Packard Discusses Steel & Plate Prices & Steel Market Momentum

Steel Dynamics published their lead time sheet and sent it out to their customers this week. We heard from a couple of their customers that this is the first lead time sheet they have seen this year. The lead times on many flat-rolled products were in the month of December (less than 4 weeks). This included galvanized lead times out of The Techs. What is also worth noting is the Sinton, Texas, plant is now on the report. The initial lead times out of Sinton reference hot rolled and cold rolled lead times as being “closed” and galvanized and some painted products as “inquire.”

An SDI customer told me that the mill is caught up on their orders and that his company had very little need to buy steel because their inventories are full. “This thing is changing,” this service center executive told me in reference to an end of steel market shortages. “Several mills are not getting their CRU deals for December [at least on hot rolled]. … We just don’t need steel.”

NLMK USA also put out lead times in November for the first time since last year. Lead times on their products were very similar to those of SDI. In other words, there is spot flat-rolled steel available to purchase.

Plate Mills

One of the Ohio Valley plate service centers told us, “Inventories seem tight in certain items, so plate may have legs until end Q1/early Q2. With HRC not quite in a death spiral, one would think plate is good through Q1. Time will tell.”

A large manufacturer buyer of hot rolled and plate steels told us, “Plate price is probably at the peak of the cycle. It appears that the latest price announcement is expected, and so far the reaction is muted or indifferent.” 

As you can see, there are differing opinions within the plate buying community as to what to expect over the next few months. For that reason, and with no clear direction regarding plate pricing, SMU continues to have our plate price momentum indicator at Neutral while our hot rolled indicator is pointing toward Lower prices over the next 30 days.

What Will New Normal Look Like?

There will be ups and downs in steel prices for the foreseeable future. The question in my mind is what should we expect for the “new normal” range for base hot rolled? This is a question that will be addressed by steel analyst Timna Tanners of Wolfe Research and Todd Leebow, CEO of Majestic Steel, during the 2022 Tampa Steel Conference. It is a question many steel buyers are asking themselves as they try to anticipate what 2022 (and beyond) will look like.

I asked several steel executives to weigh in and provide their thoughts on the subject. A large Midwest-based service center told me, “Too many people think that history will once again repeat itself. This market is different than anything we have seen before, and I don’t believe it will return to the old norm. Look at 2004, that set a new norm, and I believe this market will as well. We won’t be at these crazy prices of today. But the days of $600 (per ton) and below hot rolled are not in the cards anymore either.” 

I asked a steel mill executive to provide his insights as to where he thought “new normal” would be for base hot rolled coil. His response was $800 per ton, or about $200-$300 per ton above where normal was prior to the pandemic and the current market cycle, which took HRC prices close to $2,000 per ton.

When talking about the availability of steel today out of the domestic steel mills, I was told, “There isn’t one that does not have steel available. I told all my … customers two months ago to stop buying long lead time imports because domestic would undercut before arrival. Some listened. Others did not. Demand is good. But as inventories are balanced and as lead times become more normal, there is no point buying June imports today. You and I both know that the HRC price in June could be $80, $75, or $50 per cwt. There is no certainty. The only guarantee in my mind is that it will be high in historical relative terms, but the actual number could be anything. Add $7-$10 per cwt for downstream, and you know some import already booked will not look so good.”

This executive continues with, “I am really jazzed about demand and the overall health of the industry, but anyone who thinks the giant spread between U.S. and ROW (rest of world) will continue to be at record levels needs to learn something about supply and demand. The Vietnam case (and possible follow-ons) is big. Infrastructure is big. These are strong catalysts. But so are new plants that come onstream in H1 ’22. Domestic mills will box out imports. They did not build mills to have them sit idle. That process has begun.”

The process has indeed begun. We now are seeing SDI Sinton lead times. We don’t see new hot rolled and cold rolled tons impacting the market until second quarter 2022. But the build-up of available steel has begun. Next, as we enter the New Year, we will begin to see offers for hot rolled tons off the expansion of North Star BlueScope and the expansion of (Nucor) Gallatin. All of these projects are running late and won’t be flooding the market with cheap tons any time soon. Even so, the combination of SDI Sinton, Nucor Gallatin, and the expansion of NS BlueScope should bring 5.4 million tons of flat rolled into the market.

We have more tons potentially coming out of Mexico with the completion of the ArcelorMittal Mexico expansion. Next year we could see an additional 2.75 million tons coming from that project. Again, these projects are running late, and we don’t expect tons to overwhelm the market at the beginning of the year. But they will be a factor as we move into the second half 2022.

As I mentioned above, there will much to discuss when we meet at the Tampa Steel Conference on Feb. 15-16 (networking events on the 14th). The cost for the TSC is $650 per person. But the price could drop below $500 person if you add the various discounts available to SMU members, past TSC and SMU Steel Summit attendees, as well as group discounts. You can find more information on the conference website: www.tampasteelconference.com or by clicking here.

Also, a quick note to let you know our next Steel 101: Introduction to Steel Making & Market Fundamentals Workshop will be held virtually on Jan. 11-12. You can find more information about that event by clicking here.

Our first in-person Steel 101 workshop will be held on April 20-21, 2022, and we will be touring the Nucor Arkansas steel mill. That workshop will be based out of Memphis, Tenn., and we will take a coach over to the mill as part of the program.

SMU Community Chat Webinar (FREE) – Wednesday, December 1st

Jefferson Shaw, Vice President of Strategy for Evraz North America, will discuss the steel industry, decarbonization, the company’s plans to run its steel mill in Colorado on solar energy, infrastructure and much more during a free SMU Community Chat webinar at 11 a.m. ET (10 a.m. CT) tomorrow. You can register for this webinar by clicking on this link.

As always, your business is truly appreciated by all of us associated with Steel Market Update.

John Packard – John@SteelMarketUpdate.com