North American auto assemblies ticked up in March vs. the prior month, according to LMC Automotive data. While assemblies were up month on month (m/m), they are down 4.5% year on year (y/y).
The boost in supply over the past year has helped the market progress toward a more balanced state, something it hadn’t seen for much of the past few years.
Assembly recovery and continued improvements in supply during the second half of 2023 have pushed retail inventory levels in March to roughly 2.6 million units. The result is a 5% increase vs. the prior month and a 56% boost y/y.
North American vehicle production, including personal and commercial vehicles, totaled 1.38 million units in March, a 1.5% increase from 1.36 million units in February. It’s roughly 4.5% behind, however, the 1.45 million produced one year ago.
Below in Figure 1 is a five-year snapshot of North American light-vehicle production since 2019 on a rolling 12-month basis with a y/y growth rate. Also included is a five-year snapshot of the average monthly production, which includes seasonality since 2019.
A short-term snapshot of assembly by nation and vehicle type is shown in the table below. It breaks down total North American personal and commercial vehicle production into US, Canadian, and Mexican components. It also includes the three- and 12-month growth rates for each and their momentum change.
For the three months and 12 months through March, the growth rate for total personal and commercial vehicle assemblies in the USMCA region is positive – with personal well ahead. The momentum change, however, remains noticeably behind for the personal vehicle segment.
The longer-term picture of personal vehicle production across North America is shown below. The charts in Figure 2 show the total personal vehicle production for North America and the total for the US, Canada, and Mexico.
In terms of personal vehicle production, the region saw a 0.6% m/m decline in March, after seeing a 5.7% boost the month prior. The result was a more pronounced 7% loss vs. the period one year ago.
The US was the only market to post a production gain m/m, with an increase of 1% or 6,740 units in March. Canada, stood at 9,254 units (-8.6%), while Mexico produced 3,427 fewer units (-1.5%) m/m.
Production share across the region changed little. The US saw personal vehicle production share of the North American market at 66.8%, followed by Mexico and Canada at 22.5% and 10.6%, respectively.
Total commercial vehicle production for North America and the total for each nation within the region are shown in the first chart in Figure 3 on a rolling three-month basis. Commercial vehicle production in the US and Mexico and their y/y growth rates, as well as the production share for each nation in North America, are also shown.
North American commercial vehicle production was a bright spot in March, up 7.6% m/m with a total of 369,214 units produced during the month, an increase of 25,988 units vs. February. The gain was driven by Mexico, which saw a 15.5% boost in commercial vehicle assemblies in March, producing 13,340 more vehicles m/m – a total of 99,134 units last month.
The US produced just 11,967 more light commercial vehicles last month vs. February, a 4.9% increase m/m with a total of 256,215 units. March marked Canada’s 29th straight month of commercial vehicle assemblies after ceasing production for nearly two years from Jan. 2020 through Oct. 2021.
Canada also reported production growth in March vs. February, up 5.2% and producing 681 more vehicles over the same period for a total of 13,865 units in March.
The overall increase put the commercial production growth rate at just 2% for the region last month, slightly ahead of the growth rate gain of 1.6% in February.
The market share across the region was largely unchanged. The US was up 0.1 percentage point, with a total share of 69.1%, followed by Mexico with a 27.1% share, and Canada with a 3.8% share in March.
Presently, Mexico exports just under 80% of its light-vehicle production, with the US and Canada as the highest-volume destinations.
Editor’s Note: This report is based on data from LMC Automotive for automotive assemblies in the US, Canada, and Mexico. The breakdown of assemblies is “Personal” (cars for personal use) and “Commercial” (light vehicles with less than 6.0 metric tons gross vehicle weight rating; heavy trucks and buses are not included).
The Biden administration on Wednesday announced measures to support the domestic steel industry.
The office of the US Trade Representative (USTR) announced the launch of a Section 301 investigation into China’s practices in the shipbuilding, maritime, and logistics sectors.
At the same time, President Biden urged a tripling of existing tariffs on imports of Chinese steel and aluminum.
The USTR’s investigation comes after the United Steelworkers (USW) and four other national labor unions filed a Section 301 petition last month. The other unions include the International Association of Machinists and Aerospace Workers, the International Brotherhood of Boilermakers, the International Brotherhood of Electrical Workers, and the AFL-CIO’s Maritime Trades Department.
“The petition presents serious and concerning allegations of [China’s] longstanding efforts to dominate the maritime, logistics, and shipbuilding sectors, cataloging [China’s] use of unfair, non-market policies and practices to achieve those goals,” USTR Katherine Tai said on Wednesday.
“I pledge to undertake a full and thorough investigation into the unions’ concerns,” she added.
Tai has requested consultations with the Chinese government as part of the investigation.
A public hearing will be held on May 29 to discuss the matter.
The USW thanked the president for his worker-centered trade policy and for “taking this threat seriously and pursuing a full invesigation.”
“A robust commercial shipbuilding industry is necessary for meeting our national defense and economic security needs, but unfortunately, our domestic capacity has withered as a result of China’s non-market policies,” USW International President David McCall commented in a statement.
President Biden called on the USTR “to consider tripling the existing 301 tariff rate on Chinese steel and aluminum.” The average tariff on those products is less than 7.5% at present, according to the White House.
The president addressed union workers at the USW headquarters in Pittsburgh on Wednesday, touting the 301 investigation and other efforts his administration has been taking to support the domestic steel industry, including:
The president also reiterated his opposition to Nippon Steel’s pending purchase of U.S. Steel, promising to keep the Pittsburgh-based steelmaker “totally American.”
“U.S. Steel has been an iconic American company for more than a century, and it should remain a totally American company – American-owned, American-operated by American union steelworkers, the best in the world. And that’s going to happen. I promise you,” he stated during his speech.
Major trade associations representing the domestic steel industry welcomed the actions of the administration.
Philip K. Bell, president of the Steel Manufacturers Association (SMA), commended the president’s call for higher tariffs on imports of Chinese metal “amid a sharp rise in Chinese steel flooding the global market.”
Also important to note, said Bell, is “China’s excessive production of high-emissions steel undercuts global efforts to decarbonize the economy.”
Kevin Dempsey, president of the American Iron and Steel Institute (AISI), said, “AISI is very concerned about the recent significant increase in Chinese steel exports to world markets.
“Chinese steel exports to third-country markets often are further processed into other steel or downstream manufactured products that are then exported to the US market,” Dempsey explained.
“The Chinese government is also expanding its unfair trade practices beyond its borders by subsidizing its steel producers in building additional export-oriented steelmaking capacity outside of China — particularly in Southeast Asia through the Belt and Road Initiative,” he added.
“AISI very much appreciates the Biden administration’s continuing efforts to push back on Chinese and other foreign unfair trade practices that hurt American steel producers and their workers,” Dempsey said.
Bell added that Congress should pass the Leveling the Playing Field 2.0 act, as it “would support these administration goals and strengthen America’s ability to fight China’s market-distorting trade practices.”
The USW’s McCall said that, “By combining a firm stance on unfair trade with the work the administration has done on infrastructure, clean technology, microchips and more, President Biden is ensuring US global competitiveness and widespread prosperity well into the future.”
The latest SMU Community Chat webinar reply is now available on our website to all members. After logging in at steelmarketupdate.com, visit the community tab and look under the “previous webinars” section of the dropdown menu.
All past Community Chat webinars are also available under that selection.
If you need help accessing the webinar replay, or if your company would like to have your voice heard in our future webinars, contact info@steelmarketupdate.com.
Russel Metals Inc.’s planned purchase of seven service centers from Samuel, Son & Co. has been delayed.
When the Toronto-based service center announced the CAD$225 million (USD$165.5 million) sale in December, it said the transaction was expected to close in Q1’24 or Q2’24. The purchase includes operations in Winnipeg, Manitoba; Calgary and Nisku, Alberta; Langley and Surrey, British Columbia, in Canada; and facilities in Buffalo, N.Y., and Pittsburgh in the US.
However, Canada’s Competition Bureau is now looking into the transaction as it “has concerns related to a narrow segment of product in a specific geography,” Russel said this week.
As such, the closing is not expected to close by the end of the current quarter. A new expected closing date was not provided.
“Russel Metals and Samuel continue to engage constructively with the Competition Bureau in an effort to bring this matter to a resolution,” Russel said.
Oakville, Ontario-based Samuel did not respond to a request for comment.
The Competition Bureau is an independent law enforcement agency of the Canadian government meant to promote and protect competition for the benefit of Canadians. It has the authority to review any merger to determine if it stifles competition in the Canadian marketplace.
Earlier this week, SMU polled steel buyers on an array of topics, ranging from market prices, demand, and inventories to imports and evolving market chatter.
Rather than summarizing the comments we collected, we are sharing some of them in each buyer’s own words.
Want to have your voice heard? Contact david@steelmarketupdate.com to be included in our market questionnaires.
“Slowly but surely prices will continue to increase. Mills will continue to pressure the market.”
“Anticipate pricing to move up as much as the market will bear. Although really depends on short term demand. I don’t anticipate large movement on price either up or down.”
“I expect prices to rise a bit more in the next few weeks before coming under pressure again when lead times hit June. Then prices fall over the next six weeks or so until lead times hit late July and the mills try to push prices up from what was lost in the two months prior.”
“Prices most likely will remain steady and/or rise.”
“Pricing will be flat over next two to three months unless interest rates trend lower.”
“Discrete plate will remain flat to slightly higher over the next three months.”
“I think we’ll ebb and flow around these figures but ultimately drift lower. We see no true catalyst to push things higher.”
“Expect a drop over the next few months. Nucor’s new price mechanism will help curb mill price increases simply to boost prices.”
“Demand might soften if high Fed interest rates remain. That is their goal, right? Slow the economy?! If supply remains the same or increases as more capacity comes online and mill maintenance ends then pressure will be on prices.”
“I feel due to simple supply and demand imbalance, we will see prices declining.”
“Down – higher imports and slowing economy.”
“Discrete plate demand is improving.”
“Improving.”
“Next 60 days looks to be down a bit, but longer term third quarter demand is looking better.”
“Demand is stable for us, which seems better than most.”
“Stable, all of the indicators are suggesting the market is stable.”
“Stable. General “not-so-good” market will gradually be complemented by IRA and IIJA projects.”
“Stable for H1, soft so far in H2.”
“Demand is stable to falling – high interest rates and slowing economy.”
“Demand is stable to declining, after the Nucor CSP announcement being less than CRU, buyers are possibly waiting on purchases again for the spot market.”
“Demand is softening this past week.”
“Faster as folks keep less stock on hand and mill lead times stay low.”
“Inventory is currently running faster as customers pull contract heavy with prices trailing and spot had come in heavy for April, but expect to slow down.”
“Faster due to price increases that were established over the past month.”
“Inventory is moving maybe slightly faster, but that is because we’re capturing market share as a relatively new player in our space.”
“It appears to be moving a little slower, however, in reality, it is most likely similar to last year at the same time.”
“Discrete plate inventory is moving steady at this time. Will pick up soon.”
“Inventory is moving at about the same pace.”
“Same movement, just more competition and lower margins.”
“Imports are always more attractively priced.”
“Imports remain attractive price-wise, it is just a matter of if lead time is ‘stomach-able’.”
“Yes, laid down cost is lower than domestic but lead times are long vs. domestic (8 weeks vs. 12-14 weeks).”
“Imports are somewhat price competitive but longer lead times and future price risk of softening is making imports less attractive now.”
“Yes, but not in a position to take advantage. Also, domestic market always changing.”
“Yes, plenty of supply globally looking for a home.“
“Pricing might be more attractive for certain difficult to-forecast items; however, more important is to focus on the true cost. Domestic material is almost always the way to purchase to control cost and spend from my perspective since we have excellent relationships with the domestic producers.”
“Getting close with European prices continuing to drop and the Euro losing strength.”
“Discrete plate imports are not attractive at this time.”
“Our customers require domestic so imports are not an option.”
“There is still a lot of uncertainty of how 2024 will finish. It is not slowing down business yet, but people are on eggshells.”
“China is about to release economic data on Tuesday, and anything they publicly admit to is likely much worse. Supply in SEA is way over demand, and China hasn’t slowed down enough.”
“China is exporting a lot of steel.”
“The lack of new import orders being placed.”
“Lead times due to Suez Canal and Port of Baltimore issues.”
“Will Ahmsa really restart in September and what’s the impact?”
“It is nice to get some clarity on the AHMSA saga. Likewise, it sounds like maybe Evraz will play out soon. How about the idea of more (big boy) service center consolidation though?”
“Section 232 impacts and what direction we will see tariffs going.”
“The NBA 2024 Playoffs and all of the steel that is in the arenas where the teams play :-)”
The steel market appears to be finding a new, higher normal with the shocks of the pandemic and the war in Ukraine in the rearview mirror.
The good news: a more profitable and consolidated post-Covid US steel industry has been able to invest in operations. That includes efforts to decarbonize.
The bad news: That “new normal” could be tested. Because it’s not just domestic sheet prices that have been volatile. Geopolitics are too.
That was the rough consensus of a panel of steel experts speaking on the “Spotlight on Ferrous” panel at the 2024 ISRI Convention and Expo in Las Vegas on Tuesday, April 16.
One pattern that has emerged over roughly the last two years: a more predictable floor for the spread between hot-rolled (HR) coil and busheling scrap. That’s according to Blake Hurtik, editorial manager for Argus Media.
Before the pandemic, spreads between HR and bush were typically in the $300s per short ton (st). Now, they rarely go below $400/st. When they hit that $400/st mark, either HR prices go up or scrap prices fall. “That might be our new resistance level,” he said.
Another big change has been the consolidation of the US steel industry. That, combined with Section 232 tariffs, has resulted in sharply higher profits for domestic mills. “It wasn’t all that long ago that it wasn’t unusual for a steelmaker to post an annual loss,” Hurtik noted.
That profitability has allowed mills to invest in new, more efficient capacity. It has also allowed them to spend more in efforts to decarbonize, said John Ball, president of CRU North America.
The US steel industry already sports among the lowest CO2 emissions in the world. The goal is to go even lower by coupling EAF steelmaking, which accounts for the bulk of domestic steel production, with renewables.
“That’s the secret sauce. That’s the target. That’s the ambition,” Ball said. It explains why steelmakers such as Charlotte, N.C.-based Nucor are exploring advanced nuclear power – namely, small modular reactors, or SMRs.
Government money is also available to help mills decarbonize. Cleveland-Cliffs, for example, has been granted up to $500 million by the Department of Energy to replace the blast furnace at its Middletown Works in Ohio with two electric melting furnaces (EMFs).
“These incentives are typically starting at the top. They haven’t trickled as far down as those of you in this room would like to see. But I think this is where the opportunity is,” Ball told the assembled audience.
In other words, Uncle Sam should be there to help recyclers, too – whether that be through the Inflation Reduction Act (IRA), government departments, or other initiatives.
“The US government is pushing money onto the table and simply asking for some to come and take it to drive improvements in circularity and emissions reduction,” Ball said. “Take advantage of it.”
Countries such as China, India, and Russia, in contrast, are more reliant on coal and on blast furnaces. It will be more challenging for them to reduce to reduce emissions, he noted.
Prices might be finding a new normal. And the world might agree that C02 emissions should go lower. But risks to supply chains are increasing – as evidenced by the danger of transiting the Red Sea to the Suez Canal.
Ball noted the “strike group” headed by the USS Dwight Eisenhower aircraft carrier departed Norfolk, Va., six months ago in response to those tensions.
Such a long, forward deployment is unusual outside of wartime. And strike group has been shot at repeatedly by drones, missiles, and other arms. In fact, it has been shot at more than any other US Navy battlegroup since World War II, Ball said.
“We’re very concerned about what that means to global trade,” he added.
Tensions in the Middle East are already having a big impact on Turkey, the biggest destination for US scrap exports, said Amy Hinton, North American scrap editor at Fastmarkets.
Inflation in Turkey, which peaked at 70%, has cut into government spending on infrastructure and into consumer spending. That had already reduced domestic scrap demand in Turkey. “And we’re seeing nothing new, unfortunately, in terms of poor steel sector performance in that region,” Hinton said.
Turkey is also contending with cheap imports from Asia. That’s not only when it comes to finished steel. Traders are also bringing in cheap billet. And that billet can be converted into rebar for as little as $50 per metric ton (mt). That’s far less than the $200/mt it might cost to convert scrap into finished steel, she said.
As if that weren’t enough, the conflict between Israel and Hamas has hammered Turkish exports. Israel’s construction market typically accounts for a significant amount of Turkey’s rebar exports. But Turkey announced on April 9, with immediate effect, that it would stop exports of more than 50 products to Israel – including rebar and wire rod.
Exports to Israel had already slowed dramatically after the war erupted in October. It remains to be seen if the halt was a mostly “optical effort” by the Turkish government to “shore up some popularity.” It’s possible that the Turkish ban on steel exports to Israel will not be strictly enforced and that means to circumvent it will be found, Hinton said.
I’m writing these Final thoughts from the 2024 ISRI Convention and Exposition in Las Vegas. I wasn’t the only one with the good idea to attend.
Approximately 6,625 others did – a new record for the event. So, a big congratulations to ISRI.
The opening general session on Tuesday was big enough to encompass everything from lifetime achievement awards to the latest developments in AI. The latter introduced by no less than Mike Werner, head of sustainability programs and innovation at Google.
I’m going to focus on the lifetime achievement awards in this column. Both because I’m impressed by what those who were honored – Mel Wright and Joel Denbo – have accomplished. And how both noted, with emotion, how intertwined for them scrap, life, and family were.
Wright grew up in Beaumont, Texas, joined his family’s scrap business – Wright’s Scrap Metals Inc. – and not only became its president but also expanded it. What were some of the keys to his success? Personal relationships, mentors, and advocating for the recycling industry.
“People want to do business with people they like, they trust, and who deliver,” Wright said. “This has been a constant part of my experience.”
Another key point: “When you go to Washington, DC, or your state capital, you’re participating in the greatest freedom we have as individuals – the right to be heard … and to represent your business and your industry.”
I don’t think those two are mutually exclusive. A lawmaker might not have a good understanding of the scrap business. Until they hear about it from someone in it who they can relate to.
Maybe all of us, especially working together with group associations like ISRI, have a little more power to influence policy than we realize.
Also honored with a lifetime achievement award was Joel Denbo, president of Denbo Iron & Metal Co. Inc. in Decatur, Ala., and managing member of Denbo Metal Recovery LLC in Pulaski, Tenn.
Denbo, who will be retiring at the end of the month, also stressed the importance of personal relationships, advocacy (especially for safety), and hard work – and also remembering what all that hard work is for.
“I began working in my family’s businesses – working Saturdays, holidays, summers – to make the extra money that a young person wants to have in order to do fun things. Man, did we do some fun things,” he said. (Denbo did not disclose what some of those things were.)
Denbo noted that his retirement would mark the first time in 120 years that there was not someone with his last name in recycling. But the work has been hard and gratifying in equal measures. And retirement doesn’t necessarily mean that he will be leaving scrap entirely.
“It was once said … that you could leave your home, without your wallet, and travel across the country from scrap yard to scrap yard on the generosity of your scrap friends,” Denbo said. He said he planned to see whether that old saying still held true.
Denbo capped off his acceptance with this: “Please provide a safe workplace for your employees. And I wish you good markets.”
I don’t think I can top that. So I wish all of you – whether you’re in steel, scrap, or tech – good friends, safety, and good markets. And thanks for your continued support of SMU.
Editor’s note: SMU, our sister publication, Recycled Metals Update (RMU), and our parent company, CRU, are at ISRI. Stop by booth 2260 if you’re in Vegas and say hello.
Sheet prices varied this week. While hot-rolled (HR) coil pricing was largely flat, cold-rolled (CR) coil and tandem product pricing eased slightly reflecting the momentum shift seen last week for HR coil.
SMU’s average HR coil price was flat from last week at $835 per short ton (st) – potentially emphasizing the tension between competing published numbers from different mills.
While reaction to Nucor’s latest pricing practice remains mixed and most surveyed by SMU were neutral on its impact on the HR market, it looks as if buyers are watching, reacting, and potentially leveraging the Charlotte, N.C.-based steelmaker’s published spot price.
What may have been most surprising by Nucor’s second published pricing – which saw a marginal $5/st gain vs. the prior week – is that some sources question whether prices are at or near a top.
CR and coated sheet prices eased week over week (w/w). SMU’s CR price is at $1,140/st on average (down $10/st w/w). Our galvanized base price is at $1,130/st on average (down $5/st w/w). And our Galvalume price also stands at $1,130/st on average (down $5/st w/w).
Plate prices were flat w/w at $1,225/st, though sources continue to note that sellers are still undercutting published mill prices competing for spot business.
SMU’s sheet price momentum remains at neutral, while our plate price momentum indicator is still pointing lower.
The SMU price range is $810-860/st, with an average of $835/st FOB mill, east of the Rockies. The lower end and the top end were unchanged w/w. As a result, our overall average is flat compared to last week. Our price momentum indicator for HR remains at neutral, meaning we see no clear direction for prices over the next 30 days.
Hot rolled lead times range from 3-9 weeks, averaging 5.30 weeks as of our April 10 market survey.
The SMU price range is $1,090–1,190/st, with an average of $1,140/st FOB mill, east of the Rockies. The lower end of our range was $10/st lower w/w, while the top end decreased $10/st. Our overall average is down $10/st from the previous week. Our price momentum indicator for CR remains at neutral, meaning we see no clear direction for prices over the next 30 days.
Cold rolled lead times range from 6-12 weeks, averaging 7.47 weeks through our latest survey.
The SMU price range is $1,100–1,160/st, with an average of $1,130/st FOB mill, east of the Rockies. The lower end of our range was flat w/w, while the top of our range declined $10/st. Our overall average is $5/st lower than last week. Our price momentum indicator for galvanized remains at neutral, meaning we see no clear direction for prices over the next 30 days.
Galvanized .060” G90 benchmark: SMU price range is $1,197–1,257/st with an average of $1,227/st FOB mill, east of the Rockies.
Galvanized lead times range from 6-11 weeks, averaging 7.33 weeks through our latest survey.
The SMU price range is $1,100–1,160/st, with an average of $1,130/st FOB mill, east of the Rockies. The lower end of our range ticked up $10/st w/w, while the top end decreased $20/st. Our overall average is down $5/st compared to the previous week. Our price momentum indicator for Galvalume remains at neutral, meaning we see no clear direction for prices over the next 30 days.
Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,394–1,454/st with an average of $1,424/st FOB mill, east of the Rockies.
Galvalume lead times range from 6-12 weeks, averaging 7.60 weeks through our latest survey.
The SMU price range is $1,160–1,290/st, with an average of $1,225/st FOB mill. The lower end and the top end of our range were flat w/w. Our overall average is unchanged compared to last week. 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 5.92 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.
Following a strong February, US housing starts eased through March to a seven-month low, according to the most recent data from the US Census Bureau.
This decline is accredited to higher-than-expected interest and inflation rates, as well as higher supply costs and tighter lending conditions for builders, the National Association of Home Builders (NAHB) said.
Total housing starts stood at a seasonally adjusted annual rate (SAAR) of 1,321,000 units in March, a 14.7% reduction from the revised February estimate, and 4.3% below the March 2023 rate, Census said.
Single‐family housing starts in March were 1,022,000, down 12.4% from the revised February figure of 1,167,000.
“Builders are grappling on several fronts as the inflation fight continues,” Carl Harris, chairman of the NAHB, said in a statement.
“Higher interest rates are increasing the cost of housing for prospective home buyers and raising the development and construction cost for builders of homes and apartments,” he added.
Regionally, combined single-family and multi-family starts were mixed across the nation month over month (m/m). They fell 21.7% in the Northeast and 0.4% in the South, while starts rose 6.0% in the Midwest and 14.0% in the West.
At the same time, the overall number of privately owned housing units authorized by building permits fell 4.3% from February to March to a SAAR of 1,460,000. Single family building permits were 5.7% lower m/m while multi-family permits eased 1.2% from February.
Steel industry veteran Mark Bush announced he will be joining AM/NS Calvert as area manager steelmaking.
Bush has been involved in the steel industry for more than 30 years. He’s held various positions with SSAB Americas, including general manager of the company’s operations in Mobile, Ala. In 2020, he joined JSW Steel USA in Baytown, Texas, as CEO. He stepped down from that role in 2022 to pursue other opportunities.
The first 1.65-million-short-ton-per-year electric-arc furnace (EAF) at AM/NS Calvert is expected to come online by the end of this year. A second EAF with the same capacity is still in the works.
AM/NS Calvert is a joint venture between ArcelorMittal and Nippon Steel. In 2014, the partners purchased the hot rolling, cold rolling, coating, and finishing mill located in Calvert, Ala., from ThyssenKrupp Steel USA for $1.5 billion.
Domestic raw steel output slipped from last week’s multi-month high, according to the American Iron and Steel Institute (AISI).
Total steel output in the US is estimated to have been 1,726,000 short tons (st) in the week ending April 13, down 1.1% from the week prior. Last week’s production is down 2.4% compared to the same week one year prior when production totaled 1,769,000 st.
The mill capability utilization rate was 77.7% last week, down from both the week prior (78.6%) and this time one year ago (78.6%).
Year-to-date production through mid-April was 25,223,000 st at a capability utilization rate of 76.4%. Annual production is down 2.4% from the same time frame last year, when 25,853,000 st were produced at a capability utilization rate of 77.9%.
Production by region is shown below, with the week-over-week changes shown in parentheses:
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.
US light-vehicle (LV) sales rose to an unadjusted 1.44 million units in March, up 4.6% vs. year-ago levels, the US Bureau of Economic Analysis (BEA) reported. The year-on-year (y/y) growth in domestic LV sales came in despite a 1.3% month-on-month (m/m) decline.
On an annualized basis, LV sales were 15.5 million units in March, down from 15.8 million units the month prior, and behind the consensus forecast, which called for a a jump to 15.9 million units.
Auto sales were lower as the first quarter closed out, driven largely in part due to continued elevated prices and interest rates. While the average transaction price (ATP) is down more than 2% y/y, income growth and interest rates have lagged.
The trend has concentrated demand in the non-luxury segment of the market, which accounted for most of the 2.7% y/y growth in sales for the first quarter of the year.
The average daily selling rate (DSR) was 53,260 – calculated over 27 days – up from March 2023’s 53,260 daily rate. Passenger vehicle sales increased 1.3% y/y, while sales of light trucks moved higher by 5.4% over the same period. Light trucks accounted for 80% of last month’s sales, slightly above its share of sales in one year ago.
Below in Figure 1 is the long-term picture of sales of autos and lightweight trucks in the US from 2019 through March 2024. Additionally, it includes the market share sales breakdown of last month’s 15.5 million vehicles at a seasonally adjusted annual rate.
The new-vehicle ATP was $47,218 in March, down 0.31% from February. Last month’s ATP was also 2.2% (-$1,071) below the year-ago period, according to Cox Automotive data.
Incentives moved higher for the second straight month after they had decreased in January. March’s incentives hit a 35-month high at $2,800, up 9.2% vs. February, and 6.3% above the previous high of $2,633 set in December. With the m/m increase, incentives are nearly 6% of the average transaction price. Incentives are up roughly 80%, or $1,242, y/y.
In March, the annualized selling rate of light trucks was 12,462 million units, down 1.1% vs. the prior month but still 4.6% better y/y. Annualized auto selling rates saw similar dynamics, down 2.3% yet up 0.3% in the same comparisons.
Figure 2 details the US auto and light-truck market share since 2013 and the divergence between average transaction prices and incentives in the US market since 2020.
Editor’s Note: This report is based on data from the US Bureau of Economic Analysis (BEA), LMC Automotive, JD Power, and Cox Automotive for automotive sales in the US, Canada, and Mexico. Specifically, the report describes light-vehicle sales in the US.
Finland’s Blastr Green Steel has named Mark Bula as new CEO.
Bula will “lead the development of Europe’s first integrated ultra-low CO2 steel value chain with the main steel plant planned in Inkoo, Finland,” the green steelmaker said in a statement on April 11.
Bula previously worked as chief commercial officer at Sweden’s H2 Green Steel in Sweden and was the chief revenue officer and chief commercial officer at Big River Steel (now part of U.S. Steel).
The company said Bula “will drive Blastr’s strategic development, capital-raising, and project execution, leveraging extensive C-suite and start-up experience.”
He is taking the reins from Hans Fredrik Wittusen, and will be based in Finland.
“Global steel production needs to transform at scale to provide customers and end-users with decarbonized green steel,” Bula said in the statement. “We are in the infancy of this transition, which will fundamentally change how we make the world’s most important engineering and construction material.”
The company said it is “creating a low-carbon steel value chain with over 90% lower C02 emissions than conventional steelmaking by using hydrogen instead of coal in the production process and feedstock made with renewable energy.”
Flat Rolled = 58.3 shipping days of supply
Plate = 60.6 shipping days of supply
US service center flat-rolled steel inventories edged up in March as shipments remained low. At the end of March, service centers carried 58.3 shipping days of supply on an adjusted basis, up from 56.6 shipping days in February. Flat-rolled steel supply was also up y/y from 52.7 shipping days in March 2023. Inventories also rose slightly in terms of months of supply to 2.78 months in March from 2.7 months in February.
Most service centers had 21 shipping days in March, though some companies had 20 shipping days with the Easter holiday. February also had 21 shipping days. The lower shipments in March could be a sign that demand is still weak or that service center customers were also destocking last month.
Flat-rolled steel prices reached a bottom in mid-March. At about the same time, hot-rolled coil lead times hit their lowest level at 4.93 weeks, according to the March 13 SMU survey data. Prices and lead times have been on the upswing since. The April 10 SMU survey pegged HRC lead times at 5.3 weeks.
In March, the amount of flat-rolled steel on order rose with opportunistic, large-volume deals at the bottom of the market. At the end of March, service centers saw shipping days of supply on order up vs. February. Flat-rolled steel inventories on order saw a notable boost m/m in March.
Inventories combined with material on order indicate ample supply relative to demand levels. In the latest SMU survey, 68% of service centers said customer releases were flat y/y, 23% said they were releasing less steel y/y, and 9% said they were shipping more. Service centers continue to report weaker-than-expected demand so far this year.
With demand still slow, US service centers’ plate supply increased in March. At the end of the month, service centers carried 60.6 shipping days of plate supply, up from 58.8 shipping days of supply in February. Plate inventories represented 2.89 months of supply in March, up from 2.8 months of supply in February. In March 2023, service centers stocked 41.0 shipping days of plate supply.
Market contacts said demand remains relatively weak, and mills have been eager to make deals. At the same time, plate mills have been trying to control production, which has helped to pull back on the recent w/w price declines. SMU’s April 10 survey recorded plate mill lead times at 5.92 weeks, up from 5.41 weeks a month ago.
The total volume of plate on order was up slightly in March, but with the lower daily shipping rate, the material on order represents more supply. At the end of March, service centers shipping days of plate supply on order was up vs. February. Plate inventories on order were also up m/m in March.
In January and February, plate intake at service centers exceeded shipments, but in March, intake fell back below shipment levels. While the total volume of plate in inventory declined m/m, it is still up significantly y/y and represents much more supply with the low daily shipping rate. The amount of plate in inventory and on order seems to be high relative to demand levels but could be in preparation for a seasonal demand uptick.
U.S. Steel’s No. 4 blast furnace (BF4) at its Gary Works in northwest Indiana is undergoing a 45-day maintenance outage that started on April 4.
A spokesperson for the Pittsburgh-based steelmaker confirmed the news on Monday with SMU, noting that the maintenance would include shotcrete (sprayed concrete), among other projects.
U.S. Steel has four blast furnaces at Gary Works, according to SMU’s blast furnace status table, with BF4 having a daily capacity of 3,800 short tons (st). The other three are listed as running.
Gary Works is U. S. Steel’s largest manufacturing plant, with an annual raw steelmaking capability of 7.5 million st, according to its website.
Correction: An earlier version of this article listed the outage as the No. 8 blast furnace. This was the blast furnace provided at the time by U.S. Steel, and the company has since corrected it to BF4.
New York state saw a continued decline in manufacturing activity in April, according to the latest Empire State Manufacturing Survey from the Federal Reserve Bank of New York. The General Business Conditions Index rose nearly seven points from March to April but remains in negative territory at -14.3. This is the fifth consecutive month the reading has indicated deteriorating business conditions.
“Manufacturing activity continued to contract in New York state in April, and employment continued to decline,” commented Richard Deitz, economic research advisor at the New York Federal Reserve. “Optimism about the outlook for future business conditions remained subdued.”
The survey release indicated that new orders and shipments both declined significantly in April. Delivery times shrunk as inventory levels grew, and labor market conditions remained weak.
On a three-month moving average basis (3MMA) the index jumped nearly 10 points from March’s 45-month low, now at -12.53 in April (Figure 1). This is the highest 3MMA seen since December. Recall that in March we saw the fourth-lowest 3MMA figure within our 15-year data history, only higher than 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-plus years.
An interactive history of the Empire State Manufacturing Index is available on our website.
Does the price of ferrous scrap depend on the price of finished steel product? And how much of an influence do billet and slab prices have on scrap prices?
Starting October 2020 for hot-rolled coil (HRC) and January 2021 for rebar, the spread between ferrous scrap prices and finished steel prices has been historically high, which prompts the question: Is there a direct correlation between the price of finished steel and the price of ferrous scrap?
Scrap suppliers know that every time there’s downward pressure on finished product pricing at a steel mill, purchasing agents use it to justify decreases in their scrap buying prices.
Alternatively, when steel prices go up you can hear a pin drop from mill buyers on scrap price increases. When pressed, mill buyers reply that scrap is a stand-alone market that is affected by both global and domestic forces, pig iron, DRI/HBI, oil prices, the war in Ukraine, etc.
To add more uncertainty, when scrap prices go up, mills often add a scrap surcharge to their finished product prices. That means the two are, in fact, directly related, opposing reasoning in an attempt to achieve a beneficial outcome for steel mills. Mill purchasing agents are doing a good job of buying scrap the mill needs at the lowest possible price, and the data backs that up.
In the US, we are inundated with numerous statistics on how construction, durable goods, and auto manufacturing are down. This reduces steel demand and leads to lower steel prices, and the logical conclusion – demand for scrap will decrease and scrap prices will drop. Still, how much of an influence do finished product prices and the availability of scrap melting substitutes (such as billet and slab) actually impact scrap prices? The surprising answer is not much.
The above charts show that the price trends of scrap do reflect the price of steel. But a closer analysis shows us the distinct separation of the two.
For example, from September to November 2020, busheling was at $300 to $346 per gross ton (gt) while HRC went from $568/gt to $728/gt, increasing the Bush/HRC spread from $268/gt to $382/gt in just three months.
Was this a one-time anomaly? No.
Between May and August 2021, busheling went from $603/gt to $654/gt (+$51), while HRC went from $1,550/gt to $1,911/gt (+$361), raising the spread to $1,257/gt. To zoom in, September of that year showed busheling fell from $590 to $575 (-$15), while HRC drifted from $1,955 to $1,920 (-$35) to yield a $1,345 Bush/HRC spread. A close analysis of the shred/rebar price charts shows the same distinctions between the price of scrap and the price of finished steel.
So, while there is a correlation in the trend lines, scrap in no way moves up or down to the extent that steel prices do – and at times steel moves up and scrap stays flat or goes down. Or, scrap prices increase, and steel prices go down or stay flat.
Regarding the pricing data, a scrap source said, “The takeaway from this is that it’s end-product pricing that is driving the spreads, not raw material costs.”
One reason that scrap and steel prices are only tangentially related (that most mills will not reveal) is that the driving factor of scrap prices is that steel mills need to melt at a minimum 70% capacity utilization rate to cover their fixed overhead.
According to two separate mill owners in Turkey, “We need to melt at a minimum 70% capacity, or we will lose money on every ton of steel we ship… . 70% is the breakeven rate we need run to cover our fixed costs.”
So, mills need to buy at least enough to run at 70%, and they like to buy and run at a higher rate to reduce their fixed costs per ton.
Another argument used by mill buyers in Turkey and Asia is that cheap billet and slab from China/Russia (despite the sanctions on Russia) is being offered to Turkey. That makes it cheaper to reheat billet/slab than to melt scrap. This puts downward pressure on scrap prices. In Asia, mills, echo that this cheap billet and slab from China is dumped throughout Asian nations, hurting scrap demand in Taiwan, South Korea, Vietnam, and throughout the region. Thus, they need to buy scrap at prices that match those low-priced billet/slab offers.
The reality is that most mills can only fill a portion of their rolling mill capacity by reheating billet or slab. While cheap billet and slab may be available, most EAF/IF producers only have the capacity to reheat billet/slab to produce 10-30% of their rolling mill capacity.
At the end of the day, EAF/IF mills need and want to melt as much scrap as possible to reduce their per-ton fixed costs of production and to keep a steady, well-trained workforce fully employed.
The information we are inundated with regarding HRC/Long product prices and the availability of cheap billet and slab – while not to be entirely ignored – should be met with skepticism when forecasting the price of scrap. Statistics show that scrap prices have more to do with the level of scrap inventory that each mill has at the end of the month; the amount of scrap needed to keep the mill at a run rate that minimizes per-ton production costs; and the supply of scrap available from the dealers to fill the mill’s needs.
In my opinion, May scrap prices are going to closely reflect the current scrap inventory. Dealers sold as much as they could into a falling market in April. It looks like many of them may not be able to deliver on those orders due to the reduced scrap flow resulting from the drastic price drop they made across the scale. If dealers cannot deliver their April orders, mills will be short and any attempt at price reductions will leave them below an acceptable utilization rate.
Except shred, due to its unusually close price to busheling, prices for most grades of scrap will not likely drop in May and could increase in some regions on unusually low-priced grades, such as HMS.
Nucor said its spot hot-rolled (HR) coil price for the week of April 15 will be $835 per short ton (st), up $5/st from last week.
The Charlotte, N.C.-based steelmaker said the new price would be effective immediately in a letter to customers on Monday morning.
The exception again is California Steel Industries (CSI), Nucor’s subsidiary in Fontana, Calif. CSI’s spot HR price remained flat at $890/st – reflective of the West Coast market’s somewhat standard premium over markets east of the Rocky Mountains.
Last week’s announcement surprised many in the market who anticipated a higher base price given Cliffs’ target of $900/st. The move might have, in part, stalled the upward momentum that had seen HR coil prices jump $50/st in less than two weeks after reaching a recent bottom of $795/st, on average, on March 19.
Market reaction has been largely neutral to date. But still, over a quarter of SMU’s survey respondents view this latest trend by the steelmaker as positive, with the remaining not so keen on the prospect of a mill-published price.
This break from traditional sheet mill pricing practices will likely keep the market talking.
As the ISRI 2024 conference unfolds in Las Vegas, attendees are diving into crucial discussions shaping the future of the recycling industry. Here are the main topics being discussed:
New steelmaking capacity coming online this year
Export demand during this period
Infrastructure spending
Supply of pig iron and HBI
Current logistics challenges
May scrap prices
Green steel
Non-ferrous scrap availability and flows
Non-ferrous LME aluminum and COMEX copper rally
LME ban on Russian metal
Last week was a newsy one for the US sheet market. Nucor’s announcement that it would publish a weekly HR spot price was the talk of the town – whether that was in chatter among colleagues, at the Boy Scouts of America Metals Industry dinner in Chicago, or in SMU’s latest market survey.
Some think that Nucor’s spot HR price could bring stability to notoriously volatile US sheet prices. Others think it’s too early to gauge its impact. And still others said they were leery of any attempt by producers to control prices, according to SMU’s latest steel market survey.
SMU also asked people about demand and pricing in general. Most continue to see demand as stable. But predictions about the direction of sheet prices have diverged. Some think an upcycle that began in March has already run out of steam. Others see the gains continuing into the summer months.
Details – and some good commentary from our readers – are below.
Most folks say demand is stable. The rest are split on whether demand is improving or declining. Of note this week was a rise in those reporting lower demand. We saw a similar pattern this time last year. Will the trend continue throughout Q2, as it did in 2023?
Improving:
Stable:
Declining:
As for where prices will go from here, buyers have mixed thoughts on the matter. Thirty-four percent think HR prices have peaked or will later this month. Thirty-seven percent think prices will peak in May. And 29% think gains could continue into June-July.
Already peaked:
April:
May:
June:
July or later:
Hot rolled coil prices averaged $835 per short ton in our last market survey. Where will prices be in two months?
$750-799/st:
$800-849/st:
$850-899/st:
$900-949/st:
$950-999/st:
So, with current demand and pricing dynamics, what’s that mean for current levels of steel buying?
Two-thirds of survey respondents reported being active buyers of steel. That’s the most reporting that since the end of Q3’23.
Active:
On the sidelines:
And finally, let’s talk about Nucor’s recent surprise move to be more transparent with HR pricing.
More than half of buyers in our survey see the move as neutral at this point. About quarter see it as a positive. And the rest aren’t thrilled about the development. While speculation has been rife, it’s probably too early to say for sure what the impact of Nucor’s price will be on the domestic HR market.
Positive:
Neutral
Negative
SMU and our sister publication, Recycled Metals Update (RMU), will be at ISRI’s annual conference from Mon-Thurs, April 15-18, at the Mandalay Bay Resort and Casino in Las Vegas. We’ll be at booth 2260. Stop by and say hello!
In the meantime, a big “thank you” to everyone for being part of the SMU community. We appreciate your business and your support.
Domestic shipments of heating and cooling equipment soared in February, according to the latest data released from the Air-Conditioning, Heating, and Refrigeration Institute (AHRI).
February shipments rose 18% month on month (m/m) and 4% year on year (y/y) to 1,749,080 units.
On a 12-month moving average (12MMA) basis, shipments increased 0.3% to 1,749,311 units vs. 1,744,138 units a month prior.
February shipments of residential and commercial storage water heaters rose 12% m/m and 9% y/y to a combined 874,176 units.
Shipments of central air conditioners and air-source heat pumps were up 37% m/m and 1% y/y to 657,509 units. A total of 372,897 AC units and 284,612 heat pump units were shipped in February.
Looking at the year-to-date combined total of all products, however, shows a 3% y/y decline to 3,230,205 units. While water heater shipments are higher y/y, shipments of the other two product categories showed y/y declines.
The full press release of this data is available on the AHRI website.
An interactive history of heating and cooling equipment shipment data is available on our website. If you need assistance logging in to or navigating the website, please contact us at info@steelmarketupdate.com.
Drilling activity decreased in the US but rose in Canada in the week ended April 12, according to the latest data from Baker Hughes.
The number of active drilling rigs in the US declined by three week over week (w/w) to 617. Oil rigs dropped by two to 506, while gas rigs were down by one to 109. Miscellaneous rigs remained unchanged at two.
There were 134 fewer active US rigs compared to the same week a year ago. Oil rigs have fallen by 84, gas rigs are down by 49, and miscellaneous rigs are off by one in the same comparison.
In Canada, the number of operating oil and gas rigs increased by five w/w to 141. Oil rigs were up by five to 70, and gas rigs were unchanged at 71.
Active rotary rigs in Canada are up by 14 from this time last year. The number of active oil rigs is up by 18, while gas rigs are down by four.
The international rig count is updated monthly. The total number of active rigs for the month of March stood at 971, up 13 from the month prior and up 41 from March 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.
Total domestic aluminum mill products orders in March were up 0.2% compared to March 2023, according to the latest “Index of Net New Orders of Aluminum Mill Products” released by the US Aluminum Association (AA). This is much lower than the growth of 9.3% year over year (y/y) reported in February.
In March, shipments across all products were much weaker compared to February. Some sectors even returned to contraction. This was the case for non-heat treatable sheet, which includes the 1xxx, 3xxx and 5xxx series alloys. New orders for these products were down 1.1% y/y in March from a growth of 13.7% y/y in February. The same trend was seen for export can stock, with new orders down 2% y/y in March from a growth of 52.4% y/y in February. New orders for foil were down 16.2% y/y in March, also down from growth of 17.3% y/y in February.
Other sectors maintained growth in March but this was weaker than in February. This is the case for domestic can stock, with new orders up 11.3% y/y in March vs. 16.4% y/y in February. New orders for plate were also up only 3.1% y/y in March, from 18.3% y/y in February. The only improvement was for heat-treatable sheet, which contains the 2xxx, 6xxx and 7xxx series alloys – popular in automotive and aerospace applications. Here new orders were down 0.8% y/y in March, better than the 1.6% contraction seen in February. Finally, there was still much weakness seen for extruded products and drawing stocks, with new orders down 10.7% y/y, and down 11.3% y/y, respectively, in March.
The US Midwest premium has been trading between 19.5–20 ¢/lb. The initial jump was spurred on by the Baltimore port accident. However, it is believed that most of this has now been priced into the premium. While it has gained support at these new higher levels, another large jump higher is unlikely, barring another macro or geopolitical event. Market fundamentals had already been lifting premiums higher as demand started to come back slowly and other input costs, such as ocean freight, remain higher than a month ago.
The stronger Consumer Price Index (CPI) report did cast some doubt on future rate cuts by the Federal Reserve. Adding to this, slowing electric vehicle (EV) sales and an upcoming election create further uncertainty. While optimism has undoubtedly picked up alongside consumer confidence levels, this has yet to translate into a significant pickup in physical demand. There are important policy decisions looming on the horizon as the Global Arrangement on Sustainable Steel and Aluminum (GASSA) is still on the table, and the US International Trade Commission (ITC) continues their AD/CV investigation into extrusion imports.
As part of its efforts to meet the strong demand for low-carbon aluminum in European markets, Hydro has invested NOK100 million ($9.2 million) in recycling technology in the casthouse at the Årdal primary aluminum plant in Norway. The upgraded casting line in Årdal will mix primary aluminum, made with renewable hydropower, with up to 30% of post-consumer aluminum scrap. This would result in a record low-carbon footprint, the statement says, which helps customers in Europe cut the embedded greenhouse-gas (GHG) emissions of their products.
The recycling unit in Årdal had its official opening on April 10. Hydro Årdal is now able to deliver REDUXA 3.0 aluminum with a carbon footprint of below 3.0 kg CO2e/kg aluminum. This is approximately 80% lower than the world average. CO2e represents the exchange rate of other greenhouse gases to carbon.
According to the latest Country of Origin report published by the LME, the share of Russian warrant on the LME remained at 91% of total open warrants in March. Open warrants of Russian origin were last reported at 311,900 metric tons (mt), showing a drop of 12,775 mt from February. The second-biggest origin remains India with 27,600 mt reported, down 1,300 mt from the previous month. Other origins include Canada (1,650 mt), Iran (200 mt), Oman (100 mt), South Africa (25 mt) and the US (750 mt).
The ITC is investigating the GHG intensity of steel and aluminum production in the United States. They will collect data from both US and foreign-owned facilities through surveys and prepare a public report as requested by the US Trade Representative. The report will estimate GHG emissions intensity by product category and production stage in 2022, including Scope 1, 2, and certain scope 3 emissions. It will also describe the methodologies used for data collection and analysis.
Our aim in this update is to bring you the latest insights into the flatbed and dry van markets. Our goal is to shed light on recent trends and factors that could influence rates throughout the year.
As we navigate through the first half of 2024, we are seeing early signs of an inflationary rate environment for flatbed shipping, albeit slightly later than anticipated. Excess supply has persisted longer than expected for both flatbed and dry van, resulting in rates remaining lower than for longer than anticipated. However, with the first (very early) read of Q2 recorded, we are beginning to cross into an anticipated inflationary rate environment.
In a noteworthy alignment with the flatbed market, the dry van market is positioned similarly. Dry van spot rates are projected to close Q2 within the range of -3% to -1% on a year-over-year basis. Unlike the volatility observed in flatbed rates, dry van rates have maintained relative stability throughout the year thus far.
To see the full report or for further details and inquiries, reach out to Reibus Logistics and the author at robert.martin@reibus.com.
The Department of Commerce (DOC) has issued new rules to combat evolving “unfair” trade practice — including the unfair trade of steel products. They go into effect on Wednesday, April 24.
The DOC’s International Trade Administration is the agency responsible for imposing duties on US imports sold at dumped or subsidized prices. And the DOC’s regulations establish the process for calculating duty rates. The new regulations further the ITA’s directives.
Domestic steel producers have long alleged that the DOC’s rules have not adapted to modern unfair trade practices. Based on dozens of comments, including comments from members of the steel industry, the DOC has adopted new tools to “enhance, improve, and strengthen” its enforcement capabilities. The changes address the impact of cross-border subsidies, government inaction, and macroeconomic distortions that previously limited the effectiveness of US trade law.
A particularly notable change is the DOC’s decision to remove a self-imposed prohibition on accounting for cross-border subsidies. Traditionally, the DOC could not apply duties for subsidies that the government of Country A provided to companies located in Country B. The DOC’s underlying assumption was that a government would not provide subsidies to benefit companies and citizens in another country.
Now, however, the DOC acknowledges that this prohibition “was promulgated over 25 years ago in a global trade environment much different than the current trade environment.” Since then, China’s Belt and Road Initiative changed the basic assumption that subsidies are restricted to the grantor’s territory. “[Cross-border subsidies] are provided to promote the grantor country as well as the recipient country’s manufacturing capacities for a particular industry,” the DOC explained.
The DOC cites the government of China’s “direct investments in a third country from state-owned enterprises, with backings from state-owned policy banks, promoting [China’s] industrial policy.” Several years ago, the EU changed its practice to allow third-country subsidies to be addressed, and the DOC’s recent action is an example of the US government catching up to address evolving problems.
This regulation may have direct applications to steel. Subsidized state-owned and state-supported Chinese steel companies have invested heavily in new capacity in Association of Southeast Asian Nations (ASEAN) countries. The Organization for Economic Co-operation and Development (OECD) reports that “Chinese steel companies are investing significantly overseas, specifically in ASEAN and other parts of Asia, as well as Africa,” accounting for 65 percent of all cross-border investments in new capacity.
Much of this capacity has been identified by the OECD as high emission BF/BOF capacity that is adding to the global excess capacity crisis and contributing to climate change. Steel products imported from these producers will now be vulnerable to higher subsidy rates under the DOC’s new approach to cross-border subsidies.
The new rules also counteract foreign government inaction. “Both government action and inaction can benefit producers or exporters,” the DOC explains. According to the DOC, this is most obvious when a government foregoes collecting a fee, fine, or penalty for a particular company or provides a carve out for a specific industry. The foregone revenue provides a financial benefit to a company, which the DOC will now include when calculating a subsidy duty. Because having a robust steel industry is a priority for foreign governments, steel companies are particularly likely to receive preferential treatment, such as exemption from environmental protection penalties that other companies would be required to pay.
Similarly, the DOC recognizes for the first time that “nonexistent, weak, or ineffective property (including intellectual property), human rights, labor, and environmental protections” can have distortive impacts on the prices used to calculate dumping and subsidy duty rates. As an example, the DOC explains that “[w]hen governments decide not to enact environmental restrictions on a factory’s pollution . . . it is logical and reasonable that other countries may consider the impact such decisions have on the costs of production for that factory.”
While the DOC stopped short of treating government inaction as a subsidy, the DOC may disregard certain prices used to calculate dumping or subsidy rates where there is evidence of distortive government inaction. This will allow the DOC to calculate stronger dumping and subsidy rates because it will be able to exclude artificially low prices distorted by government inaction from its benchmark and surrogate value data sets.
The DOC’s rules also target broader cost and pricing distortions through a new “particular market situation” regulation. According to Commerce’s new regulation, “a particular market situation is a circumstance or set of circumstances” that prevents comparing prices or distorts the reported costs of productions used to develop a dumping duty rate. The new regulation responds to recent court decisions by clarifying the DOC’s legal authority to find a particular market situation.
The particular market situation authority was previously used to address the impacts of global excess capacity and oversupply in steel markets. In multiple trade remedy cases, the DOC found that the oversupply of steel distorted prices for upstream steel inputs, such as hot-rolled and cold-rolled steel. It also distorted the prices and costs of downstream steel products, such as pipes and tubes. The DOC’s new rule incorporates this situation into a non-exhaustive list of circumstances that may constitute a particular market situation.
Defenders of unfairly traded imports make provocative claims that trade has been weaponized and that the threat of war is increasing because of these regulatory improvements. These claims are farfetched. The DOC’s regulations simply patch holes in a regulatory framework that empowered foreign governments to support their companies and advance national priorities at the expense of US producers and foreign producers of fairly traded merchandise.
Editor’s note: This is an opinion column. The views in this article are those of experienced trade attorneys 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.
U.S. Steel Corp.’s impending sale to Japan’s Nippon Steel Corp. (NSC) has cleared one hurdle: USS stockholders voted overwhelmingly in favor of the nearly $15-billion merger.
U.S. Steel held a special meeting of shareholders on Friday, April 12. It had been widely anticipated that shareholders would approve the transaction, which will see them receive $55 per share once the deal closes.
A preliminary count revealed “more than 98% of the shares voted at the special meeting, representing approximately 71% of the shares of U.S. Steel common stock … were voted in favor of the proposal to adopt the merger agreement,” the Pittsburgh-based steelmaker said in a statement after the vote.
“The overwhelming support from our stockholders is a clear endorsement that they recognize the compelling rationale for our transaction with NSC. This is an important milestone as we progress toward completing the transaction,” commented David B. Burritt, president and CEO of USS.
“This transaction will make U.S. Steel and the domestic steel industry stronger and more competitive, enhancing the legacy of steel that is mined, melted, and made in America, in the face of unfair competition from China,” Burritt added.
Responding to the vote, the United Steelworkers (USW) said it was not surprised by shareholders voting to “cash in and sell out,” as “Wall Street investors and U.S. Steel executives obviously stand to gain the most” from the deal.
A Bloomberg report on Friday said USS and NSC are considering formally pushing back the expected time frame for the deal’s closure.
When the proposed deal was announced in December, the companies said they expected it to close in the second or third quarter of this year.
But with political opposition in an election year and the deal facing regulatory hurdles at both the Department of Justice and the Committe on Foreign Investment in the United States (CFIUS), the companies now expect it to close in the second half of the year, according to the Bloomberg article, which cites people familiar with the matter.
Neither U.S. Steel nor Nippon Steel replied to a request for comment.
The CFIUS review has a good chance of delaying the acquisition’s closure, according to CRU principal analyst Josh Spoores.
“We are more focused on what may happen if the government were to reject this acquisition,” Spoores noted in an email to SMU.
“The potential scenarios we see if this acquisition is rejected is that U.S. Steel may re-enter their strategic review. The result of which could be that U.S. Steel remains an independent entity, they may opt sell out to someone else, enter a JV with a partner for some assets, and even opt to close some outdated production facilities,” he added.
Timna Tanners, managing director of Wolfe Research, sees little chance of the deal closing soon.
“We still see very little chance of the deal being completed before the US election in November given explicit opposition from President Biden. Our base case is U.S. Steel remains a standalone entity going forward,” she told SMU.
SMU’s Steel Buyers’ Sentiment Indices both rose this week.
Every other week, we poll steel buyers about their companies’ chances of success in the current market as well as three to six months down the road. We use this information to calculate our Current Steel Buyers’ Sentiment Index and our Future Sentiment Index. (We have historical data dating to 2008. You can find that here.)
SMU’s Current Buyers’ Sentiment Index stands at +61 this week, up nine points from two weeks earlier (Figure 1). This is the first time it’s broken 60 since the middle of February.
SMU’s Future Buyers’ Sentiment Index measures buyers’ feelings about business conditions three to six months in the future. The index increased three points this week to +66 (Figure 2). Future Sentiment has only fallen below +60 once so far in 2024, in the middle of February.
Measured as a three-month moving average, the Current Sentiment 3MMA fell one point to +60.00 (Figure 3).
This week’s Future Sentiment 3MMA increased to +64.50 vs. +63.83 at the last market check. (Figure 4).
“H2’24 might be interesting if the market doesn’t stabilize. I predict extreme volatility will continue, contrary to HR futures.”
“We are still working through high-cost steel received in January/February.”
“Labor is an issue.”
“So hard to predict where the market will be in six months since mills have been driving price movement, not demand.”
“Labor is biggest constraint”
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.
The latest SMU market survey results are now available on our website to all premium members. After logging in at steelmarketupdate.com, visit the pricing and analysis tab and look under the “survey results” section for “latest survey results.”
Historical survey results are also available under that selection.
If you need help accessing the survey results, or if your company would like to have your voice heard in our future surveys, contact david@steelmarketupdate.com.
While shipping and supply chains have always been subject to wars, pirates, privateers, geopolitical issues, and natural disasters, it seems that “it’s been busier lately when it comes to dealing with significant supply chain disruptions,” according to logistics expert Anton Posner.
Posner, CEO of Mercury Resources, joined SMU managing editor Michael Cowden for another Community Chat on Wednesday, April 10. He shared his expertise on the latest happenings in the global logistics markets.
Mercury Resources, based in Port Washington, N.Y., is a global supply chain management company focusing on commodities, including steel and other metals and the raw materials that go into making them, as well as coal, cement, fertilizers, and more.
As such, Posner provided the SMU community with great insights into the state of shipping and global supply chains.
Discussing the March 26 collapse of the Francis Scott Key Bridge in Baltimore, Anton said it’s a “temporary big story.” The Port of Baltimore is a major container port and an important port for imported ferroalloys and exported coal.
“We’re seeing quite a signficnat amount of scrambling container ships, men changing their schedules to drop containers or route export containers via Newark, Philadelphia, Norfolk, and other ports on the East Coast,” Posner explained.
There are a handful of ships carrying coal for export that have been trapped in Baltimore due to the bridge collapse.
“The Baltimore coal export market is for the most part frozen in time, waiting for the reopening,” Posner said.
He said the port and Army Corps of Engineers expect to have a 35-foot deep channel open to limited traffic by the end of April.
As for reconstruction of the bridge, that’s going to take years to do, Posner said.
“I think the more lasting impact is going to be on the truck freight market in the Baltimore area. It’s knocked out a major artery for truck traffic,” he noted.
Posner said the greatest impact the situations in the Panama and Suez canals have had has been on global freight rates.
In addition to longer routes and higher freight rates, insurance costs have increased as well, he noted.
The situation in the Suez Canal is “unprecedented in terms of the modern world,” Posner said, as commercial ships risk entering a dangerous situation. We’d have to go back to the 1700s to see such a threat to commercial shipping, he said.
“Warheads hitting commercial ships is not something I dreamed I’d be talking about,” he said.
The impact on freight rates has been significant. Although shipments going to and from the eastern Mediterranean and ports in the Persian Gulf have been more affected, higher rates are now baked into freight rates globally, he said.
The situation in the Panama Canal has been easing, Posner said. Daily traffic has increased to about 27 ships, up from about 20 in the past few months.
Posner said the cost to put a ship into the canal’s queue has been “extremely high.” Those costs include fees on top of regular tolls, additional surcharges, and bidding by ship owners to move up the list. However, he noted, those costs have begun to drop.
Posner provided an example of recent freight numbers Mercury Resources has seen for metals moving out of Southeast Asia: in December, rates were ~$2,000 for a container. By February, rates had spiked to $6,000. Although they’ve started easing, they’re now ~$5,000, he said.
The canal delays have now been baked into break bulk, he said. “Ships have just been routinely going around and not dealing with paying extra going through the canal,” he noted.
Mercury Resources is closely watching the climate situation.
While he would categorize barge traffic in the US as “normal to quiet at this point,” Posner warned of a situation his company is monitoring.
A drought in the Midwest has greatly reduced the snowpack in the north, meaning less ice is now melting and flowing into the river systems. Low water levels could affect barge traffic, he cautioned.
So, are we going to see more of this type of thing? “We’re going to be dealing with far more drastic climate issue swings in different regions, from the inland river system to the canals, to storms. And what’s expected to be a very exciting Atlantic hurricane season this year, too,” he said.
When asked what keeps him up at night, Posner didn’t hesitate: “It’s what potentially could happen if cooler heads don’t prevail in Southeast Asia.”
China has territorial ambitions in the South China Sea, and its Coast Guard is firing water cannons at Filipino supply boats. Vessels are “bumping into each other and playing quite a nasty game of chicken,” he said.
He said they’re starting to see Taiwanese manufacturers put contingency plans in place to continue business should a major disruption occur there.
If something more significant happens in the region, it could affect steel exports, raw materials, energy, eggs, pretty much everything, Posner said.
“We’re seeing far more challenges to global supply chains, more than we’ve ever seen. I’ve been playing in this game for just over 30 years, and it seems like the curveballs are coming faster and more furious lately. It’s keeping us on our toes. It’s constant evolution,” Posner said.
“I anticipate this pace continuing. If I had to put my money at the right spot on the roulette table, I’m putting my chips on crazy,” he added.
SMU subscribers can access a replay of the Community Chat with Posner on our website.
We have three upcoming Community Chats that you’ll surely want to join us for:
Visit the SMU Community Chat webpage for more information and to register.
To ease trade tensions with the United States, the economy ministry in Mexico is preparing measures to strengthen definitions on steel being shipped into the country.
Mexico has faced accusations it is being used as a route for steel and aluminum produced in Asia to be sent on to the US, so-called triangulation.
Earlier this year, United States Trade Representative Katherine Tai noted in a meeting with Mexico’s secretary of economy, Raquel Buenrostro, that the US has the right to reimpose 25% import duties on steel and 10% on aluminum.
The Section 232 tariffs on Mexico, implemented in 2018, were suspended in 2019 ahead of the USMCA trade agreement going into effect in 2020.
To avoid the levies’ return, the economy ministry said it would update documentation and information requirements for submission of automatic import notices for steel products on mill and quality certificates, Mexican media reported.
A preliminary draft to the changes is before the National Commission for Regulatory Improvement and will be subject to public comment before a final version is published in the Official Gazette and the changes become effective.
Canacero, a Mexican steel trade association, has bristled at suggestions that the country acts as a conduit for steel going into the US from other countries.
This article was first published by CRU. Learn more about CRU’s services at www.crugroup.com/analysis.