Fields will succeed current ATI CEO Robert S. Wetherbee, who will now serve as executive chairman for the company. Wetherbee was named president and CEO in 2018 and chairman of the board in 2020.

“Kim is ready to lead this organization. Her demonstrated operational and commercial success makes her proven to perform. As ATI’s next CEO, Kim will further accelerate our growth and value creation,” Wetherbee commented in a statement.

ATI is a specialty metals and materials producer serving the aerospace, defense, oil and gas, chemical, electrical energy, and medical sectors.

The m/m improvement was driven by a 14.5% increase in Chinese crude steel output, even though the rest of the world (RoW) also improved.

Regional breakdown

China, the world’s top steel producer, saw its m/m gain reach an output of 77.2 million mt in January. Despite the near 15% increase m/m, China’s production was down 2.9% y/y. January’s output was still its third-lowest production total in more than a year.

Meanwhile, steel output in RoW also improved vs. December, up 3.8% m/m and up 7.8% y/y to 70.9 million mt in January.

Regionally, the European Union saw the highest m/m gain in output, increasing by 12.1% to 10.2 million mt. Asia and Oceania’s production rose by 11.6%, followed by South America’s 6.3% gain, Africa’s 5.3% increase, and Russia, other CIS’s 1.4% rounded out regional gains.

North America’s steel output was down 1.1% m/m in January at 9.2 million mt, but up 1.1% vs. the year prior, according to worldsteel’s figures.

Regions with lower on-year production included Europe, Other (flat at 3.9 million mt), and the Middle East (-4.1% at 4.7 million mt).

Rippey has had a distinguished career in the steel industry, having served as chairman of the board, president, and CEO of ArcelorMittal USA. Prior to joining SunCoke in 2017, he was a senior advisor to Nippon Steel & Sumitomo Metal.

“We thank Mike for his outstanding service and substantial contributions to SunCoke,” said company chairman Arthur F. Anton on behalf of the board. “During his tenure, he significantly restructured and strengthened the organization and reduced SunCoke’s risk profile. Mike has been, and remains, a great asset to our company.”

Katherine T. Gates will take over as SunCoke’s new CEO in May. Since the start of 2023, she has served as president of the company, a position she will continue to hold alongside the chief executive role. Gates has more than 10 years of executive experience with the Lisle, Ill.-based company, and previously worked in the field of private law.

Regarding Gates, Anton said, “The board is pleased to announce Katherine’s promotion to chief executive officer as the result of a deliberate and well-executed succession planning process. … She is a successful leader with a strong execution orientation. She has the highest integrity and brings great energy to all she does.”

We have heard that Korean steelmaker POSCO would hot idle and maintain its BFs. This will lead to weaker raw materials demand in the region. In China, steel demand is ramping up after the Chinese New Year, but the demand outlook is bearish for the coming peak season. Without support from demand, steel margins are unlikely to improve, limiting the increase in steel production and consequently demand for raw materials.

In India, the market condition will be no better than others, with slow progress of infrastructure projects under tight budgets and high steel inventories continuing to restrict steelmakers’ operations. Altogether, this will keep raw materials demand low, but buying activity will gradually improve in most regions in tandem with steel demand recovery towards Q2. Importantly, the ‘Two Sessions’ meetings will be held in China in early March, so do watch out for any policy changes in the country.

Iron ore

Following the Chinese New Year holiday, the iron ore price has continued to decline despite persistent supply disruptions. The price fall was driven by pessimism in the market, which has overridden the fundamentals. Higher inventories have made the market less sensitive to supply disruptions, which has enabled the bearish steel demand outlook to weigh on iron ore prices. Supply will continue to face downside risks such as those from weather and maintenance, which will add a risk premium. Brazil will likely maintain strong shipments but rainy weather in the southern part of the country poses a downside risk. 

Australian outflow is expected to remain lower year over year (y/y), as the risk of tropical lows/cyclones and further maintenance-based disruptions could further impact outflow. Elsewhere, Ukraine and South Africa will have the same supply constraints as before, though the former has high potential for adding more volumes to the market. Meanwhile, Swedish miner LKAB will slowly ramp up outflow back to full utilization. The supply risks and disruptions will push the price to a more sustainable level of ~$130/dmt (dry metric ton) over the coming month. The bearish steel outlook and lack of restocking are the main downside risks to this.

Metallurgical coke and coal

Supply of metallurgical coal from top exporters including Australia, the US, and Canada has improved dramatically over the past month, rising to the top of the 2017-23 range. The continuation of this trend will put downward pressure on prices. This will be reinforced by weak restocking demand in India, Southeast Asia and Europe, which is expected to begin recovering in Q2’24 followed by an acceleration in H2’24. Combined with lower hot metal production in China, we expect the market equilibrium price to fall below $300/metric ton (t) in the coming month, and towards ~$250/t by mid-2024. However, further supply disruptions, especially from Australia, will keep seaborne prices near current levels. Meanwhile, another upside risk is the stricter prohibition of overproduction at coal mines in China.

With the third price cut realized in the Chinese coke market recently, we expect the Chinese coke export price to drop by another $10−15/t in the coming weeks and then remain stable. This is because coke margins are currently low and unsustainable. We forecast the price pressure from the ailing steel sector will be ultimately balanced by limited coking coal supply as well as the exit of high-cost merchant coke producers later in the year.

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

There was concern about domestic demand with sheet prices falling and at least one major mill outage in March. This could have a weakening effect on scrap prices. On the other hand, some scrap buyers are still seeking scrap, especially for #1 busheling in the Southeast region. It is unclear if there is enough supply of industrial scrap to go around.

Another concern is the decrease in prices for exports into Turkey. In recent days, European cargoes of HMS 80/20 to Turkey have dropped to $406 per metric ton (mt) CFR. The last cargo sold from the US was at $414/mt. This number could drop on the next round of sales, if there is no resistance from the export community.   

With the month of March approaching, the supply of obsolescent scrap should increase on into April as “spring cleanup” will be well underway. These are seasonally weak months for scrap. The scrap community seems to be expecting prices to fall in March and April, the uncertainty being by how much. SMU will continue to keep our readers updated on what actually transpires.

Recently, SMU sat down with Paul Balserak, the American Iron and Steel Institute’s (AISI’s) vice president of environment. Having previously worked at the US Environmental Protection Agency (EPA), he is uniquely placed to give some of the key takeaways from the new regulation.

Steel impact

With any new federal regulations coming down the pike, it’s often hard to sort out what exactly the impact for the steel industry will be, if any. The US industry is in a delicate balance, and more red tape could affect the cost of domestic steel vs. the rest of the world.

“Yes, I think the concern is that steel is a very competitive international market, and we’re in a country … where already at 12, we had the tightest PM controls in the world,” Balserak said. He noted that we are “more stringent already than Europe is.”

Balserak said that the background PM on average across the country is 8 micrograms per cubic meter, “and a lot of that comes from natural sources like wildfires or dust, which are sources that really can’t be regulated.”

“You can’t really regulate wildfires,” he pointed out. He noted the concern is “the only sources that can actually be forced by the government to try and reduce PM is industry.”

“It will create a bottleneck on expansions and siting of new plants and new capacity, and it will add cost to the existing operations because they now have to go through this onerous costly permitting program. And we’ll have to put on new controls that will be costly,” Balserak said.

Attainment vs. non-attainment areas

A thumbnail sketch of the new regulation is that the country is divided into areas roughly corresponding to the size of counties. Sometimes, the areas will overlap with the counties themselves. By the new standards, the areas will be either judged in attainment or non-attainment.

If you’re operating in an area that is classified as in non-attainment, in order to modify an existing permit or get a new permit approved, the process becomes much more complicated, according to Balserak. He said with the new standards, many urban areas in the US will become non-attainment areas.

“So the opportunities for increasing your capacity or expanding your plant in that area is going to be severely limited,”Balserak said.

“You have to model what your anticipated increase of PM emissions would be, and you have to find an offset somewhere, either on your site or another source in the non-attainment area that can lower their PM commensurate with your modeled increase to offset,” commented Balserak.

He also said you “have to meet what’s called LAER (lowest achievable emission rate), so technologies for meeting this PM level would be based on the most stringent technology available without considering cost.”

All domestic manufacturing would be affected by these new rules, including steel-intensive industries like automotive. The calculus of where to locate a plant could change, according to Balserak, as attainment areas would have less stringent permitting rules. But permitting even in many attainment areas will still be much more difficult under the new annual standard.

What’s next?

The next step is for the new EPA rule to be published in the Federal Register. From there, between EPA attainment demonstrations across the country, followed by state-commissioned programs on how to implement the standards, it will be a few years before any concrete change occurs.

However, Balserak noted that this is a final rule from EPA. He said next possible steps could be industry petitions for litigation. You could potentially ask EPA to reconsider specific issues or the effectiveness date of the rule. Still, he was quick to point out that AISI has not yet spoken to any of its members regarding this option, and no decisions have been made on this matter. More broadly, though, with the potential to affect the entire economy, this issue is definitely something for us to all keep our eye on. 

Thank you to everyone who shared your time and insights!

And if you don’t participate in our survey but would like to, please contact my colleague David Schollaert at david@steelmarketupdate.com.

Steel prices are moving lower. How do you expect prices to trend over the next three months, and why?

“Down for the next 30 days.”

“Down a bit more then flattening out. $800 per short ton (st) is a floor in my opinion.”

“Continue down – too much inventory in a slowing economy and cheap imports.”

“Likely drop over the next few weeks, and then it will flatten out.”

“Lower because everyone is talking them down – it’s self-fulfilling.”

“Lower because it’s an election year, and historically there is a pause in the steel industry during an election year.”

“It will move lower due to weak demand and good offshore inventories.”

“Prices will bottom out by May/June.”

“Down, down, down. I was always told coming up in this business that it is ‘feast or famine.’ That has definitely become the reality in the last five years.”

“Continuing lower until May, from import pressure on the one hand and scrap on the other.”

“Down into Q2 before a potential correction.”

“I think we will reach bottom shortly, then the mills will pull up. But, unfortunately, prices will be under pressure again come the summer slowdown.”

“We will hit bottom in Q1.”

“Prices will continue to move down through March. The mills will start to push back a bit harder come April/May.”

Is demand improving, declining, or stable – and why?

“Declining. High interest rates are slowing down the economy.”

“Demand is stable, which is great to report. I keep hearing automotive is soft, though, which is bad for everyone.”

“Demand is stable. I expect contract buyers to pull back some this month but to increase as contract prices ease over the next two months. Spot buying should also return.”

“February is slow.”

“We’re stable across the board.”

Are imports more attractive vs. domestic material? Why or why not?

“No. Domestic price is falling.”

“Not now. Because US pricing is dropping fast and because of the lead times.”

“Less attractive due to price, lead-time, and quality concerns.”

“Imports are always priced better than domestic.”

“Yes, due to gap of pricing between domestic and offshore.”

“Imports for specialty products are competitive. But the lead-time risk is large given future price trends.”

“Import pricing is still attractive, albeit less so than a few months ago. Lead time remains the real hurdle.”

“Yes, but getting close to a breakeven in risk.”

“Yes and no. Yes on current price spread. But no due to lead time and falling domestic market.”

“The prices are attractive, but the lead times are not favorable.”

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

“Supporting scholarships for truck drivers.”

“How Section 232 has completely changed the US market, giving mills power to periodically starve the market and raise prices hundreds of dollars above the actual value of steel established on the world market.”

“Covid and other illnesses keeping people home and production down.”

“Who is going to buy Evraz North America?”

“We’ve seen more chatter on SSC M&A activity, which is good. I still am curious about AHMSA, though.”

“Outages that are planned for second quarter.”

“The lack of new import orders being placed for late Q2.”

I don’t agree with that last point. Scrap prices have been wobbly, sheet lead times have come in, and global prices were bound to (eventually) exert some gravity on US prices whether SMU wrote it or not. But I digress.

Then there is the question of when. Some of you tell me that prices will find a floor before Q1 is over. Others don’t think we’ll find one until June. And still others think the market will bottom, rebound, and then cycle down again as the summer doldrums approach.

I think a lot might hinge on when import volumes peak and begin to recede.

Here is one way to quantify it: The US imported 832,063 metric tons (mt) of flat-rolled steel in January (the highest figure since last June), or 26,841 mt per day. So far for this month, the US was licensed to import 507,357 mt, according to government figures last updated on Feb. 19. That amounts to 26,703 mt per day – roughly on par with January import volumes. When does that figure start to go down?

I’m guessing people ordered a lot on the import side in September and October, when they also ordered a lot from domestic mills. And the material ordered then explains why January and February import levels are high. Did big import buys continue into November and December as domestic prices rose? Or did they taper off along with domestic spot activity?

If you (correctly) expected that US prices and lead times were going to shoot higher last fall, it was a no brainer to order imports. Now, that calculation is a little less obvious. Case in point: Check out David Schollaert’s article on the spread between foreign and domestic HR prices. That spread is only $77/st now on average, down from nearly $300/st just last month.

Lead times are also a big hurdle for imports now. Import lead times are measured in months. Last fall, so were domestic lead times for cold-rolled and coated products. That’s no longer the case. You can order from domestic mills these days for a competitive price and a reasonable lead time.

My guess is that imports taper off faster than expected as US prices fall quicker than might have been anticipated. So count me in the camp that thinks domestic prices will drop, pop, and then cycle down again with the summer doldrums. Especially if demand remains stable, which most of the people we hear from say remains the case.

But I’m a little less sure on the demand side than I used to be. I’m hearing from some of you that higher interest rates are finally starting to bite. We’ve written a lot about CME HRC futures falling. And it’s not just steel that’s seeing prices drop on futures markets – just check out soy and corn. That’s not a great sign for agricultural equipment.

That’s not the only thing that caught my attention. Phil Hoffman has a good column today on the weak Japanese yen hurting the West Coast scrap export market. Japan has, as has been widely reported, tipped into recession. It has also fallen from the world’s third-largest economy to its fourth largest – behind the US, China, and Germany.

Meanwhile, iron ore prices have been weak after Chinese New Year. (We’ll have more on that in our next issue.) That’s not a great signal from the world’s second-largest economy. But maybe the US economy is a juggernaut big enough to shake it off. Or it’s got a fast enough car to get outta troubles abroad. (Auto sales were really strong in 2023.) We’ll see!

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

Olympic Steel’s earnings jumped in the fourth quarter, even as the company dealt with “significant” price volatility in hot-rolled coil.

The company on Thursday reported  net income of $7.4 million in Q4’23, up 87% from $3.96 million a year earlier on sales that fell 5.9% to $489.4 million.

Speaking about the full-year results, CEO Richard T. Marabito said in a press release, “Our pipe and tube business delivered its second most profitable year ever, and our carbon business showed its resiliency in navigating the pricing pressures of 2023.”

Regarding hot rolled, he said: “For the second year in a row, we withstood a hot-rolled carbon steel index pricing decline of more than 45% during the year.”

He noted that “despite significant pricing fluctuations, we continue to deliver on our commitment to achieve more consistent, profitable results.”

Looking ahead, Marabito was upbeat.

“As we head into 2024, Olympic Steel is stronger than ever,” he said. “We remain committed to our disciplines around working capital, operating expenses, cash flow and debt, while we seek opportunities to further expand our portfolio of higher-return, higher-value-add products.”

A breakdown of the company’s Q4 operating income by product is below.

“We have been actively evaluating opportunities to grow our company, all while staying highly disciplined on value and knowing when to say no,” Kestenbaum said on the call.

“We will remain active, but only where valuations are attractive and synergies are significant,” he added.

Inorganic growth

Kestenbaum noted that Stelco was active on several acquisition opportunities last year, but they “didn’t get there.”

“We don’t control M&A. We can’t force somebody to sell to us,” he commented on the call.

The CEO noted he’s learned a lot from the ongoing U.S. Steel sales process and continues to study the acquisition to see what can be learned from the sale’s valuation. When looking at Nippon Steel’s proposed nearly $15-billion buy of U.S. Steel, “whether it happens or not, clearly some assets in that package are attractively valued,” he said.

“I’m studying with interest some of the things that U.S. Steel has done very, very well. And I give them a tremendous amount of credit,” he said, for making decisions that may have caused them to face criticism.

“The management at Stelco is highly entrepreneurial … we look and try to study from what others have done successfully,” he said. That deal “has given us time to reflect on what we can do better to improve on the multiple we trade at compared to the very attractive price that was paid for U.S. Steel.”

On the call, Kestenbaum said one thing he learned from the M&A activity Stelco pursued last year was how remarkable the company’s access to capital really is.

“One of the things I learned from that endeavor was how attractive our business is to shareholders, lenders, their confidence in our track record, their knowledge that we’re not reckless, and that we know how to extract synergies,” he said.

Organic growth

Kestenbaum hinted the company could add some value-added output to its mill in Hamilton, Ontario, in the future.

“We’re not driven by awards and accolades from big auto manufacturers. … We get driven by profitability. And I think there’s more profitability in our downstream operations than what we’re currently doing,” he commented.

The company has initiated a review of those operations. He said the study is currently in the evaluation stage.

“We do have the facilities right here to do it. … Stay tuned. Maybe in the next quarter, we’ll have a bit more meat to put on the bones for you guys with a more specific direction,” he said.

Ryerson swung to a net profit in the fourth quarter, though revenue declined from the same period last year.

The Chicago-based service center group posted net income attributable to Ryerson of $25.8 million in Q4’23 vs. a loss of $24.1 million a year earlier on revenue that slipped 13.6% to $1.11 billion.

“Revenue during the period was influenced by seasonally lower volumes and easing average selling prices, which decreased 5.9% to 450,000 tons and 5.2% to $2,472 per ton, respectively, compared to the third quarter of 2023,” the company said in a statement on Wednesday.

A breakdown of shipments and average selling prices is shown below.

Tons shipped (in thousands)	Q4’23	Q3’23	Q4’22	Q/q change	Y/y change
Carbon steel	347	371	365	-7%	-5%
Aluminum	48	49	45	-2%	7%
Stainless steel	52	55	52	-6%	0%
Average selling prices (per short ton)
Carbon steel	$1,657	$1,744	$1,874	-5%	-112%
Aluminum	$5,021	$5,571	$5,978	-10	-16%
Stainless steel	$5,212	$5,527	$6,019	-6%	-13%

Eddie Lehner, Ryerson’s president and CEO, said, “Fourth-quarter volumes decreased across most of our end-markets due to holiday seasonality and ongoing destocking across nonferrous product lines.”

He added that for full-year 2023, “our end-market volumes mainly increased in our commercial ground transportation and oil and gas end-markets, while decreasing across most other industrial and consumer end-markets.”

Looking to Q1’24, Ryerson said it “expects normal seasonal demand conditions, with customer shipments expected to increase approximately 8% to 10%, quarter over quarter.”

The company said it anticipates Q1 revenue to be “in the range of $1.21 to $1.25 billion, with average selling prices increasing 1-3%.” 

But most West Coast suppliers are not accepting this … for now. However, an unconfirmed sale was made at $372/mt. Dealers maintain that no deals were done below $375-380/mt, and they are resisting selling. However, it is possible that the weaker players (those in constant need of cash) did break and sell at the lower $372/mt CFR Taiwan price.

Overall and throughout 2024 to date, the East/Southeast Asia ferrous export market has had a cap mainly due to the weakness of the Japanese steel market and the weakness of the Japanese Yen (JPY) versus the US dollar (USD). The Asian ferrous market is mainly derivative of the Japanese scrap market. Some perspective: In 2023, Japan exported seven million tons of ferrous scrap to Asian destinations while the US exported 4.3 million tons. The stronger the Japanese domestic market is, the less Japanese export scrap goes into other countries in the region.

The Japanese domestic vs export market is significantly contingent on the value of the JPY vs the USD. The weaker the JPY gets v the USD, the more competitive Japanese scrap becomes vs US scrap. For example, in January 2023, the JPY hit a strong Y128 vs USD. But starting in late May, the JPY weakened – hitting 141 and held onto the 140-150 range for the rest of 2023. That continues to today. The weakness in the JPY vs USD led to a huge increase of Japanese scrap imports to Taiwan and Vietnam in 2023 (up 55% and 28% YOY respectively in 2022/2023). Taiwan and Vietnam are the two largest destination nations for US scrap exports from the West Coast to East Asia. As long as the JPY exchange rate remains weak (140-150 JPY/USD range), the US scrap export market to Asia has a cap barring any unforeseen market shocks.

Within the 140 to 150 range, the JPY/USD exchange rate strengthened from 151 on November 10 to 141 on December 31. Thus, from November 1 to December 31, Japanese scrap became more expensive vs US scrap. We saw a corresponding price increase for US scrap exporters. However, this was short lived. As of early January 2024, the JPY rate weakened again and is now at 150. This has made Japanese short sea scrap cheaper than US scrap CFR Taiwan and Vietnam than it was in November and December of 2023. It has also has put renewed downward pressure on US scrap prices to Asia since early January.

As of today, short sea Japanese H1/H2 (HMS 80/20) scrap to Vietnam is $395-400/mt CFR, which pushes US containerized scrap down to $380-385/mt CFR Vietnam. The $10-$15/mt price differential between container vs bulk shipments is because container scrap costs $10-$15/mt more to truck and handle at the discharge ports then do shipments made by bulk

In summary, dealers on the West Coast expect export prices to rise this week as buyers return to the market. But any increase could be short-lived. In addition to the weak JPY, exporters are also facing rising container freight rates due to issues both in the Red Sea and the Panama Canal. Given the weakness in the Japanese Yen and expected freight rate increase, I wouldn’t hold my breath for any significant increase in US ferrous scrap export prices from the US to Asia. And if a bounce does occur, take the order because it may not last long.

January’s headline index was three points lower than the 49.3-point reading during the same month of 2023.

The ABI is a leading economic indicator for nonresidential construction activity with a lead time of 9-12 months. Any score above 50 indicates an increase in billings. A score below 50 indicates a decrease.

“This now marks the lengthiest period of declining billings since 2010, although it is reassuring that the pace of this decline is less rapid and the broader economy showed improvement in January,” AIA chief economist Kermit Baker said in the latest report.

Despite these conditions, Baker noted that most firms are reporting “growth with inquiries into new projects and value of newly signed design contracts is holding steady, showing potential signs of interest from clients in new projects.”

Newly signed design contracts were at 49.7 in January, just marginally below the 50-point threshold seen the month prior, the report said.

Results were mixed across the country. The Midwest and Southern regions inched up, while the Northeast and Western regions saw a drop, AIA said.

“Business conditions remained weak at firms in all regions of the country except the Midwest, where modest growth was seen in three of the last four months,” the report said.

Initially, the blame for this sudden downturn was directed towards the financial players. However, data published by the Commodity Futures Trading Commission (CFTC) painted a different picture. Contrary to popular belief, financial players have been largely absent from the hot-rolled coil (HRC) steel market in recent times. Total open interest held by money managers as a percentage of the total market open interest has dwindled into the low single digits from over 30% in the fourth quarter of the previous year.

As market participants searched for clues, evidence of weakness in the physical market became more widely observed and the futures market took another sharp leg lower, now testing $800/st. Importantly, spot market indices followed suit, confirming the downtrend initially observed in the futures market.

While $800/st HRC steel seemed farfetched for many a month ago, it’s now looking like a realistic possibility. And for those who think this is the new floor, I’d like to remind readers that the nearby futures curve was trading below $700/st ~5 months ago, just before domestic mills began announcing price hikes.

The sharp drop in the nearby futures curve has shifted the forward curve into contango for the first time since the middle of October, implying a well-supplied physical market.

Fundamentally, several factors have contributed to the recent downtrend and the case for a rebound is looking increasingly difficult in the near term. In recent weeks, domestic production has increased, imports are arriving at an accelerating pace, domestic lead times have collapsed, and macro demand indicators continue to signal a sluggish first quarter. Furthermore, there have been notable declines in input costs and associated products, including iron ore, steel scrap, and European and Chinese HRC.

While the recent downturn can be discouraging to some, it also presents an opportunity for stakeholders to reassess their strategies and adapt to the evolving market dynamics. Navigating these uncertain times requires vigilance, adaptability, and a keen understanding of market trends.

Stay tuned.

The new requirement comes after the government began seeking public comment on the issue in 2022.

At present, importers have the option to begin reporting the data. This is part of the government’s phased-in approach to ensure a smooth transition to mandatory reporting in the fall, it said.

“Canada is implementing a predictable and transparent process for collecting melt-and-pour information, which will bring more reliability and resiliency to the North American steel supply chain,” commented Mary Ng, Canada’s Minister of Export Promotion, International Trade and Economic Development.

The government noted that the US is the only other country at present that collects data on the country-of-melt origin.

Steel industry response

Canada’s steel industry welcomed the announcement.

“As Canada’s steel industry faces significant exposure to global steel excess capacity and unfair trade practices, it is a crucial development that Canada is now requiring this disclosure as a new condition on all steel imports into the country,” the Canadian Steel Producers Association (CSPA) said in a statement.

CSPA said the new requirement will allow for greater transparency and accountability in steel trade, and “support efforts to prioritize the use of cleaner steels throughout North American supply chains.”

Additionally, it will better align Canada’s trade monitoring system with the US’ system, CSPA said.

A spokesperson for Algoma Steel told SMU their views on this matter are in line with CSPA’s. Algoma CEO Michael Garcia sits on the CSPA board executive committee.

Stelco’s CEO Alan Kestenbaum called the new melt-and-pour standard a “major win for the steel industry” in Canada.

“I believe we’re going to have a very significant benefit from this,” Kestenbaum stated on the Canadian steelmaker’s quarterly earnings call on Thursday.

He said the requirement will likely reduce customers’ appetite for imports as the inconvenient, added step and the risks associated with importing, such as long lead times, will outweigh the “relatively small financial benefit” that imports provide.

In dollar-per-ton terms, US HRC is now on average just $77 per short ton (st) more expensive than offshore product, down $54 w/w on average and off more than $200/st from an average premium of $281/st a month ago.

This week, domestic HRC tags were $875/st on average based on SMU’s latest check of the market on Tuesday, Feb. 20. US prices are now at their lowest level since early November.

Methodology

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

We add $90 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 HRC 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.

Asian HRC (East and Southeast Asian ports)

As of Thursday, Feb. 22, the CRU Asian HRC price was $535/st, down $9/st vs. the prior week. Adding a 25% tariff and $90/st in estimated import costs, the delivered price of Asian HRC to the US is approximately $759/st. The latest SMU hot rolled average for domestic material is $875/st.

The result: US-produced HRC is theoretically $116/st more expensive than steel imported from Asia. The spread is down $54/st vs. last week, and down $165/st from a seven-month high of $281/st in late December.

Italian HRC

Italian HRC prices were down $9/st to roughly $720/st this week. Despite that decline, Italian prices are still up $141/st from a recent bottom of $577/st last October. After adding import costs, the delivered price of Italian HRC is in theory $810/st.

That means domestic HRC is theoretically just $65/st more expensive than HRC imported from Italy. The spread is down from $121/st last week. The domestic hot band price premium over offshore product from Italy is down $232/st from a recent high of $297/st in mid-December.

German HRC

CRU’s German HRC price ticked down $13/st vs. the week prior to $735/st. After adding import costs, the delivered price of German HRC is in theory $825/st.

The result: Domestic HRC is theoretically a mere $50/st more expensive than HRC imported from Germany. The spread is now $215/st below 2023’s widest spread of $265/st.

Figure 4 compares all four price indices. The chart on the right zooms in to highlight the difference in more recent pricing.

Notes: Freight is important in deciding whether to import foreign steel or buy from a domestic mill. Domestic prices are referenced as FOB the producing mill, while foreign prices are CIF the port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Inland freight, from either a domestic mill or from the port, can dramatically impact the competitiveness of both domestic and foreign steel. It’s also important to factor in lead times. In most markets, domestic steel will deliver more quickly than foreign steel.

Effective Jan. 1, 2022, Section 232 tariffs no longer apply to most imports from the European Union. It has been replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25% tariff. SMU still includes the 25% Section 232 tariff on prices from other countries. We do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.

North American vehicle production, including personal and commercial vehicles, totaled 1.3 million units in January, a 24.2% gain from 1.05 million units in December. That’s also nearly 11% ahead of the 1.18 million produced one year ago.

Below in Figure 1 is North American light-vehicle production since 2014 on a rolling 12-month basis with a y/y growth rate. Also included is the average monthly production, which includes seasonality since 2014.

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 January, the growth rate for total personal and commercial vehicle assemblies in the USMCA region is up by double-digits. The momentum change, however, remains slightly behind.

Personal vehicle production

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 25% month-on-month (m/m) boost in January, after declining by 22% the month prior. The result was also a 14% gain vs. the period one year ago.

The US saw the largest increase in units produced while Mexico’s percentage gain led the way in January vs. December. The US was up 104,784 units (+18.8%), followed by Mexico, up 71,646 units (+49.2%), while Canada produced 22,461 more units (+26.6%) m/m.

Production share across the region was largely unchanged. The US saw personal vehicle production share of the North American market edge up marginally to 67.1%. Both Mexico and Canada saw its share slip to 21.4% and 11.5%, respectively.

Commercial vehicle production

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 up 21% in January with a total of 319,495 units produced during the month, an increase of 55,564 units m/m. The gain was driven by the US, which saw a 23.9% boost in commercial vehicle assemblies in January, producing 43,737 more vehicles m/m.

Canada produced 11,486 light commercial vehicles last month, a 5.2% increase from December’s 10,921 total units. January marked Canada’s 27th straight month of commercial vehicle assemblies after ceasing production for nearly two years from Jan. 2020 through Oct. 2021.

Mexico also reported a double-digit production growth in January vs. December, up 16.1% and producing 11,262 more vehicles over the same period.

The overall increase put the commercial production growth rate just 1.8% for the region last month, a strong reversal from a -8.9% rate in December.

The market share across the region was largely unchanged. The US was up 3.1 percentage points, with a total share of 69%, followed by Mexico with a 26.8% share, and Canada with at 4.2% share in May.

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).

Canadian steelmaker Stelco swung to a loss in the fourth quarter as revenue declined due to decreased shipping volume and average selling prices.

The Hamilton, Ontario-based company reported a net loss of Canadian $25 million (-US$18.5 million) in Q4’23 vs. net income of C$23 million a year earlier on revenue that fell 9% to C$613 million (US$454.1 million).

“Our fourth-quarter results were down over the previous quarter, but we do expect improved margins in Q1 and into Q2’24, as we begin to realize the higher market pricing that we saw in the latter part of 2023,” Alan Kestenbaum, executive chairman and CEO, said.

He made the comments in a statement released after market close on Wednesday, adding that the company remains “optimistic that market demand will stay strong.”

Stelco reported a 9% year-over-year drop in shipping volume in Q4’23 to 609,000 short tons (st). Meanwhile, the company logged a 2% decrease in average selling price per short ton for steel products to $941 in the same comparison.

Comparing it to Q3’23, CFO Paul Scherzer said, “Our average selling price declined 13% quarter over quarter which, combined with a scheduled maintenance outage that had an impact on our shipments for the fourth quarter, led to a decline in adjusted Ebitda to C$51 million and adjusted net income of C$9 million.”

He continued: “Entering Q1’24, we anticipate a return to shipping volume of approximately 625,000 to 675,000 st and an improvement in adjusted Ebitda due to the realization of more favorable pricing witnessed through much of the fourth quarter.”

A breakdown of Stelco’s shipments is below.

Auto sales were likely impacted by a holiday splurge hangover and several winter storms across the Midwest and Northeast. High-priced inventory and higher financing rates continued to weigh on sales, though a recovery in incentive spending helped to support sales. And while production levels are roughly back at pre-pandemic levels, the average transaction price only fell by 2.4% in 2023.

The average daily selling rate (DSR) was 43,042 – calculated over 25 days – down from January 2023’s 43,622 daily rate. Passenger vehicle sales increased 1.4% y/y while sales of light trucks moved higher by 3.1% over the same period. Light trucks accounted for 80% of last month’s sales, roughly the same as its share of sales in January 2023.

Below in Figure 1 is the long-term picture of sales of autos and lightweight trucks in the US from 2019 through January 2024. Additionally, it includes the market share sales breakdown of last month’s 15 million vehicles at a seasonally adjusted annual rate.

The new-vehicle average transaction price (ATP) was $47,401 in January, down 2.8% from December. Last month’s ATP was also 4.2% (-$2,067) below the year-ago period, according to Cox Automotive data.

Incentives decreased for the first time in four months. Last month’s incentives were $2,346, down 10.9% from December’s 31-month high of $2,633. With the m/m decrease, incentives are nearly 5% of the average transaction price. Incentives are up 86%, or $1,086, y/y.

In January, the annualized selling rate of light trucks was 11.991 million units, down 7.2% vs. the prior month and down 0.5% y/y. Annualized auto selling rates saw similar dynamics, down 5.8% and 1.5% 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.

Lead times have edged down to roughly 5 weeks, while hot-rolled coil is now on average below the $900-per-short-ton (st) mark.

SMU’s Steel Demand Index now stands at 47, down 2.5 points from a reading of 49.5 at the beginning of February. The measure is the lowest it’s been since late December, still in contracting territory, a level it’s been in for the better part of the past ten months.

The measure had improved by more than 13 points back on Nov. 9, staying in expansion territory until late December. Of note, 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.

SMU’s Steel Demand Index has been largely trending downwards and in contraction territory since early April.

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 overall market sentiment is steady – hovering around an average reading of 65 for the better part of a couple of months – buyer resistance, tighter lead times, lower scrap prices, and improved reading in mills’ willingness to negotiate lower prices point to tags trending down further.

SMU’s latest check of the market on Feb. 20 placed HRC at an average of $$875/st FOB mill, east of the Rockies, down $65/st vs. the prior week. Hot band is now down $170/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 a bit to 5.13 weeks vs. 5.16 weeks in early February.

As we move into the second half of Q1’24, buying has not been as strong as many anticipated and buyers seem unwilling to build inventory. The result: it’s no surprise that our demand index has declined as we approach March.

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

I’m afraid to say it, but it’s still lead times. After they pushed out a bit in late December, SMU’s survey results have since shown lead times to be on a steady decline. Our hot-rolled lead times are presently averaging right around five weeks, with several inputs between three and four weeks. They are nearly two weeks below 2023’s high of 6.96 weeks and pointing lower.

With prices still declining, will lead times continue to wane, and what does that mean for overall underlying demand as we move closer to 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.

“The good news is that demand is still there,” he added.

He told analysts that he doesn’t see prices going down much further in the near future because of this, noting that he sees a new, higher floor for HRC prices in North America.

He said that imports should begin to ease starting in May.

On the last couple of conference calls, “we were always talking about when the recession is coming,” Vedoya said. “And to be honest, today, we don’t see that in the demand. We see healthy demand in both countries, in the US and in Mexico,” he said.

Vedoya said on the call that “we expect shipments in Mexico to maintain the strong level reported in the fourth quarter of 2023.” The company reported shipping 2.12 million metric tons of steel in Mexico in Q4’23.

“Growth in Mexico’s steel market has been strong,” he stated on the call, noting that steel consumption in the country grew by double digits from 2022 to an all-time high of more than 18 million tons in 2023. And while he doesn’t see consumption growing by as much this year, he noted that the World Steel Association forecasts 2% growth in Mexico.

“The market environment in Mexico continues to be healthy,” he said, citing strong industrial activity, automotive production, non-residential construction activity, and reshoring of manufacturing. Residential construction was the only segment in which he noted weakness due to it being negatively affected by rising construction costs.

“The tentative deal addresses these and other core issues of concern to KTP autoworkers,” UAW added.

Still, there are “dozens of remaining open local agreements across the Big Three automakers, while the national contracts were ratified this fall after the union’s Stand Up Strike,” according to the union.

“We are pleased to have reached a tentative agreement on a new labor contract with UAW Local 862 covering Kentucky Truck Plant and 8,700 valued UAW-Ford employees,” a spokesperson for Ford said in a statement sent to SMU. “Ford is the No. 1 employer of UAW-represented autoworkers and 2024 is one of our biggest-ever new product launch years in the US.”

In October, Nucor said it was considering the Pacific Northwest for a new rebar micro mill.

Potential locations for the new mill are still being evaluated. Construction of the mill will take two years to complete, the company said.

Nucor currently operates 15 bar mills in the US, producing an array of bar products, including hot-rolled bar, rounds, light shapes, structural angles, channels, wire rod, and highway products. At the end of 2023, Nucor had approximately 9.6 million st of annual bar-making capacity.

The company has two rebar micro mills in Sedalia, Mo., and Frostproof, Fla., with a third currently under construction in Lexington, N.C.

“This new rebar micro mill in the Pacific Northwest will help Nucor maintain its leadership in the steel bar market and further execute our strategy to better serve our customers west of the Rocky Mountains, which also includes the addition of a melt shop at our Arizona bar mill,” commented Nucor’s chair, president, and CEO Leon Topalian in a statement on Wednesday.

He noted that rebar produced at Nucor’s micro mills is made from nearly 100% recycled scrap.

Nucor expects strong demand in the domestic rebar market to continue because of increasing government infrastructure investments.

Latin American steelmaker Ternium posted a strong uptick in earnings in its fourth quarter, and sees increasing steel demand growth in Mexico.

Ternium reported net income of $554 million in Q4’23 on Tuesday, up a whopping 839% over the same period last year on sales that increased 39.1% to $4.93 billion.  

The steelmaker cited, among other things, strong steel shipments in Mexico “in a seasonally weaker period, aided by continued growth of commercial customer demand.”

“Ternium’s shipments in the country grew by 22% during the year, representing a significant market share gain supported by the ramp-up of its new hot rolling mill in Pesquería,” the company said in a statement.

Steel shipments totaled 8.36 million metric tons (mt) for Mexico in 2023, up from 6.84 million mt in 2022. Meanwhile, Ternium’s Mexican steel shipments totaled 2.12 million mt in Q4’23, down 1% from the previous quarter.

Pesquería updates and outlook

Ternium said it expects to begin deploying its downstream project in Pesquería during the second half of 2024, with the startup of a 550,000-mt-per-year new pickling mill and the first lines in its new service center.

“This should support an increase in volumes in this market during the second half of this year,” Ternium said.

Ternium announced in June 2023 its plans to build a $3.2-billion EAF slab mill in Pesquería, adjacent to the $1-billion downstream facility currently under construction there.

The company commented that “healthy industrial activity in Mexico,” along with the nearshoring of manufacturing trend, “are contributing to steel demand growth in the region.”

“On the other hand, apparent steel demand in the domestic commercial market is showing short-term weakness due to a destocking tied to the recent downturn in steel spot prices in North America,” Ternium said.

Usiminas

In Brazil, Ternium said it began fully consolidating Usiminas results in July 2023, a period in which Usiminas “successfully relined its main blast furnace.”

Ternium, along with Luxembourg-headquartered Tenaris, had announced their increased stake in Brazilian steelmaker Usinas Siderúrgicas de Minas Gerais S.A. (Usiminas) last July.

“In 2024, Usiminas will be focused on increasing its industrial system productivity,” Ternium said.

The company added that for Usiminas in Q1 it “anticipates a sequential improvement in the profitability of its steel segment.”

However, Ternium also anticipates “a revenue decline in its (Usiminas’) mining segment due to the temporary halt of one of its ore processing plants and seasonal rains at the beginning of the year.”

Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?

CME HR futures indicate that prices could fall into the high $700s/low $800s. Futures of course don’t predict the future. But I’d say they’re somewhere between magic and the “toilet paper” moniker the Cleveland-Cliffs CEO Lourenco Goncalves memorably gave them last month. (Futures did correctly indicate, it turned out, that HR prices would fall below $1,000/st.)

Another opinion on the future comes from our steel market surveys. Our most recent survey indicates that people expect prices to stay lower for longer than they had just a month ago. Nearly 40% of respondents now predict that HR prices will dip into the low $800s or high $700s. And more than half now think that prices won’t bottom until Q2.

Again, that aligns with what we’re seeing on the CME. It also aligns with chatter we’ve heard that East Asian HR is available in the $700s/st to the Gulf Coast. Could we see all of this change if someone announced a blast furnace idling? Yes. But, so far, we haven’t heard of anything like that coming down the pike.

Also, since the initial panic over the war in Ukraine subsided, we’ve seen HR prices fluctuate between roughly $1,100/st and $600/st. We don’t stay in the $600s very long. Nor do we stay near or above $1,100/st for long. Is that a good way to think of peaks and valleys going forward?

Let me know what you think.

Galv, imports and new capacity

I tend to focus on domestic HR. Let’s turn to foreign cold rolled (CR) and coated for a moment. Market participants have told me that they think offers cold-rolled and coated product from Southeast Asia could fall into the $900s/st.

That makes some intuitive sense. When US prices get out of whack with world prices, you’ll sometimes see foreign CR/coated offers roughly on par with domestic spot pricing for HR. What surprised me a little was that some of you told me that European CR/coated offers could drop into the $900s as well.

But that makes some sense too. European steelmakers restarted blast furnaces earlier this year. The EU remains under pressure from imports. And if the US market is around $1,200 for CR/coated products, it will be an attractive destination for foreign tandem products – whether from Asia, Europe, or elsewhere.

That doesn’t mean people will jump on those offers, even if they might seem competitive now. Take SE Asian CR/galv, for example. It might not arrive until late summer. And the risks of ordering it are therefore too high, especially with domestic lead times falling along with domestic prices.

Here’s another thing to keep tabs on: There is a lot of coating capacity coming into the US market over the next few months. SDI will be starting up new coating capacity at its mill in Terre Haute, Ind., as well as at its mill Sinton, Texas. U.S. Steel’s Big River Steel in Osceola, Ark., should be bringing new coating capacity into the market too.

That’s not a bad thing. One of the express justifications for building Sinton was to serve Gulf Coast and West Coast markets that had largely relied on imports. And if competitive US prices are available in a matter of weeks from new lines, that could be a good deal for both domestic mills and domestic manufacturers.

SMU Community Chat

Thanks to those of you who signed up for the Community Chat with Mercury Resources CEO Anton Posner. Due to some last-minute scheduling conflicts, we won’t be able to hold that webinar on Wednesday as planned.

Our next Community Chat will instead be on March 6 with Worthington Steel CEO Geoff Gilmore. We’ll catch up with Posner on April 3. You can see all of our upcoming webinars and register here.

We haven’t recorded such a steep week-over-week (w/w) decline since June 2022, when prices rapidly retreated following a spike earlier in the year stemming from Russia’s invasion of Ukraine.

There is no obvious external shock that sparked the decline this time. Instead, it appears to be a collection of smaller issues – higher service center inventories, weaker-than-expected scrap prices, increased import competition, and a normalization of US prices with world prices.

Cold-rolled (CR) and coated prices held up somewhat better but still fell. SMU’s CR price stands at $1,185/st on average, down $10/st from a week ago. Galvanized base prices are at $1,180/st, down $25/st from last week. And Galvalume prices are at $1,215/st, down $15/st from a week ago.

The result: Spreads between HR and CR/coated base prices are more than $300/st on average – much higher than the $200/st spread the market has become accustomed to in recent years. Several sources said they expect that spread to narrow as prices for tandem products follow HR lower on a lag.

Plate, meanwhile, stands at $1,320/st on average, down $10/st from last week.

SMU’s price momentum indicators for all sheet and plate products continue to point lower.

Hot-rolled coil

The SMU price range is $820–930/st, with an average of $875/st FOB mill, east of the Rockies. The bottom end of our range was down $80 per st vs. one week ago, while the top end of our range was down $50/st w/w. Our overall average is $65/st lower from last week. Our price momentum indicator for HRC remains lower, meaning SMU expects prices will move lower over the next 30 days.

Hot rolled lead times: 3–8 weeks

Cold-rolled coil

The SMU price range is $1,120–1,250/st, with an average of $1,185/st FOB mill, east of the Rockies. The lower end of our range was flat vs. the prior week, while the top end of our range was down $20/st. Our overall average is down $10/st from last week. Our price momentum indicator for CRC remains lower, meaning SMU expects prices will move lower over the next 30 days.

Cold rolled lead times: 6–9 weeks

Galvanized coil

The SMU price range is $1,110–1,250/st, with an average of $1,180/st FOB mill, east of the Rockies. The lower end of our range was down $30/st vs. the prior week, while the top end of our range was $20/st lower w/w. Our overall average is $25/st lower than the week prior. Our price momentum indicator for galvanized remains lower, meaning SMU expects prices will move lower over the next 30 days.

Galvanized .060” G90 benchmark: SMU price range is $1,207–1,347/st with an average of $1,277/st FOB mill, east of the Rockies.

Galvanized lead times: 5–10 weeks

Galvalume coil

The SMU price range is $1,160–1,270/st, with an average of $1,215/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 down 30/st from the prior week. Our overall average was down $15/st when compared to the previous week. Our price momentum indicator for Galvalume remains lower, meaning SMU expects prices will move lower over the next 30 days.

Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,454–1,564/st with an average of $1,509/st FOB mill, east of the Rockies.

Galvalume lead times: 7–8 weeks

Plate

The SMU price range is $1,260–1,380/st, with an average of $1,320/st FOB mill. The lower end of our range was down $20/st vs. the week prior, while the top end of our range was flat 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.

The Sims Metal recycling business division has operations in North America, Australia, New Zealand, and the UK, and includes its North America Metal (NAM) segment.

Commenting on the six-month period ended Dec. 31, 2023, Sims said, “The seaborne ferrous scrap market was negatively impacted by two significant factors: a global manufacturing slowdown and escalating geopolitical tensions, resulting in a reduction in metal scrap demand in international trade.”

Sims’ NAM segment relies more heavily on the export market, so its results were more impacted by the slowdown in trade, Sims said.

The performance of the SA Recycling joint venture showed more resilience due to its “strong domestic sales and procurement of scrap at source.”

North America Metal

Sims’ NAM division posted an underlying EBIT loss of AUS$8.8 million (US$5.76 million) in the six-months ended Dec. 31, a drop of 6.3% from a year earlier. Intense competition in scrap sourcing and challenging export markets were cited as reasons for the decline.

NAM’s intake volumes rose 6.5% to more than 2.47 million metric tons (mt) in the six-month period. However, excluding the impact of the acquisitions of Baltimore Scrap Corp. (BSC) in August and Northeast Metal Traders in March 2023, intake was “flat due to challenging market dynamics,” the company said.

NAM’s sales volumes of 2.47 million mt were 0.8% higher than a year earlier, but excluding acquisitions were down 4.5%.

Sim’s acquisition of BSC and the integration of nonferrous NMT mark important steps “in realigning NAM with US market trends,” Sims commented.

Sims’ NAM division operates 59 metal facilities and 48 shredders.

SA Recycling

SA Recycling’s EBIT grew 13% year over year (y/y) to AU$59.6 million. Its focus on the US domestic market, as well as recent acquisitions, were cited as reasons for the growth.

SA Recycling’s sales were 10.7% higher y/y at 2.431 million mt.

Since 2007, Orange, California-based SA Recycling has been a 50/50 joint venture between Sims and the Adams family. It operates 24 shredders and 130 locations across 16 US states, according to Sims’ 2023 annual report.

The headline index for Empire State manufacturing saw a huge contraction to start the year, plummeting from -14.5 in December to -43.7 in January. Despite shooting up 41 points this month, the index remained negative at -2.4 for February.

The survey, conducted Feb. 2-8, points to an ongoing decline in new orders, a small increase in shipments, a modest contraction in inventories, and short delivery times, the Fed said.

“Manufacturing activity continued to edge slightly lower in New York state after contracting sharply in January, and price increases picked up. Firms’ optimism remained subdued,” noted Richard Deitz, economic research advisor at the New York Fed.

The headline index suggests slow manufacturing in the state and pessimism from manufacturing executives. The highest the headline index got in 2023 was 10.8 in April. For all of 2023, the index averaged -8.6. In 2022, it averaged -2.9.

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

ArcelorMittal, which owns 62% of Taranto, responded by saying it was surprised and disappointed to learn via media reports that Invitalia had called for the special administration, as that proposal was not mentioned during an emergency board meeting held on Sunday, Feb. 18. “This is an egregious breach of the investment agreement,” the AFP news agency quoted the company as saying.

The Luxembourg-headquartered group also reiterated it is seeking an orderly exit from the public-private partnership, Acciaerie d’Italia (ADI).

Italy’s economic development minister Adolfo Urso said: “[ArcelorMittal] doesn’t have the intention to invest in the company. I believe that the country is justified in reappropriating the fruit of its labor and the sacrifices of entire generations.”

The government prepared the ground for special administration back in January.

Ownership uncertainty returns at ADI

To some extent we have been here before. The former Ilva was placed in special administration in 2013 amid a long-running legal case against its former owners Gruppo Riva centering on violations of environmental standards that were associated with elevated incidences of cancer in the local population around Taranto. In 2021, this case led to multiple managers, politicians, and consultants associated with Ilva receiving jail sentences, including 22 and 20 years, respectively, for brothers Fabio and Nicola Riva.

After operating under special administration for five years the deal that led to ArcelorMittal taking majority ownership of Ilva was agreed to in 2018. But Acciaierie d’Italia, as it was renamed, has often been in the news with stories – whether founded or otherwise – of discontent and apparent tension around the relationship between owners, operators, unions, and politicians. Operationally it has been running well below installed capacity. Reduced utilization is not something confined to ADI in the European steel industry, but steel is an emotive sector worldwide and any perceived weakness in it can be leveraged by various stakeholders to pursue their goals, whether that be employment levels, votes, or other factors.

At the time of writing, special administration has not actually taken effect, but the threat is that this will happen in the coming days. This may yet be a negotiating tactic. But with ArcelorMittal apparently prepared to exit, albeit on different terms, it seems that ownership changes will once again happen in Italy one way or another. What will happen next? If ADI is effectively nationalized, the government may look to increase production in the short term for political rather than commercial reasons. With sheet prices now falling in Europe, that would add supply into a weakening market and probably cause further short-term price falls. Longer term, there would be the question of what the future ownership structure looks like. Special administration is a tool but not a permanent solution, and the government has taken pains to highlight that it believes there to be interest from multiple parties in coming on board at ADI. One might keep an open mind on this. The political risk must surely now be perceived as elevated.

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

The mill capability utilization rate was 77.5% in the week ended Feb. 17, up from 77% a week earlier yet down from 80.5% a year ago. At 77.5%, utilization is at its highest since the week ended June 24, 2023, when capability reached 78.1%.

Despite the boost, present utilization rates at a total steel output of 1,721,000 st assume the estimated total annual domestic production of 115.4 million st, which is a decrease of 4.1 million st from the end of 2023.

Year-to-date production through Feb. 17 was 11,657,000 st at a capability utilization rate of 76.5%. That was off 1.8% from 11,873,000 st in the same period a year earlier when capability utilization was 78.1%.

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

• Northeast – 127,000 st (down 6,000 st)
• Great Lakes – 558,000 st (down 2,000 st)
• Midwest – 190,000 st (up 2,000 st)
• South – 777,000 st (up 18,000 st)
• West – 69,000 st (down 1,000 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.