, in conflict with these efforts, electricity demand is surging.

Much of the increase is related to new data centers, which are in turn caused by the explosive rise in AI. The demand to shutter fossil fuel generating capacity runs headlong into building the tools for the data revolution. Which will it be?

Is this another chance for politics to provide the answer? This one is harder to predict. The forces to choose climate are powerful, so are the forces for increased data use and storage.

And then there’s harmony

War and peace is a third example of this phenomenon. Ukraine funding is held up because efforts to secure the southern border are viewed by some Republicans as inadequate. President Biden says that the Senate border bill is enough, while Donald Trump supports the Republican HR 2. Meanwhile, Ukraine (and Israel) funding are stuck.

Being optimistic by nature, I believe these impasses will be resolved (or papered over). But resolution in a presidential election year, when the polls are within the margin of error, is extremely difficult.

Will resolution come only after an action-forcing event? I don’t know, and I’m not predicting any.

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 positive momentum comes as a welcomed shift for carriers, following a challenging 17 consecutive months marked by decreasing flatbed spot prices.

Potential accelerators

• Several factors could contribute to the current upward trajectory in spot rates. Keep an eye on the following potential accelerators:
• Increase in Diesel Prices: Fluctuations in diesel prices can directly impact spot rates.
• Increased Carrier Exits: As carriers exit the market, supply and demand dynamics can influence rates.
• Disruptive Weather Events: Unforeseen weather events may lead to supply chain disruptions, affecting spot rates.
• Supply Chain Disruptions: Any disruptions in the supply chain can have a direct impact on flatbed spot rates.
• Loosening of US Fiscal and Monetary Policy: Changes in fiscal and monetary policies can influence overall economic conditions, affecting the flatbed market.

Potential decelerators

• While the outlook is positive, it’s essential to be aware of potential decelerators that could impact spot rates:
• Economic Headwinds: Adverse economic conditions can act as a decelerator in the flatbed market as businesses become reluctant to invest capital in new projects during times of uncertainty.
• Interest Rates: Interest rates may stay higher for longer, which could have a cooling effect on the economy.
• Lower Diesel Prices: A decline in diesel prices would lead to lower rates in general and has the potential to keep more supply in the marketplace due to lower overhead expenditures.
• Slower Carrier Exits: A slower rate of carriers exiting the market may stabilize supply and demand dynamics.
• Geopolitical Factors: Global events and geopolitical shifts can introduce uncertainties that may affect the flatbed market.

March Rundown

1. Global shipping challenges: In a missile attack on True Confidence on March 6, the bulk steel carrier was hit by a missile 50 nautical miles southwest of Aden, resulting in a fire. Tragically, three lives were lost in the first known casualties since Houthi Rebels initiated attacks in the Red Sea in late November. These incidents have led to increased transit times from China to Europe and the US East Coast.
2. Cass freight index update: There are mixed trends in shipments and expenditures. The cass freight index reports a 7.3% month-on-month (m/m) increase in shipments but a 4.5% decline year-on-year (y/y). While the index remains soft overall, Q1 has shown improvement in underlying volumes, with a projected 3% sequential rise from Q4. Freight expenditures rose 4% m/m but fell 20% on a y/y basis.
3. Class 8 truck orders: Normalization has followed a recent peak ftr’s report on class 8 preliminary net orders for January, revealing a decrease of 9% from December but an 11% y/y increase. After reaching a peak in November, Class 8 orders have stabilized around the estimated replacement rate of approximately 25,000 units per month.
4. Consumer Price Index (CPI): Higher-than-expected inflation in caused February’s CPI to come in higher than projected, with a 0.3% monthly increase and a 3.1% annual gain, surpassing economists’ forecasts of a 0.2% monthly increase and a 2.9% annual gain. This unexpected uptick may impact the likelihood of the Federal Reserve cutting rates in the early part of the year, contrary to earlier expectations.

Stay tuned for more updates on the dynamic landscape of the shipping and logistics industry. For further details or inquiries, feel free to reach out to us.

Editor’s note: This is an opinion column. The views in this article are those of an experienced supply chain professional 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.

In dollar-per-ton terms, US CR is now on average $183 per short ton (st) more expensive than offshore product, up $12 week over week (w/w) on average. This is $128/st lower, however, from mid-January when the average premium for US CR over imported cold band saw a reacent peak of $311/st.

This week, domestic CR tags were $1,105/st on average based on SMU’s latest check of the market on Tuesday, March 12. And even while US prices are now at their lowest level since early late October, they continue to carry a large premium over imports.

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, March 14, the CRU Asian CR price was $644/st, down $9/st w/w and down just $36/st from a month prior. Adding a 71% anti-dumping duty (Japan theoretical), and $90 per ton in estimated import costs, the delivered price to the US is $1,191/st.

The South Korean theoretical price is $734/st. The latest SMU cold rolled average is $1,105/st, flat w/w, but down $90/st compared to one month ago.

The result: US-produced CR is now theoretically $86/st cheaper than steel imported from Japan but $371/st more costly than cold rolled imported from South Korea.

Italian cold-rolled coil

Italian CR prices were down $31/st to roughly $786/st this week. Despite that decline, Italian prices are down just $10/st from a month ago. After adding import costs, the delivered price of Italian CR is in theory $876/st.

That means domestic CR is theoretically $229/st more expensive than CR imported from Italy. The spread is down just $10/st from last week, but the domestic cold band price premium over offshore product from Italy is down $224/st from a recent high of $453/st in mid-December.

German cold-rolled coil

CRU’s German CR price ticked down $41/st vs. the week prior to $799/st. After adding import costs, the delivered price of German cold rolled is in theory $889/st.

The result: Domestic CR is theoretically a whopping $216/st more expensive than CR imported from Germany. The spread is now $212/st below a recent high of $428/st during the first week of 2024.

Figure 5 compares all five price indices. The chart on the left shows historical variation from Feb. 1, 2022, through present. The chart on the right zooms in to highlight the recent volatility in US pricing since mid-2023.

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 as 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 then the 25% tariff.

The number of active rotary rigs in the US increased by seven week over week (w/w) to 629 as of March 15. Oil rigs rose by six to 510, gas rigs increased by one to 116, and miscellaneous rigs held steady at three.

This week there are 125 fewer active US rigs compared to the same week last year. In this time oil rig counts have fallen by 79, gas rigs are down by 46, and miscellaneous rigs are unchanged.

Canada rigs

The number of operating oil and gas rigs in Canada declined by 18 to 207 this week. Oil rigs fell by 13 to 128, while gas rigs declined by five to 79.

Active drilling levels in Canada are exactly where they were this time last year, though the number of active oil rigs is up by six and gas rigs are down by the same amount.

International rig count

The international rig count is updated monthly. The total number of active rigs for the month of February was 958, down seven from January, but up 43 from February 2023.

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.

Weakening demand was the story for sheet markets across the globe this month. US price falls were again large m/m as end-use demand surprised to the downside, inventory levels remained elevated, and new capacity fought for market share. Early-year price rises in Europe also came to a halt, and buyers pulled back from the market on weakness in many key end-use sectors and competitive import offer levels. These same market dynamics were at play across Asia, with Chinese stimulus measures less supportive than hoped and production costs falling.

North American prices again faced pressure due to an ongoing imbalance between supply and demand. Mill lead times are still relatively short, service center inventories plentiful, and newly installed capacity is finally up and fighting for market share. What is more, import price levels remain quite competitive relative to the current domestic market. Compounding this is a slowdown in demand, with market participants growing increasingly bearish on market direction in the coming months even after recently announced mill price increases.

European sheet demand is also low. Stockholders have restored inventories back to sufficient levels, and key end-use sectors activity remains subdued. Steel production capacity that has restarted in recent months is still up, although we do not expect that there will be additional restarts any time soon. Meanwhile, in Turkey, inflation, currency devaluation, and stricter monetary policy are constraining demand and, in addition to attractive import levels, are weighing on prices.

Post-holiday demand in Asia has not returned to the market as strong as some expected. The Two Sessions meeting in China, which typically drives prices higher because of newly announced stimulus measures, did not live up to expectations this year—particularly for the construction sector. Prices in Southeast Asia also fell this month in the lead up to Ramadan, which reduced buying activity and because of falling costs. Japanese prices fell for the first time this year as well on weakening export demand by key export destinations, except by the US.

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

Oil and gas spot prices

The weekly West Texas Intermediate oil spot market price held steady at $79.53 per barrel as of the week ending March 8 (Figure 1). Oil spot prices have been gradually recovering since December. The EIA expects oil spot prices to average $88/b in the second quarter of 2024 (up $4 from the February estimate), attributing this higher forecast to reduced production due to OPEC+ cuts.

Natural gas spot prices remain near historical lows, falling to a 3.5-year low last week of $1.55 per metric million British thermal units (mmBtu). The EIA notes that this is a record low price when adjusted for inflation. The March STEO forecasts natural gas prices to remain below $2.00/mmBtu through the second quarter, due to surplus inventory levels from reduced winter consumption.

Rig counts

The number of active US oil and gas drill rigs has remained relatively stable over the past five months. The latest US count was 629 active drill rigs as of the end of this week, made up of of 510 oil rigs, 116 gas rigs, and three miscellaneous rigs, according to Baker Hughes (Figure 2). Active rig counts are down 25% compared to levels one year prior.

The latest Canadian rig count is 207 rigs, made up of 128 oil rigs and 79 gas rigs. Canadian rig activity is beginning to decline from annual highs, a seasonal trend experienced each March. Active Canadian rigs are unchanged compared to activity this time last year (Figure 3).

Table 1 below compares the current US, Canadian and international rig counts to historical levels.

US oil and gas production is heavily concentrated in Texas, Oklahoma, North Dakota, and New Mexico. As of March 15, Texas is the most active state with 290 rigs in operation and New Mexico is the second highest with 107 rigs (Figure 4). The percentage of land drilling activity represented by each state has seen little variance over the past year; roughly half of all drilling activity continues to occur in Texas, followed by 18% in New Mexico, 7% in Oklahoma, and 4-5% in Louisiana, North Dakota, and Pennsylvania.  

Stock levels

US crude oil stocks continue to decline from 2020 highs, having reached a 38-year low of 765 million barrels last September. Stock levels have begun to recover since then, rising to 809 million barrels last week. March levels are 3% higher than the start of this year but 5% less than levels one year ago (Figure 5).

Trends in energy prices and rig counts are an advanced indicator of demand for oil country tubular goods (OCTG), line pipe and other steel products.

Lead times were largely sideways, holding just below 5 weeks, while hot-rolled coil is still on average $815 per short ton (st).

SMU’s Steel Demand Index now stands at 52, up eight points from a reading of 44 at the end of February. The bounce comes after the index had reached its lowest measure since late December.

In recent months, the measure had improved by more than 13 points back on Nov. 9, staying in expansion territory until late December. The latest reading pushes the index into growth territory for the first time since the first week of January and is the highest measure since Nov. 9.

There is a bit of a cautionary tale in the latest gain. 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 mid-June, late September, and November.

And here we are again – mills have set new base price targets, stopping the downward momentum, and drawing buying interest. Demand appears to have responded, but it’s too early to tell if it will last.

It’s important to note that SMU’s Steel Demand Index has been largely trending downwards and in contraction territory for nearly a year.

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.

Current state of play

While we haven’t seen much from hot rolled prices or lead times this week – both are in what appears to be a holding pattern. We’ve heard that buyers were keen to secure “pre-announcement” volumes.

There were also some service centers covering inventory gaps after buying little since October.

That boost in buying, coinciding with some mill sales, may have filled order books through Q2. Add in planned outages from March through June, and that might be all mills need to see prices turn.

SMU’s latest check of the market on March 12 placed HRC at an average of $$815/st FOB mill, east of the Rockies, flat vs. the prior week. Hot band is now down $230/st since recently peaking at $1,045/st in early January.

And lead times have still been pointing down as well for much of the past two months. Lead times edged down just a bit, 4.93 weeks vs. 4.96 weeks at the end of February.

Ultimately, prices and lead times might have bottomed and about to inflect up, highlighted by the boost in our demand index. But it’s too early to tell.

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 to watch for

Keep an eye out for widening lead times and another round of price hikes from mills. If the added buying and gap covering seen from the mill announcements indeed improved order books, lead times will stretch a bit giving precedence for another round of price increases.

While hot-rolled coil lead times are still below five weeks on average and pointing lower, maintenance outages coupled with recent buying could push lead times out and boost pricing. It’s too early to tell how it will all shake out, but it will be interesting to see how underlying demand moves as we close in on Q2.

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.

Flat Rolled

After weaker-than-expected shipments in January, US service center shipments of flat-rolled steel picked up in February, which caused supply to decrease. At the end of February, service centers carried 56.6 shipping days of flat-rolled steel supply on an adjusted basis. This is down from 60.3 shipping days of supply at the end of January but up year on year (y/y) from 52.2 shipping days of supply in February 2023. Inventories represented 2.7 months of supply at the end of February, down from 2.74 months in January.

February had 21 shipping days, compared to January’s 22 shipping days. The daily shipping rate in February was flat y/y, while January’s daily shipping rate was down 8% y/y. Shipments rose to more normal levels in February, after a slow January, though market contacts have said that demand has been steady but not great. High inventories at the start of the year, when demand was weak, drove significant weekly price declines in February.

For the first time since October, shipments exceeded intake at service centers – but only slightly. Inventories were still fairly heavy in February relative to demand. While lead times were short in February, we expect to see lead times extend in March with heavier bookings and spring outages.

The latest SMU survey published Feb. 28 showed hot-rolled coil (HRC) lead times contracted to 4.96 weeks, compared to 5.16 weeks a month earlier.

The amount of flat-rolled steel on order declined to the lowest level seen since August 2023. Service centers had fewer shipping days of supply on order at the end of February vs. January. Material on order was also down on a percentage basis of inventories in February vs. January.

We believe the amount of material on order will rise in March with the large-volume deals placed ahead of the price increase announcements made in early March, and with additional ordering on contracts at pre-price increase levels.

Plate

US service center plate supply declined again month on month (m/m) in February, though inventories remain at elevated levels. At the end of February, service centers carried 58.8 shipping days of plate supply, down from 63.4 shipping days in January. In terms of months of supply, service centers carried 2.8 months of plate supply in February, down from 2.88 months in January. Plate supply in February was much higher than February 2023, when service centers carried 45 shipping days of supply or 2.25 months of supply.

In the last two months, service center intake for plate significantly outpaced shipments, and this has contributed to persistently high inventory levels. Market contacts commented that demand was slow to steady with some project delays, especially for government-funded projects. Demand in the first two months of the year has been weaker than expected, and supply remains readily available from mills and service centers.

Nucor announced a $90-per-ton price decrease at the end of February, though all the plate mills had been competing aggressively on price, according to market contacts. With prices declining steadily and demand subdued, plate buyers feel no urgency to place orders, and service centers have been cutting resale prices to compete.

The amount of plate on order decreased m/m, with fewer shipping days of supply in February vs. January. The amount of material on order represented on a percentage basis of inventories was also down in February vs. January.

Lead times have also shortened for plate mills. At the end of February, the SMU survey recorded plate mill lead times at 5.38 weeks, down from 5.8 a month earlier.

SMU’s Current Buyers’ Sentiment Index stood at +57 this week, down slightly from +58 two weeks earlier (Figure 1). This is the lowest the index has been since the start of 2024 when it stood at +56.

SMU’s Future Buyers’ Sentiment Index measures buyers’ feelings about business conditions three to six months in the future. The index increased two points this week to +70 (Figure 2). Prior to this rise, the Future Sentiment Index hadn’t touched +70 since the end of November.

Measured as a three-month moving average, the Current Sentiment 3MMA fell to +61.67 from +63.67 two weeks prior. (Figure 3).

This week’s Future Sentiment 3MMA slightly increased to +63.67 vs. +63.33 at our previous market check (Figure 4).

What SMU respondents had to say:

“Investing in 2024 to be ready for growth in 2025-28.”

“As a reseller, margin compression is an issue. Too many irresponsible wholesalers and distributors are liquidating inventory below replacement cost.”

“With prices declining, less import buys.”

“We are prepared with a balance of contract tons, spot tons, and offshore.”

“We hope to regain market share in the second half of the year.”

“Hopefully, prices will bottom out soon and increase, creating an import buying market.”

“We have a good backlog.”

About the SMU Steel Buyers’ Sentiment Index

The SMU Steel Buyers Sentiment Index measures the attitude of buyers and sellers of flat-rolled steel products in North America. It is a proprietary product developed by Steel Market Update for the North American steel industry. Tracking steel buyers’ sentiment is helpful in predicting their future behavior.

Positive readings run from +10 to +100. A positive reading means the meter on the right-hand side of our home page will fall in the green area, indicating optimistic sentiment. Negative readings run from -10 to -100. They result in the meter on our homepage trending into the red, indicating pessimistic sentiment. A reading of “0” (+/- 10) indicates a neutral sentiment (or slightly optimistic or pessimistic), which is most likely an indicator of a shift occurring in the marketplace. Sentiment is measured twice per month via SMU surveys. If you would like to participate in our survey, please contact us at info@steelmarketupdate.com.

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.

On a three-month moving average basis (3MMA) the index eased to a 45-month low of -22.33 in March (Figure 1). Since 2010, the only instances we have seen a 3MMA lower than this March measure were the months of March, April, and May 2020.

The manufacturing index saw significant swings in the first two months of this year, plummeting 29 points in January and then rebounding 41 points in February, remaining in negative territory in both months. In 2023, the index peaked at 10.8 in April and has only indicated business condition improvements for eight months out of the last two years.

An interactive history of the Empire State Manufacturing Index is available on our website.

Higher shipments and earnings are boosting profitability in its steel operations, the company said, noting improved performance at its newest flat-rolled steel mill in Sinton, Texas. The automotive, non-residential construction, energy, and industrial markets are driving demand, SDI said.

SDI’s metals recycling operations are seeing “substantially stronger realized product pricing” and higher ferrous and non-ferrous volumes compared to the prior quarter.

While results from the steel fabrication segment will be historically strong, SDI said earnings will be down sequentially due to seasonally lower shipments and a squeeze in metal spreads.

“The non-residential construction sector remains solid, as further evidenced by steel joist and deck order backlog volume that extends into the third quarter of 2024, with historically strong associated product pricing,” SDI commented in its earnings guidance statement.

“In addition, the continued onshoring of manufacturing, coupled with the robust US infrastructure program and industrial buildouts, support strong demand in the coming years,” it added.

SDI will release its full Q1’24 earnings results after the market closes on Tuesday, Apr. 23.

New orders for nearly all categories of products improved in February with the exception of heat-treatable sheet. Indeed, new orders for heat-treatable sheet, which contain the 2xxx, 6xxx and 7xxx series alloys – popular in automotive and aerospace applications – went from a growth of 11% y/y in January to a contraction of -1.6% y/y last month. Otherwise, orders for all other products progressed and were steady from the previous report.

New orders for non-heat treatable sheet, which include the 1xxx, 3xxx and 5xxx series alloys, increased by 13.7% y/y in February from 6.4% y/y in January. New orders for domestic can stock had a similar path, moving from 5.8% y/y growth in January to 16.4% y/y last month. Export can stock had a more spectacular progression with orders moving from a contraction of -15.7% y/y in January to 52.4% y/y in February. A similar progression was seen for new orders for foil, moving from a decline of -22.1% y/y to +17.3%, as last reported.

New orders for plate performed similarly to January, with new orders improving by 17.3% y/y in February. Finally, the picture was less positive for extruded products, which is a sector that has been struggling in the past months. New orders indeed remained in a contraction of -6.8% y/y in February. This is in line with what was seen in January (-6.3% y/y) and suggests there is no improvement in US extrusions demand yet. 

Latest US inflation report proves hotter than expected

The latest data showed that the US consumer prices index (CPI) increased in February, leaving the y/y headline rate above 3%, ahead of the Federal Reserve’s March 19-20 meeting. The US inflation rate came in at 3.2% y/y last month, just above the market consensus of 3.1% and up from 3.1% in January. The more closely followed core rate, which removes food and energy prices, increased by 0.4% month over month (m/m) and 3.8% y/y — both higher than market expectations.

Senior Fed officials have been clear lately that they wanted more convincing proof that inflation is slowing toward their 2% annual target before they start to cut interest rates. This February CPI report failed to provide that. Although this report could prompt Fed officials to delay any decision until the summer, for now the consensus is still for a June cut. 

US makes preliminary anti-subsidy rulings on lithographic printing plates

The US Department of Commerce announced earlier this month a positive preliminary anti-subsidy ruling against aluminum lithographic printing plates imported from China. The preliminary ruling stated duties range from 38.50% to as much as 231.98% on specific companies. The Department of Commerce is expected to make a final countervailing ruling on July 9.

This case involves products under US customs codes 3701.30.0000 and 3701.99.6060 and some products under 3701.99.3000 and 8442.50.1000. On Oct. 19, 2023, Commerce launched an anti-dumping and countervailing investigation into aluminum lithographic printing plates imported from China and an anti-dumping investigation into the same plates imported from Japan.

Alumina to be taken over by Alcoa

Australia-based Alumina Ltd. has signed a binding scheme implementation deed with partner Alcoa, enabling the US-based aluminum producer Alcoa to conditionally acquire 100% of Alumina. The deal values the company at approximately $2.2 billion. “We believe the time is right to combine our two companies,” said Alumina chairman Peter Day. “The combined entity will have a larger and stronger balance sheet and be better able to fund the current portfolio restructuring actions in AWAC, as well as realizing potential growth options in the medium to longer term.”

AWAC refers to Alcoa World Alumina and Chemicals, which is the companies’ joint venture (JV) that has bauxite, alumina, and aluminum interests worldwide. Melbourne-headquartered Alumina argues that a joint venture with Alcoa will give shareholders exposure to a global pure-play upstream aluminum company and to a metal that is key for energy transition and decarbonization, while also simplifying AWAC’s corporate structure and leading to more efficient funding, resulting in potential financial synergies.

Alumina’s directors have recommended that the company’s shareholders vote for the transaction, in the absence of an alternative proposal and given an independent expert insists the deal is in their best interests. Completion is expected in Q3, provided shareholders and regulatory authorities approve the transaction and customary conditions are cleared. If concluded, Alumina Ltd.’s shareholders will own 31.6% of the enlarged Alcoa and existing Alcoa shareholders 68.4%.

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

The Japanese steelmaker said through increased financial investment and the contribution of advanced technologies to U.S. Steel, Nippon “will advance American priorities.”

One of these includes “strengthening US supply chains and economic defenses against China.”

“No other US steel company on its own can meet this challenge while also meeting antitrust requirements,” Nippon claimed.

The company reiterated its commitment to “job security, pension security, capital investment, technology sharing, financial reporting, and the ability to enforce contractual obligations post-closing.”

Recall that the United Steelworkers (USW) union has opposed the deal, first announced in December.
   
“Nippon Steel is the right partner to ensure that U.S. Steel is successful for generations to come as an iconic American company,” the company said.

“We are progressing through the regulatory review, including CFIUS, while trusting the rule of law, objectivity, and due process we expect from the US government,” Nippon added.

“CFIUS” is the Committee on Foreign Investment in the US review process.

Concluding, Nippon said it was determined “to see this through and complete the transaction.”

Is this price pause just a temporary pitstop in the downward journey?

Are prices indeed inflecting?

Is another round of mill pricing notices imminent?

Reviews are in and they’re still mixed

For many, the move by mills was not just an effort to “stop the bleeding” or “hold the line,” but its timing ahead of planned outages was indeed to push prices back up.

“Mills are positioning themselves for some increases,” said an OEM executive, adding that the move wouldn’t just have an impact on hot band, but that it would ultimately set a floor for tandem products and potentially even plate.

Demand fundamentals don’t appear to have shifted significantly, but we’ve seen this trend a good bit. Prices are moving down and at a given point mills announce a price floor and plan for a rebound. The move hasn’t always been successful, but it’s often been helped when big volumes at discounted levels are moved just before a price notice.

That’s something we saw again this time around.

But there are still some that aren’t sure if increases can be sustained because demand is still lagging expectations.

“If demand doesn’t get better, we’ll see how far anything can run,” said a source. “At the end of the day, it always comes back to Econ 101: supply vs. demand.”

Groundhog Day or The Twilight Zone

But could it be that the reaction from the market may have played right into the mills’ hands? We’ve heard that buyers were keen to secure “pre-announcement” volumes and that some service centers are reportedly covering inventory gaps after buying little since October.

That coincided with mill sales, and the buying frenzy that immediately followed the announcements may have helped some mills fill Q2 order books. It could all move lead times out and shift sentiment. This is something my colleague Josh Spoores, principal analyst at CRU, believes could lead to increased prices.  

“Any reading of lead times or sentiment prior to this week is now old data that is not relevant to a forward-looking view,” he noted.

Several sources told SMU that it was hard to pin a price this week, even more so pricing and availability for April shipment.

“Some mills are not quoting yet,” said a service center executive. “It would not be a surprise to see a new round of price increase announcements very soon.”

And the move also plays well for EAFs, especially with “slumping” scrap prices. It could help mills accommodate huge volumes of hot band recently sold around $700 per short ton (st).

For most, it may just feel like Groundhog Day with some solid comedic relief, but after talking to others, I get the sense that for some it’s more like The Twilight Zone – just a big strange mix of horror, science-fiction, drama, and comedy, but most of all superstition.

At SMU we don’t forecast, so we’ll just watch and let it all play out. We’ll soon find out if prices are indeed inflecting up or just a momentary break before the downtrend resumes.

Let me know what you think? Are prices inflecting, with a new round of increases on their way? Or will prices start to slip again still waiting on stronger demand?

SMU Community Chat

Barry Zekelman, chairman and CEO of Zekelman Industries will be the featured guest for our next next Community Chat.

It’s this coming Wednesday, March 20, at 11 a.m. ET. You can register here.

I’m sure it will be one you won’t want to miss. But if you do, a replay of the chat, once available, for subscribers can be found here.

And, as always, thanks to all of you for your continued support of SMU!

Through March 13 data, prices for iron ore, coking coal, pig iron and steel scrap all saw declines month on month (m/m). Meanwhile, aluminum prices held steady and zinc prices saw a significant recovery. Compared to levels three months earlier, dynamics were similar for each product. Looking back to this time last year, prices for all seven raw material prices have seen double-digit declines across the last 12 months, some moving as much as 25% lower.

The below table 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

The import price of 62% Fe Chinese iron ore fines has been easing throughout the year, having reached a 19-month high in early-January.  Figure 1 shows the price of 62% Fe delivered North China, currently at $111/dry metric ton (dmt) through March 13. Prices are 15% lower than levels seen this time last year.

Coking coal

Like iron ore prices, premium hard coking coal prices have gradually eased over the last four months. The latest weekly price is $301/dmt as of March 13, down 4% over the last month and down 10% from prices three months prior (Figure 2). Prices are down 17% compared to tags one year ago.

Pig iron

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

Prior to this month, pig iron prices had risen since December to reach $465/dmt. March figures eased 4% to $445/data, now 17% lower than levels seen 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 (Figure 3).

Scrap

Steel scrap tags have trended downwards since peaking in December. In our Tuesday issue, SMU published scrap price indices through March. Shredded scrap slipped $53/gross ton (gt) from February, while busheling declined $45/gt. Scrap prices are down $55-90/gt compared to the December highs and are nearing recent lows. Figure 4 shows the spread between shredded and busheling scrap, priced in dollars per gross ton in the Great Lakes region.

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 minimills, whose primary feedstock is scrap. Figure 5 shows the prices of mill raw materials over the past three years. Both iron ore and shredded scrap prices are 12-13% below levels one month ago, and similarly (41%) less than prices this time last year.

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/blast furnace producers and a lower ratio favors the mini-mill/electric-arc furnace (EAF) producers. Integrated producers had mostly held the cost advantage from late-2021 through mid-2023. The advantage then briefly shifted to EAF producers in the second half of 2023, but has since edged back up to neutral ground. The ratio is up to 3.62 as of Mar. 13.  

Zinc and aluminum

Zinc is used in galvanized and other coated steel products. Spot prices fluctuated dramatically in the past couple of years, but have remained relatively stable since reaching multi-year lows in mid-2023. The LME cash price for zinc as of March 13 is $1.14 per pound, up 10% m/m and up 4% from levels three months prior. Compared to this time last year, zinc prices are down 15% (Figure 7).

Aluminum prices, which factor into the price of Galvalume, have also stayed near their historically low levels for the past year and a half. (Note that aluminum spot prices sometimes have large swings and return to typical levels within a few days, as seen in the graphic below.) The latest LME cash price is $1.01 per pound as of March 13. Aluminum prices are up just 1% from one month prior, 7% higher than tags three months earlier, but down 11% from prices one year ago.

Nucor said the steel mills segment’s earnings are anticipated to rise in Q1’24 “due to higher average selling prices and volumes, particularly at our sheet mills.”

Meanwhile, earnings in the steel products segment are expected to fall in Q1’24 “due to lower average selling prices and decreased volumes.”

“We expect earnings in the raw materials segment in the first quarter of 2024 to be comparable to the fourth quarter of 2023 as improved performance of our DRI (direct-reduced iron) facilities is offset by lower margins at our scrap processing operations,” the company said in a statement.

Nucor said it will release Q1’24 earnings after the markets close on Monday, April 22.