• Busheling at $390-400/gross ton (gt), averaging $395, flat from August.
• Shredded at $370-380/gt, averaging $375, down $2.50 from August.
• HMS at $315-330/gt, averaging $323, down $7.50 from August.

One source said October should resemble September: “not great demand from domestic mills.”

He said there is some incentive to start stocking up “before what I think will be an inevitable price increase into the end of the year, and reasonably level overseas prices.” But he believes there won’t be a “whole lot of movement on price next month.”

A second source agreed. “It’s hard to see anything but a sideways market next month, given outages and cutbacks.  But after that, we should higher prices to end the year,” he said.

A third source was slightly more optimistic, saying it seems like pricing will move up in October.

This week, SMU survey respondents were widely proven correct in their prediction of a sideways move for prime scrap tags in September, with 80% expecting prices to be flat this month. Only 7% anticipated an increase.

Some comments from the survey respondents included:

“Lack of demand and less production.”

“We’ve been told ‘soft sideways’.”

“Do not think the demand is there.”

“All alternative iron-bearing materials are down.”

Correction: An earlier version of this story reported survey respondents were providing a forecast for October.

Negotiation rates by product

As seen in Figure 2, negotiation rates are mixed between sheet and plate products, ranging from 61-89%. Aside from Galvalume, negotiation rates on all sheet products are at some of the lowest levels seen since March/April of this year. Negotiation rates on plate products continue to be the strongest. Rates by product are:

• Hot rolled: 71%, unchanged from late-August.
• Cold rolled: 61%, down 10 percentage points.
• Galvanized: 72%, down 11 percentage points.
• Galvalume: 86%, up four percentage points.
• Plate: 89%, up one percentage point.

Here’s what some survey respondents had to say:

“Depending on mill, more volume can do better, but not by much.”

“Curious to see if the trade case strengthens galvanized.”

“Some hesitancy with the announcement of the new [galvanized] tariffs.”

“With tons yes [plate].”

Note: SMU surveys active steel buyers every other week to gauge their steel suppliers’ willingness to negotiate new order prices. The results reflect current steel demand and changing spot pricing trends. Visit our website to see an interactive history of our steel mill negotiations data.

We’ll discuss the latest happenings at the multinational service center, how the company sees the current market developing, and more. We might even talk a little bit about hockey.

Recall that Steel Warehouse is based in South Bend, Ind. It has additional locations across the US, as well as facilities in Mexico and Brazil. Lerman will bring insights from across the company’s broad reach.

Editor’s note: You can see the full archive of our Community Chat webinars – dating back to April 2020 – here.

SMU’s check of the market on Tuesday, Sept. 10, put domestic HR tags at $685 per short ton (st) on average, down $5/st from last week. Stateside hot band has now slipped $15/st over the past two weeks after rallying by $65/st from July’s 20-month low.

Domestic HR is now theoretically 2.8% more expensive than imported material. US prices were 2% more expensive last week but nearly 12% cheaper just six weeks ago.

In dollar-per-ton terms, US HR is now, on average, $19/st more expensive than offshore product (see Figure 1), compared to $14/st more expensive on average last week. This is a $91/st shift from less than two months ago when US tags were roughly $72/st cheaper than offshore material.

The charts below compare HR prices in the US, Germany, Italy, and Asia. The left-hand side highlights prices over the last two years. The right-hand side zooms in to show more recent trends.

Methodology

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

We add $90/st to all foreign prices as a rough means of accounting for freight costs, handling, and trader margin. This gives us an approximate CIF US ports price to compare to the SMU domestic HR coil price. Buyers should use our $90/st figure as a benchmark and adjust up or down based on their own shipping and handling costs. If you import steel and want to share your thoughts on these costs, please get in touch with the author at david@steelmarketupdate.com.

Asian HRC (East and Southeast Asian ports)

As of Thursday, Sept. 12, the CRU Asian HRC price was $425/st, down $10/st vs. the week prior. Adding a 25% tariff and $90/st in estimated import costs, the delivered price of Asian HRC to the US is approximately $621/st. As noted above, the latest SMU US HR price is $685/st on average.

The result: US-produced HRC is theoretically $64/st more expensive than steel imported from Asia. That’s up $8/st vs. last week as prices in Asia were down at a slightly sharper clip compared to US prices. Still, its a far cry from late December when US HR was $281/st more expensive than Asian product.

Italian HRC

Italian HR coil prices were down $9/st to $585/st this week. After adding import costs, the delivered price of Italian HR coil is, in theory, $675/st.

That means domestic HR coil is theoretically $10/st more expensive than imports from Italy. That’s up $4/st from last week. Just five months ago, US HR was $297/st more expensive than Italian hot band.

German HRC

CRU’s German HR price moved to $611/st, which is $10/st lower than last week. After adding import costs, the delivered price of German HR coil is, in theory, $701/st.

The result: Domestic HR is theoretically $16/st cheaper than coil imported from Germany, down from a $21/st discount last week. At points in 2023, in contrast, US HR was as much as $265/st more expensive than imported German hot band.

Notes: Freight is important when deciding whether to import foreign steel or buy from a domestic mill. Domestic prices are referenced as FOB, the producing mill, 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.       

A Hybar spokesperson confirmed on Wednesday that Stickler’s comments at the conference were referring to the Quanta investment. No further details of the deal were offered. 

Quanta joins the project’s other equity investors, which include TPG Rise Climate, Koch Minerals & Trading, and Global Principal Partners, the investment entity used by Hybar’s senior management team.

Houston-based Quanta is a specialized contracting services company that delivers infrastructure solutions for the utility, renewable energy, technology, communications, pipeline, and energy industries.

“Quanta’s expertise in developing large-scale infrastructure and renewable energy projects lines up well with Hybar’s objective of producing the most environmentally sustainable steel rebar in North America,” Stickler said on Wednesday.

Hybar broke ground on its first steel rebar mill in August 2023 and expects operations there to begin less than a year from now. An adjacent 105-MW solar field and battery storage facility will power the facility. The company has secured a special-rate contract with Entergy Arkansas LLC.

The Cleveland-based steelmaker did not respond to a request for comment from SMU.

Market sources were also mixed on the potential impact of the idling. Some said an extended idling could reduce supply and provide a catalyst for higher prices.

Others said the impact would be muted because several of Cliffs’ furnaces have been running well below capacity. Idling the C-6 furnace would allow those furnaces to run fuller and more efficiently without impacting customers, they said.

Cliffs has two active furnaces at Cleveland Works: C-5 and C-6, according to SMU’s furnace status table. The C-6 furnace has a daily capacity of 4,150 short tons. The C-5 furnace has a daily capacity of 4,350 st.

Cliffs took the larger C-5 furnace down for maintenance in February 2022. The furnace was not restarted until August of that year following a full reline.

It is not clear to SMU whether an idling of the C-6 furnace would prove to be equally protracted or for a significantly shorter period.

“Gearing up to build our first-ever Ram electric truck and the range-extended version in Michigan is a meaningful moment of pride for our teams,” Stellantis CEO Carlos Tavares said in a statement on Wednesday.

The company said it is on track to become a carbon net-zero corporation by 2038.

The specific investments in each Michigan plant (located in the city of its name) are listed below.

Sterling Heights Assembly Plant (SHAP)

The company will invest $235.5 million at SHAP to produce the first-ever battery-electric 2025 Ram 1500 REV light-duty truck. Also, the plant will produce the all-new range-extended 2025 Ram 1500 Ramcharger.

Warren Truck Assembly Plant (WTAP)

Stellantis will spend ~$97.6 million at WTAP to produce a future electrified Jeep Wagoneer.

The company said this is one of four Jeep EVs that the brand will launch globally before the end of 2025.

Dundee Engine Plant (DEP)

Stellantis will invest more than $73 million to retool DEP to produce parts for the architecture of two of its EV platforms. The plant will assemble, weld, and test the STLA Frame’s battery trays and machine the front and rear beams for the STLA Large.

Production will begin in 2024 and 2026, respectively, the company said.

While market conditions remain healthy, with days’ supply only slightly below pre-pandemic levels, LV sales surprised to the downside in August. The culprit remains high financing costs, which are still weighing on sales.

Auto sales rose just 0.5% y/y, while light-truck sales jumped 9.4% from last year. Light trucks again accounted for 81% of August’s total sales, slightly above its 80% share last year.

August’s average daily selling rate (DSR) was 50,670 vehicles – calculated over 28 days – up 3.8% from the 48,837-unit daily rate one year ago.

Figure 1 below shows the long-term picture of US sales of autos and lightweight trucks from 2019 through August 2024. Additionally, it includes the market share sales breakdown of last month’s 15.1 million vehicles at a seasonally adjusted annual rate.

While auto production has largely recovered from the pandemic, inventories have slowly increased, although they remain well below 2019 levels.

The new vehicle average transaction price (ATP) remains widely impacted by the lack of base trim models.

August’s ATP of $47,870 was -1.1% m/m and -1.2% (-$583 lower) y/y, according to data from Cox Automotive.

Incentives rose 4.9% m/m, reaching a 41-month high of $3,035. With the m/m increase, incentives now represent more than 6% of the ATP. Compared to last year, incentives are up nearly 60%, or $1,133.

The annualized selling rate of light trucks for August was 12.263 million units, down 4.6% vs. the prior month but 0.5% higher y/y. Annualized auto selling rates were down 4.1% m/m and 7.3% y/y.

Figure 2 details the US auto and light truck market share since 2014 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.

Terms of the deals were not disclosed.

“These three acquisitions align with our strategy to grow our regional network,” President and CEO Jonathan Padnos said in a statement on Wednesday.

• Recycling center Sam Winer will operate as PADNOS Elkhart.
• Salvage yard Howe Auto Sales will operate as PADNOS Bay City.
• Grandpa’s Garage, also a salvage yard, will be consolidated with the neighboring PADNOS Traverse City location.

PADNOS has more than 900 employees at 30 locations throughout Michigan and Indiana. The company is a recycler of ferrous and nonferrous metals, paper, plastics, and electronics.

By the way, SMU’s Laura Miller had a good article last week that spells out alleged anti-dumping margins for all countries named in the case. None of them are low. Brazil is nearly 76%. The UAE is approximately 78%. Even Canada and Mexico got tagged with an alleged 35% and 34%, respectively.

But Vietnam is in a class of its own with a margin well over 100%.

Why does that matter? Vietnam shipped approximately 681,000 short tons (st) of flat-rolled steel to the US from January through August, according to government figures. (I’ve converted the metric tons the Commerce Department reports in to short tons.) That amounts to ~85,000 st per month – the vast majority of which is coated material.

We’ve also heard that some steel buyers have already started diverting coated purchases away from imports to domestic mills. That could create opportunities for US mills as well as for service center and distributors whose purchases are tilted more toward domestic product.

One thing we haven’t seen so far is a big reaction on the price side of the ledger. Why is that? For starters, it’s probably too early to say how the dust will settle on the trade case until we’ve got at least a preliminary injury determination from the International Trade Commission (ITC). That vote is scheduled for Oct. 18.

In the meantime, there is also material already on the water. And our understanding is that some countries, notably Canada and Mexico, will continue to ship to the US. After all, it’s hard to unlink cross-border automotive supply chains, for example. And I don’t think many expect critical circumstances against the United States’ USMCA partners.

Also, domestic capacity for both galvanized and Galvalume is increasing – notably with recent expansions at Steel Dynamics Inc. (SDI) and U.S. Steel’s Big River Steel. That could help fill any void left by imports.

Then there is the fact that demand isn’t stellar at the moment. We’ve been hearing for a while that agriculture and construction are slow. And we’ve heard chatter more recently that automotive inventories are starting to stack up despite generous incentives.

Additionally, there is the matter of August service center inventories. Data providers who received our flash report on Monday already have insight into the subject. Our premium subscribers will get the results on Monday, Sept. 16. (That data series is a good reason to upgrade to premium. If you’d like to, contact Luis Corona Luis.Corona@crugroup.com.)

Service centers had 64.2 shipping days of supply of flat-rolled steel in July, up from 60.9 in June. That also marked the highest level we’ve seen for the month since we started collecting service center inventory data in January 2019. And our channel checks don’t indicate that inventories are running any leaner now.

Again, I’m not saying prices will fall from here on the coated side. We’ve heard there were some low prices in the market last week. Also, that certain domestic mills pulled those offers after the trade case was announced.

There will be gaps to fill on the West Coast, which relied heavily on Vietnam. Ditto when it comes to thin-gauge material – a product typically served by imports because domestic mills prefer to run heavy-gauge items.

But it still might not be easy for domestic mills. US mills typically have higher extras than mills abroad. And the cost to ship via rail to the West Coast are high. So will domestic mills see more business? Or will it be another game of whack-a-mole? (I can think of some mills in East Asia and Southeast Asia not targeted in this case that specialize in light gauge.)

What happens next? It could be that buyers flush with inventory do what they typically do – wait it out. But I think there is also a case for higher prices in late Q4/Q1 if contracts talks, ongoing now, lead to supply chains shifting.

Whatever happens, it’s clear that this isn’t a market – like the ones we’ve seen in recent years – when even a small disruption could send prices shooting higher. If things do move higher this time, it might be a slow burn.

SMU Community Chat and the 101s

We’re restarting our Community Chat webinar series next week following a pause ahead of and during Steel Summit. Our next guest will be Marc Lerman of Steel Warehouse. You can register here.

We’re also picking up again with our 101 training courses. Our next Hedging 101 will be on Sept. 25 in Chicago. You can learn more about that one and register here.

That will be followed by Steel 101 on Oct. 8-9 in Starkville, Miss. It will feature a tour of SDI Columbus. More info on that event is here.

In the meantime, thanks from all of us at SMU for your continued support. We really do appreciate it.

In light of this, we have adjusted the SMU sheet price momentum indicator from higher to neutral. Our plate price momentum indicator remains at lower.

Hot-rolled steel prices eased for a second consecutive week, declining $5 per short ton (st) to an average of $685/st. Despite the recent declines, HR prices are still up $20/st from a month ago, according to our Interactive Pricing Tool.

Cold-rolled sheet prices also shifted lower, down $5/st week over week (w/w) to $940/st. Prices are still $25/st higher than four weeks ago.

While our price range for galvanized sheet widened, our average galvanized price did not budge this week, holding steady at a nine-week high of $905/st. Galvalume prices ticked back up $10/st w/w to $925/st, reverting back to the average price reported in the last three weeks of August.

Our plate index dropped $10/st to $950/st this week. Plate prices have fallen $55/st over the last month and have trended downward since last November.

Hot-rolled coil

The SMU price range is $650-720/st, averaging $685/st FOB mill, east of the Rockies. The lower end of our range is down $10/st w/w, while the top end is unchanged. Our overall average is down $5/st w/w. Our price momentum indicator for hot-rolled steel has been adjusted to neutral, meaning we see no clear direction for prices over the next 30 days.

Hot rolled lead times range from 3-7 weeks, averaging 5.2 weeks as of our Aug. 28 market survey. We will publish updated lead times in this Thursday’s newsletter.

Cold-rolled coil

The SMU price range is $900–980/st, averaging $940/st FOB mill, east of the Rockies. The lower end of our range is unchanged, while the top end is down $10/st w/w. Our overall average is down $5/st. Our price momentum indicator for cold-rolled steel has been adjusted to neutral, meaning we see no clear direction for prices over the next 30 days.

Cold rolled lead times range from 5-9 weeks, averaging 7.0 weeks through Aug. 28.

Galvanized coil

The SMU price range is $850–960/st, averaging $905/st FOB mill, east of the Rockies. The lower end of our range is down $10/st, while the top end is up $10/st w/w. The overall average is thus unchanged. Our price momentum indicator for galvanized steel has been adjusted to neutral, meaning we see no clear direction for prices over the next 30 days.

Galvanized .060” G90 benchmark: SMU price range is $947–1,057/st, averaging $1,002/st FOB mill, east of the Rockies.

Galvanized lead times range from 6-9 weeks, averaging 7.3 weeks through our Aug. 28 survey.

Galvalume coil

The SMU price range is $880–970/st, averaging $925/st FOB mill, east of the Rockies. The lower end of our range is unchanged, while the top end is up $20/st w/w. Our overall average is up $10/st w/w. Our price momentum indicator for Galvalume sheet has been adjusted to neutral, meaning we see no clear direction for prices over the next 30 days.

Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,174–1,264/st, averaging $1,219/st FOB mill, east of the Rockies.

Galvalume lead times range from 7-9 weeks, averaging 7.4 weeks through our latest published survey.

Plate

The SMU price range is $900–1,000/st, averaging $950/st FOB mill. The lower end of our range is down $20/st, and the top end is unchanged w/w. Our overall average is down $10/st w/w. Our price momentum indicator for plate remains pointed lower, meaning we expect prices to decline over the next 30 days.

Plate lead times range from 3-5 weeks, averaging 4.2 weeks through our Aug. 28 survey.

SMU note: The graphic above shows our hot rolled, cold rolled, galvanized, Galvalume, and plate price indices for the last year. For more historical data, check out the Interactive Pricing Tool on our website. If you need help navigating the website or need to know your login information, contact us at info@steelmarketupdate.com.

A notice in the Federal Register on Monday said Commerce found that revoking or sunsetting the CVD order “would be likely to lead to the continuation or recurrence of countervailable subsidies at the levels” shown in the chart below.

Exporter/manufacturer	Subsidy rate
Weifang East Steel Pipe Co.	29.83%
Kingland companies	48.18%
Shuangjie companies	620.08%
All others	39.01%

Background

Trade laws require that unfair trade remedies like anti-dumping duties and CVDs are reviewed every five years.

In the US, Commerce’s International Trade Administration (ITA) and the independent International Trade Commission (ITC) are tasked with this responsibility.

Considering if the duties were allowed to expire or be ‘sunset,’ the ITA determines if the subsidies or duties would reoccur, and the ITC determines if the domestic industry would continue to be injured.

Commerce initiated this sunset review in May. The case was expedited as responses from respondent interested parties were deemed inadequate, while domestic interested parties provided timely notices of their intent to participate.

Those companies include Bull Moose Tube, Maruichi American Corp., Nucor Tubular Products, and Zekelman Industries, all of which are domestic producers of standard and/or structural pipe.

The ITC voted in early August to expedite its sunset review and should have it completed by the end of September. Although one commissioner voted for a full review, two others opted for expedited reviews. One commissioner did not participate in the vote.

This is the third sunset review of this particular CVD order. The duties were initially applied in 2008.

The DMI tracks the value of nonresidential construction projects entering the planning stages. It typically leads construction spending by about 12 months.

“Commercial planning saw another month of broad-based improvements,” said Sarah Martin, associate director of forecasting at Dodge.

Last month’s boost saw most nonresidential sectors grow, driven by expectations that “the Fed’s September rate cut all but finalized,” according to Martin.

The commercial building index was up 1.9% month over month (m/m) in August and up 42% vs. August 2023. While growth was widespread across all segments, the network noted that data centers were still a driving force of growth. Warehouse, hotels, and retail planning have also been a bright spot over the past three months.

Institutional planning jumped 5.7% higher in August from July and 8% vs. year-ago levels.

A total of 30 projects valued at $100 million or more entered planning throughout the month of August, DCN said.

Apparent supply rose to 8.38 million st in July, up by 264,000 short tons (st), or 3%, from June and less than 1% below the average monthly rate of 2024. Recall that in June we saw the greatest month-on-month (m/m) decline in apparent supply witnessed in over two years. Earlier this year we saw supply climb to a 21-month high of 8.90 million st in May.

Trends

To smooth out the variability seen month to month, we can calculate supply levels on a three-month moving average (3MMA) basis to better highlight long-term trends. The 3MMA through July eased to a three-month low of 8.46 million st, having reached an 11-month high in May. Compare this to the 2023 monthly supply average of 8.49 million st and the 2022 average of 8.83 million st. Supply on a 3MMA basis has generally trended downward over the past three years, following the November 2021 peak at 9.87 million st.

Looking across the last four months, July apparent supply represents the second-lowest monthly rate. In this time frame we have witnessed a general decline in both finished imports and domestic mill shipments. The increase seen from June to July was primarily due to a 301,000-st (17%) recovery in finished imports, slightly negated by a 46,000-st (6%) decline in exports.

Figure 4 shows year-to-date (YTD) monthly averages for each statistic over the last four years. The average monthly supply level for the first seven months of 2024 now stands at 8.45 million st, 2% less than the same period last year. Currently, 2022 holds the highest YTD monthly average in our recent history at 8.78 million st. Over this period we have seen consistent growth in finished imports, while domestic shipments and total exports have fluctuated.

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

Shown left to right in the photo above, SMU’s Michael Cowden moderated the panel, which featured Alan Amici, president and CEO of the Center for Automotive Research; Dean Kanelos, market development and product applications manager at Nucor; Dan Bowerson, VP of energy and environment at the Alliance for Automotive Innovation; and Michael Davenport, executive director and president of the Auto/Steel Partnership.

Improving costs

The group discussed improvements in EV production and costs, noting that while EVs still have a higher initial cost compared to internal combustion engine (ICE) vehicles, the premium has fallen to an average of 15%.

Amici attributed this to advancements in production technology and a decreasing supply/demand imbalance for raw materials. He explained a significant cost reduction in battery production, as battery prices have halved since the pandemic.

Panelists all anticipate that EV prices will continue to improve as technology advances further, and the cost difference between EV and ICE vehicles will even out in the not too distant future.

Consumer readiness

Panelists also addressed the challenge of balancing EV production regulations with consumer readiness. They explained that while automakers have mandates to sell a certain percentage of EVs, buyers have no such obligations.

Despite substantial investments and regulations pushing for EVs, panelists agreed that consumers are not yet ready to make the switch to fully electric cars. They cited high prices and insufficient charging infrastructure as major deterrents to buying and were in agreement that these issues will improve as technology and infrastructure advance.

“People can’t see EV chargers out there on every corner like you can see gas stations,” commented Amici. He went on to say that once people start seeing these chargers everywhere, they will start to see that “their EV trip is not that bad.”

Best of both worlds?

In a Q&A session following the discussion, panelists discussed how hybrid vehicles may be the most logical option to bridge the gap between ICE and EV vehicles. Davenport agreed that hybrid vehicles are a practical solution as EV infrastructure develops, combining the convenience of gasoline engines with the benefits of electric power.

Steel usage

Steel demand was also brought up as panelists discussed the evolving role of various materials in EV production and charging infrastructure. Kanelos explained how high-strength and electrical steels are essential for EV infrastructure, and that as the number of charging stations grows, so will the demand for those steels.

Looking ahead, the auto experts anticipate continued advancements in EV technology and infrastructure development will ultimately make EVs more accessible and convenient for buyers.

After multiple calls to address a supposed surge in steel imports from Mexico, President Joe Biden revived the 232 tariffs in July. A caveat was added: If the steel products are melted and poured in the US, Mexico, or Canada, they will not be subject to the 25% tariff.

Recall that Ternium Mexico is currently constructing a $3.2-billion, 2.6-million-short-ton-per-year EAF/DRI slab mill in Pesquería, in the northeastern Mexican state of Nuevo León, but melting operations there are not slated to begin until 2026.

The company’s current business model relies on importing semi-finished steel slabs, mainly from sister companies in Brazil, and then rolling them into finished steel products. Shreveport, La.-based Ternium USA then imports those products for further processing and/or sale to US customers.

Exclusion requests

The US Department of Commerce publishes a list of exclusion requests for public inspection. Any individual or organization in the US can file an objection to an exclusion application within 30 days of its posting.

From July through the morning of Sept. 10, Ternium filed 36 exclusion requests for a range of sizes of hot-rolled, cold-rolled, and galvanized coils. The company’s exclusion asks now total 88 so far this year, compared to 87 requests over the prior four years combined, according to the government website. Some requests have been granted over the years, while others have been denied.

All 36 requests since July have a ‘pending’ status, but only 20 still have an open public objection window. For another 14, the rebuttal window is open, giving Ternium the opportunity to respond to any objections received. The surrebuttal window for the two July requests is now closed and decisions are pending.

While some of Ternium’s exclusions have been requested due to “insufficient US availability,” others are because of the melt-and-pour requirements announced in July.

For the latter requests, Ternium points out that the Mexican government declared in July that its agreement with the US ensures that the melt-and-pour requirement doesn’t apply to Mexican steel products made from slabs imported from Brazil.

Exclusion objections

Domestic steelmakers, including U.S. Steel, Nucor, and Steel Dynamics Inc. (SDI), have been quick to respond and push back on Ternium’s requested exclusions. Note that not all the exclusion requests have received objections.

 “U.S. Steel emphasizes that the United States and Mexico have no agreement or mechanism for excluding Mexican-origin steel products that were melted and poured in Brazil from the Section 232 tariffs,” the steelmaker states in its objections.

Nucor also says, “There is no legal basis” for Ternium’s argument about the Brazil carve-out. As such, “This request should be denied,” Nucor states.

USS’ objections further add, “The requestor is a foreign-owned rolling/finishing mill with a business model focused on importing and consuming upstream steel products manufactured by its affiliates in lower-cost markets (e.g., Mexico and Brazil) rather than the United States.”

Ternium is based in Luxembourg and is one of Latin America’s leading steel producers, with 17 production centers in Argentina, Brazil, Columbia, Guatemala, Mexico, and the US.

In their objections, U.S. Steel, Nucor, and SDI state that they are able and willing to produce the products for which Ternium has requested exclusions.

“Such an exclusion would fail to increase the capacity utilization rates of US steelmakers and, as such, undermine the broader national security goals of the Section 232 action,” USS argues.

Ternium could not be reached for comment.

Monthly averages

Looking at exports on a three-month moving average (3MMA) basis can smooth out the fluctuations seen month to month. Export volumes had trended downward throughout the second half of last year. The 3MMA changed course as it entered 2024, peaking at 825,000 st in April. The 3MMA has declined since then but remains relatively strong in July at 792,000 st, down 4% from April’s high.

Exports can be annualized on a 12-month moving average (12MMA) basis to further dampen month-to-month variations and highlight historical trends. From this perspective, steel exports have overall moved higher since 2020. The 12MMA reached a five-and-a-halfd-year high in February (805,000 st), easing each month since. The 12MMA through July remains healthy at 780,000 st, but is the lowest rate recorded over the last year.

Exports by product

Changes in monthly export rates were mixed across the major flat-rolled steel products we track, with four moving higher and three declining. The biggest monthly movers from June to July were hot-rolled sheet (+15%), other-metallic coated (+14%), and coiled plate (-13%).

Exports of most products were down compared to the same month last year, apart from galvanized sheet and other-metallic coated. Significant year-on-year (y/y) changes were witnessed in other-metallic coated exports (+30%), plate in coils (-14%), and hot-rolled sheet (-11%).

Figure 4 shows a history of exports by product on a 3MMA basis.

Note that most steel exported from the US is destined for USMCA trading partners Canada and Mexico. Over half of all exports in July went to Mexico (54%), followed by 38% to Canada. The next largest recipients were Honduras at 1% (with an unusual surge in semi-finished exports), followed by China, Brazil, and the Dominican Republic at less than 1% each.

“Whether it’s rain, sleet, or snow, ZMAG coated steel has the toughness to ensure projects are built to last,” James Bruno, SVP of business development and president of USS Kosice, said in a statement on Monday.

Bruno noted that the production process reduces waste and represents U.S. Steel’s commitment to lowering its environmental impact.

USS emphasized that ZMAG offers “a new level of reliability and durability for the solar, automotive, and construction industries.” Specifically, it cited solar frames and racking systems as examples of where it could be used.

The product is “100% domestically produced” as it is melted and manufactured in the US and coated at PRO-TEC in Leipsic, Ohio.

The company noted it is offering an exclusive 25-year warranty on ZMAG steel.

The introduction of ZMAG comes less than a week after domestic mills, including U.S. Steel, filed a trade case against coated steel imports, alleging significant dumping margins and an array of illegal subsidies.

The mill capability utilization rate stood at 79.8% last week, rising from 79.2% the week prior and 74.4% a year earlier.

AISI said adjusted year-to-date production was 61,110,000 st through Sept. 7 with a mill capability utilization rate of 76.7%. That marks a 1.8% slip from 62,251,000 st in the same 2023 period when the capability utilization rate was 76.9%.

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

• Northeast – 128,000 st (up 3,000 st)
• Great Lakes – 596,000 st (down 6,000 st)
• Midwest – 215,000 st (up 3,000 st)
• South – 767,000 st (up 7,000 st)
• West – 66,000 st (up 5,000 st)

Editor’s note: The raw steel production tonnage provided in this report is estimated and should be used primarily to assess production trends. AISI’s monthly “AIS 7” report is available by subscription and provides a more detailed summary of domestic steel production.

HR prices for Nucor subsidiary California Steel Industries (CSI) also rose on Monday. The company aims to collect $780/st, representing a $25/st increase from the previous week

Lead times will remain on offer at 3-5 weeks, but Nucor said customers should contact their district sales manager for availability. Published extras will apply to all spot transactions.

SMU’s Sept. 3 check of the market put current HR coil spot prices in the range of $660-720/st, averaging $690/st. The average fell $10/st from the previous week, the first decline in over a month.

In that spirit I will try to showcase three “political football” rules of the game I have gleaned as we enter the warp speed portion of the election cycle. Note that this is not the view of a trade attorney, a political scientist, or cable news commentator. Rather, it is the single view of one of the aforementioned humble journalists. The players in the drama have been disguised to keep objectivity.

• It seems the first rule of political football is to talk about the football. Publish statements, react to statements published by others. Appear on cable news. But, at crucial times, refuse to give a statement, or do not respond at all to those seeking a statement. I will admit here that this is a 4-D level of the game I do not completely comprehend. Still, acting as if what you are saying is the most logical, level-headed, commonsense take vs. your opponent’s far-fetched wackiness seems integral to the process. Appeal to others’ interests, and note your actions are in service to them, never your own.
• If you are a hypothetical leader of the free world, “prepare” to do something. Have this information filter down through the press and even to water coolers and Teams/Slack channels across the nation. After this occurs, stand back and watch rule #1 kick into high gear. The statements, reactions to statements, refusals to give statements, and uneasy silences, could overwhelm comprehension. Perhaps one day a quantum computer will exist to make sense of it all.
• The final takeaway concerns a trading bloc in the Western Hemisphere. Be friends. Lower tariffs. Open doors, build factories across borders. Squabble. Accuse. Shake hands, maybe grab a beer after work. Also, file trade cases that include members of your bloc.

I think the most important rule that often gets overlooked is that it will eventually be Nov. 6. Now I am not saying that on Nov. 6 we will know who will be president. Rather, I’m using “Nov. 6” as a stand-in for whatever date, hopefully before January, when we learn the results of the election. While these issues could help decide votes, those votes are people who will be affected by the decisions taken on these issues. Whether you’re on the floor of a mill, or crunching numbers in a skyscraper, our country is in itself its own “national” trading bloc. We’re all in this together.

Thin gauge in thin supply?

A third standard feature is that the petitions are not limited to products that the domestic industry actually makes. Certain dimensions, especially thin gauges, are not produced by US mills. Why? Because they want to maximize profits by running through their hot- and cold-rolling mills the maximum tonnage.

Thin gauges require more attention to tolerances and reduce the tonnage per unit of time that runs through the mills. Based on the available evidence, domestic producers are not interested in thin gauges. Yet the petitions include those thin gauges within their scope.

What is unusual is the market situation surrounding these cases. In most major case filings, the domestic industry pointed to low import prices. Yet prices in the US now are declining because of a lack of demand rather than cheap imports. Not only that — even with declining prices, the US prices of these products are also the highest of any major world market. That is a result of tariff policies in the last six years or so.

High costs could push manufacturers abroad

Any major producer of products with significant steel content is likely to be looking at how to avoid these high prices that rob them of competitive advantage. That includes autos (body panels and components), appliances, production machinery, and tires (think radial tire cord).

The industry must have concluded that imports of corrosion-resistant steel are a threat that will only get worse. I am not convinced that the industry is right about that. But I am pretty sure that the recent sag in US demand, which has seen import levels decline in the last three months or so, is at least in part due to a rethinking by steel users about where to produce. Tariffs (Section 232, Section 301, as well as antidumping and countervailing duty cases) seem to be a permanent feature of doing business in the US. The result: Many steel consumers might be wary of making substantial manufacturing investments in the world’s highest-priced steel market.

The domestic steel interests do not seem to be worried about that. Perhaps they are counting on the government to impose more restrictions on imports of downstream products, such as autos and capital goods. These are, at least for the most part, covered by Section 232 tariffs. Section 301 tariffs only apply to China. So covering downstream goods would be a major hit on US consumers who are just now seeing reduced (but not eliminated) inflation.

Steelworker clout at consumers’ expense

The two major political parties also seem to be unconcerned. But they should not be so sanguine. Consumers will certainly notice persistent price increases above the levels of other major markets. And businesses will continue to be frustrated by government inattention to the consequences of high tariffs on what used to be globally competitive industries. During the campaign, scant attention has been directed to the widening US trade deficit, which widens not only from increasing imports but also from decreasing exports. In 2023, both total imports and total exports declined slightly from 2022 levels.

Protectionist trade policies have clearly intensified over the last six years. The Trump tariffs were largely continued under President Biden. Consumers, both businesses and individuals, have been largely ignored. Trade cases proliferate because the law ignores consumer welfare in imposing duties.

The consensus between Republicans and Democrats on these points can be explained, at least in part, by the incredibly tight poll numbers leading up to election day. Steel producers in particular have argued that the global market is unfair to them. And policy makers have bought the argument. Even if politicians realize that we cannot disengage from the world (we are even having trouble disengaging from one country — China), the runup to the election requires courting groups of voters (such as steelworkers) who believe they are victims of unfair trade practices by allies and adversaries alike. As long as the races are tight, neither party is likely to adopt rational choices for trade policy.

An irrational choice: Opposition to Nippon-USS deal

What would such rational choices look like? For me, it would require asking protected industries to get better at competing in global markets. We inhabit the same planet as the Chinese, and the Russians, and the Iranians, but we can’t seem to connect measures, such as antidumping and countervailing duties as well as Section 232 and 301 duties, with a requirement to improve competitiveness so that these measures will actually help create better markets.

One example of this policy myopia is the political opposition to the acquisition of U.S. Steel by Nippon Steel. Having looked at this acquisition carefully, I can only say that the only argument against it is political. Candidates from both parties are desperately going after steelworkers’ votes. The economic logic of the acquisition is largely ignored. Nippon Steel is based in one of our most stalwart allies. And that company has made clear its intention to restore U.S. Steel to global competitiveness, without sacrificing workers.

The opposition from President Biden, Vice President Harris, and Donald Trump has revealed that there is little concern at the political level for the future of U.S. Steel.

Editor’s note: This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.

Smoothing out the data

To smooth out the variability in the monthly data, we can look at imports on a three-month moving average (3MMA) basis. On this basis, imports through final July data were at 2.48 million st. Recall that we saw a 22-month high 3MMA of 2.73 million st in May. The 3MMA through August is down further, currently at a seven-month low of 2.25 million st.

For comparison, the average monthly import rate in 2023 was 2.35 million st, while the first seven months of 2024 averaged 2.54 million st.

Semi-finished vs. finished breakdown

Semi-finished steel imports fell 8% m/m in July to a nine-month low of 388,000 st. August licenses currently total 416,000 st, 7% greater than July. For reference, semi-finished imports averaged 524,000 st per month last year. 2024 has seen a monthly average of 561,000 st through July figures.

Meanwhile, imports of finished steel products totaled 2.03 million st in July, a 17% jump from June. The latest finished import tally through August declined 13% to 1.76 million st. Finished imports averaged 1.83 million st per month in 2023, whereas the monthly average for the first seven months of 2024 now stands at 1.98 million st.

Imports by category

Figure 3 shows monthly imports by product category. Following June’s dip, flat-rolled steel imports increased 18% in July to 1.05 million st. License data suggests a potential 8% decline in August.

Imports of long products bounced back in July, surging 57% from June’s nine-month low to 535,000 st. August licenses currently show a decline of 31% m/m to 370,000 st.

Pipe and tube imports fell 19% in July to an eight-month low of 340,000 st. August licenses are up 1%.

Stainless imports rose 32% from June to a two-year high of 111,000 st in July. August stainless projections are currently at 89,000 st, potentially down 20% from July.

Flat-rolled imports

Figure 4 shows flat rolled imports by popular products. July imports ticked higher for all but two categories following June’s dip. The largest monthly mover was cut-to-length plates (+139%), followed by tin plate (+115%), cold-rolled coil (+59%), and other metallic coated (-23%).

August licenses are mostly down across the products we track. Current data indicates significant declines in CTL plates (-55%), hot rolled (-25%), plate in coils (-14%), and tin plate (-14%).

Imports by product

The chart below provides further details on imports by product, highlighting high-volume steel products. Explore this steel trade data deeper on the Steel Imports page of our website.

The case asserts that Canada, Mexico, Brazil, the Netherlands, Turkey, the United Arab Emirates, Vietnam, Taiwan, Australia, and South Africa have been dumping coated flat-rolled steel in the US at prices below market value.

The table below shows the dumping margins alleged in the petition reviewed by SMU.

Country	Min.	Max.	Average
Australia	45.5%	51.35%	48.42%
Brazil	47.0%	99.5%	75.7%
Canada	19.1%	51.3%	35.0%
Mexico	26.67%	41.08%	34.16%
Netherlands	12.8%	20.6%	15.6%
South Africa	51.96%	52.02%	51.99%
Taiwan	–	–	67.9%
Turkey	9.4%	24.47%	16.39%
UAE	76.96%	78.41%	77.68%
Vietnam	–	–	158.83%

The trade case petition also argues that producers in Canada, Mexico, Brazil, and Vietnam have benefited from government subsidies.

Veteran trade attorney Roger Schagrin of Schagrin Associates and lead counsel for SDI and the USW told SMU, “While dumping cases require margin allegations, subsidy cases don’t.”

Subsidy cases “must contain evidence of the programs and use of the programs by foreign producers,” he said.

Petitioners believe they have laid out the evidence of those programs in their 9,000+ page case filing.

The Department of Commerce is tasked with determining the exact amounts of subsidies received during the period of investigation and then establishing the countervailable duty (CVD) rates.

The International Trade Commission (ITC) has scheduled a case hearing for Sept. 26 and its preliminary injury determination vote for Oct. 18.

Editor’s note: This story has been updated to reflect Mr. Schagrin’s position as lead counsel for two of the domestic petitioners, but not all.

There were 582 drilling rigs operating in the US in the week ended Sept. 6, one less than in the week before. The oil and miscellaneous rig counts were stable at 483 and five, respectively, while gas rigs fell by one to 94.

There were 50 fewer active US rigs last week compared to the same week last year, with 30 fewer oil rigs, 19 fewer gas rigs, and one less miscellaneous rig.

Canada rigs

There were 220 active Canadian drilling rigs last week, unchanged from the prior week. Oil rigs fell by one to 152, gas rigs held steady at 67, and miscellaneous rigs increased to one.

There are currently 38 more Canadian rigs in operation than levels one year ago, with 39 more oil rigs, two fewer gas rigs, and one more miscellaneous rig.

International rig count

The international rig count is a monthly figure updated at the beginning of each month. The total number of active rigs for the month of August fell to 931, two less than the July count and 21 fewer than levels one year prior.

The Baker Hughes rig count is important to the steel industry because it is a leading indicator of demand for oil country tubular goods (OCTG), a key end market for steel sheet. A rotary rig rotates the drill pipe from the surface to either drill a new well or sidetrack an existing one. For a history of the US and Canadian rig counts, visit the rig count page on our website.

US CR coil prices averaged $945 per short ton (st) in our check of the market on Tuesday, Sept. 3, up $25/st vs. the prior week. Despite the steady improvement of late, CR tags are still down roughly $380/st from a year-to-date high of $1,325/st in January.

Domestic CR prices are, theoretically, are roughly 22.1% more expensive than imports. That’s up from 18.9% last week. While US CRC prices are still higher than offshore material, the US CR premium is down from a 31.5% premium in early January.

In dollar-per-ton terms, US CR is now, on average, $159/st more expensive than offshore product (see Figure 1). That compares to $131/st costlier on average last week. That’s still well below a recent peak of $311/st in mid-January.

The charts below compare CR coil prices in the US, Germany, Italy, South Korea, and Japan. The left-hand side highlights prices over the last two years. The right-hand side zooms in to show more recent trends.

Methodology

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

We add $90/st to all foreign prices as a rough means of accounting for freight costs, handling, and trader margin. This gives us an approximate CIF US ports price to compare to the SMU domestic CR price. Buyers should use our $90/st figure as a benchmark and adjust up or down based on their own shipping and handling costs. (Editor’s note: If you import steel and want to share your thoughts on these costs, please get in touch with the author at david@steelmarketupdate.com.)

East Asian CR coil

As of Thursday, Sept. 5, the CRU Asian CR price was $508/st, flat week over week (w/w) but down $45/st over the past month. Adding a 71% anti-dumping duty (Japan, theoretical) and $90/st in estimated import costs, the delivered price to the US is $959/st. The theoretical price of South Korean CR exports to the US is $598/st.

As noted above, the latest SMU CR price is $945/st on average, which puts US-produced CR theoretically $14/st below CR product imported from Japan. But US tags are still $347/st more expensive than CR imported from South Korea.

Italian CR coil

Italian CR prices were down $5/st to roughly $695/st this week. After adding import costs, the price of Italian CR delivered to the US is, in theory, $785/st.

That means domestic CR is theoretically $160/st more expensive than CR coil imported from Italy. The spread is up $30/st from last week but still $293/st below a recent high of $453/st mid-December.

German CR coil

CRU’s German CR price was down just $7/st vs. last week. After adding import costs, the delivered price of German CR is, in theory, $803/st.

The result: Domestic CR is also theoretically $142/st more expensive than CR imported from Germany. The spread is up $32/st w/w but still well below a recent high of $431/st in the first week of 2024.

Notes: We reference domestic prices as FOB the producing mill, while foreign prices are CIF the port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Inland freight from either a domestic mill or a port is important to keep in mind when deciding where to source from. It’s also important to factor in lead times. In most market cycles, domestic steel will deliver more quickly than foreign steel. Note also that, effective Jan. 1, 2022, the blanket 25% Section 232 tariff was removed from most imports from the European Union. It was replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25% tariff. A similar TRQ with Japan went into effect on April 1, 2022. South Korea is subject to a hard quota rather than a tariff.

Future Month	Settlement Price on 9/5/24	Settlement Price on 8/7/24	Change
September HRC	$699.00	$724.00	-$25.00
October HRC	$718.00	$744.00	-$26.00
December HRC	$774.00	$779.00	-$5.00

This is the third straight month in which spot price weakness has been felt both on the index level and the forwards, which overall have come off massively this year. Spot month September futures had a peak this year of $879/st. This itself was a nosedive from the start of the year as September had touched an amazing $1,149/st during late December of last year. With one print down and three to go, even if mills can make a move, we are still likely to average out in the $700-715/st range optimistically, perhaps lower if the index does not respond quickly to mills efforts to get prices up.

Farther forward, going into this month the October low was $723/st back on July 23, so we are trading right around that same level here in September now. (Actually, $723/st is the October bid on CME globex at the time of this writing.) December also is remarkably unchanged from a month ago even with the trade case news no longer a rumor but actually playing out in some ways as we would have expected. It’s now a broad ranging trade action that encompasses USMCA members Mexico and Canada. Additionally, there is a greater possibility of blocking the Nippon play for U.S. Steel deal with recent news from the White House.

It seems like from here we are going to need to see some real follow through on spot price increases before the market is willing to price in much additional premium over the current spot levels. But there was a certain uneasiness on Thursday that really had things crazy for a moment. October was trading above $745/st briefly, and markets were approaching $50/st day-over-day increases in some cases before eventually backing off and settling lower. It was still an extreme intraday move for HRC. Will we see more of that, or will the announcement now being made crystalize some things? Check back next month and we will sort out how it was priced in.

Source: data is from Comex HRC futures settlement prices as published by CME group.

Disclaimer: This material should be construed as the solicitation of an account, order, and/or services provided by the FCM Division of StoneX Financial Inc. (“SFI”) (NFA ID: 0476094) or StoneX Markets LLC (“SXM”) (NFA ID: 0449652) and represents the opinions and viewpoints of the individual authors or presenters. It does not constitute an individualized recommendation or take into account the particular trading objectives, financial situations, or needs of individual customers. Additionally, this material should not be construed as research material. The trading of derivatives such as futures, options, and over-the-counter (OTC) products or “swaps” may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand the risks prior to trading. Past results are not necessarily indicative of future results. All references to and discussion of OTC products or swaps are made solely on behalf of SXM. All references to futures and options on futures trading are made solely on behalf of SFI. SXM products are intended to be traded only by individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. SFI and SXM are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Contact designated personnel from SFI or SXM for specific trading advice to meet your trading preferences. Reproduction or use in any format without authorization is forbidden.

“The following day, Bouchard appeared on a cable news program and said that Esmark had $10 billion available in cash committed to the deal and would not put up any of Esmark’s assets as collateral,” the SEC said in a statement on Friday.

Esmark didn’t have the cash to make the deal. And its public statements were therefore false, the SEC said.

“Bouchard and Esmark could not have completed the tender offer for U.S. Steel that they announced,” Antonia M. Apps, director of the SEC’s New York regional office, said in the statement.

“Investors should be able to trust companies’ and executives’ public statements,” she added.

The SEC found that Esmark and Bouchard violated Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-8 thereunder.

Esmark and Bouchard, without admitting or denying the SEC’s findings, agreed to cease and desist from future violations. They also agreed to pay civil penalties of $500,000 and $100,000, respectively.

Recall that Bouchard at the time of the proposed acquisition was chairman and CEO of Esmark. He stepped down from the CEO role last November but continues on as chairman.

A request for comment from Esmark was not returned by time of publication.

In a candid fireside chat with SMU Senior Analyst/Editor David Schollaert, Stelco CEO Alan Kestenbaum opened up about Stelco’s pending sale to Cliffs and his business strategy, industry outlook, and plans for the future. The chat took place on Tuesday, Aug. 24, at the 2024 SMU Steel Summit in Atlanta.

Having overseen and turned around businesses worldwide, Kestenbaum said that Stelco has been one of the most efficiently run operations of his career.

“This is probably the easiest business I’ve ever had. It just runs so well,” he commented, emphasizing the company’s strong fundamentals, low-cost structure, and strategic investment plans.

Low-cost advantage

Kestenbaum credited much of Stelco’s success to its focus on lowering production costs, reinvesting in its facilities, and maintaining operational excellence.

Focusing on being a low-cost producer in a highly capital-intensive industry has allowed the company to weather fluctuations in the business cycle, he said. And reinvesting more than $1 billion into Stelco’s two facilities has been pivotal in reducing conversion costs, even in an inflationary environment.

The CEO said that Stelco’s profitability stems not from chasing the highest-priced contracts but from focusing on cost efficiency in what may be less-glamorous areas of steel production – commodity-grade hot-rolled coil.

Although Stelco has the capability to produce high-grade automotive steel and does have some exposure to the auto market, Kestenbaum sees this as less profitable due to inconsistent demand and low margins.

After conducting various analyses, the company realized that its most profitable products were not the premium, high-cost offerings, but rather more basic products produced at a lower cost.

“Our biggest competitive advantage was on the old, boring stuff,” he commented, and so that is their focus.

“We continue to push our conversion costs lower and lower,” he said, noting the importance of technological upgrades and operational efficiencies.

Securing iron ore supply

Kestenbaum said securing a stable and affordable supply of iron ore in the early days of the Covid-19 pandemic was a critical move for the Canadian steelmaker.

He recounted how the company took advantage of the downturn to negotiate a favorable supply agreement with U.S. Steel, which includes the option to acquire a 25% share of the iron ore mine at a later date.

The deal has given Stelco long-term security in a key input for steel production. This further strengthens the company’s position as a low-cost producer, the CEO said.

Additionally, he noted that internal efficiency gains have helped to offset the pressure of rising raw material prices, including coal and iron ore.

The sale of Stelco

Kestenbaum admitted he “wasn’t looking to sell the business” when approached by Goncalves and Cleveland-Cliffs.

Given Stelco’s strong financial performance, including high dividends, $600 million in cash, no debt, and industry-leading margins, “You don’t sell businesses like that,” he commented. But when considering Stelco’s shareholders, he said the responsible thing to do was to take the offer.

As for the deal’s impact on the wider market, Kestenbaum thinks it will be positive. “The feedback I’m getting from my customers has really been excellent and supportive,” he noted.

He expressed confidence in Cliffs’ ability to integrate Stelco’s operations and mentioned potential synergies in things like iron ore supply that will benefit customers on both sides of the US-Canada border.

Market outlook and US-Canada relations

Despite a bumpy year so far, Kestenbaum remains optimistic about broader market conditions.

With interest rates likely to fall and infrastructure projects expected to pick up, demand for steel should also pick up in the near future, he said.

“I see things very, very optimistically for the next number of years,” he stated.

He also praised Canada’s recent alignment of trade policies with those of the US, particularly the tariffs on Chinese steel, aluminum, and electric vehicles. He believes we’ll see more of Canada closely aligning itself with the US.

He pointed out that Canada and the US share a strong economic relationship, with Canada’s future closely tied to the US economy, which is the biggest in the world.

“We are blessed to be on the doorstep of the US economy,” he noted. “Our future is not with China. Our future is not with Europe. Our future is with our partners in the USMCA.”

What keeps him up at night?

When asked what keeps him up at night, Kestenbaum first said, “That I might invest in an EAF.”

“No, in all seriousness,” he continued, “The challenges that lie ahead on the decarbonization” front are what really energize him.

“Achieving that is something that keeps me up at night, not from the perspective of being fearful, but really being excited about the future,” he noted.

What’s next for Kestenbaum?

Even as he prepares to transition out of Stelco, Kestenbaum remains excited about future opportunities in this business.

He hinted that he remains deeply interested in the metals and mining sector, including base metals and battery metals. And he plans to reinvest the proceeds from Stelco’s sale back into these industries, noting that “these are basic products and are never going to go out of style.”

“I love this business, and why I’m going to continue to stay in it is exactly that – it’s identifying opportunities, coming up with a strategy, and executing,” he stated.

Kestenbaum is confident in Stelco’s future under Cliffs’ leadership. While the sale will mark the end of an era for the Canadian company, he also believes it will set the stage for future growth and transformation in the North American steel industry.

Chinese crude steel output decreased by 9% y/y to 83 million metric tons (mt) but this has not significantly affected prices. The short-lived growth in domestic production following the May Day holidays was the last sign of steel industry life, but cuts only began to accelerate this month, prolonging the oversupply issue. Prices have yet to see any upwards pressure from lower supply as domestic demand falters, due to the weak property market, less government support than hoped and a bearish macroeconomic outlook. A change to the rebar quality standard increased supply pressure as sellers try to destock. Rebar prices in China are at their lowest level since 2017.

RoW follows divergent production trends

In Asia outside of China, the mild but steady production growth of the past few years was reinforced by a 3% m/m increase, bringing the July total to 32 million mt. There was broad-based growth throughout the APAC region, with all the major regional steel producers seeing some level of monthly increase. The standouts were Taiwan and South Korea, with a number of South Korean mills restarting to drive 7% m/m growth. In y/y terms, Vietnam and Turkey continue to increase steel production. Output in Asia outside of China grew 2% y/y.

European output is down to 11 million mt as maintenance shutdowns continue in the face of low and weak demand – weaker than the usual summer slowdown. However, this still represents a 5% y/y increase, and margins are not yet at Chinese levels. A large decline in import availability was no match for the continued downwards price pressure. Overall, Europe saw a 5% m/m decrease in crude steel production.

Both longs and sheet prices were more stable in the US than elsewhere, though price declines still occurred. With mills running up against costs, a potential bottom is in sight. North American crude steel production rose by 3% m/m, but fell 2% y/y because of a severe drop in Mexican output over 2024. This was due in part to the Biden administration’s recent strengthening of US tariffs against Mexican steel. The US, Mexico, and Canada have each announced increased tariffs on Chinese output, further limiting good export options for Chinese producers.

To learn more about CRU’s services, visit www.crugroup.com.