June Shipments and Supply of Steel Products

The supply/demand differential remains in place with supply still topping demand even though both shrank in June. Apparent supply (domestic shipments plus imports) in June was still more than 10% above domestic shipments totals, while export totals were roughly unchanged (+0.3%) over the same period. Imports were higher month-on-month (MoM), up 2.4% in June versus May’s total.

Domestic mill utilization averaged 81% through June, down roughly 1.1% from May’s 81.9% and down 2.1% versus the same year-ago period. Prices began sliding in May once raw material availability due to the war in Ukraine began to fade and accelerated through June as supply outpaced demand.

SMU’s benchmark hot-rolled coil price declined by roughly $330 per net ton ($16.5 per cwt) in June. It had peaked at $1,480 per ton during the week of April 19, and has been declining since. HRC prices closed out June at an average of $955 per ton FOB mill, east of the Rockies on June 28. Prices declined throughout the month, a trend that accelerated and has carried well into early August.

The earlier price bounce reflected uncertainty stemming from the war in Ukraine and the subsequent sanctions against Russian enterprises. The market has reset since, bringing prices down. According to SMU’s latest check of the market on Aug. 9, the price for HRC averages $820 per ton. Raw steel production, shown below in Figure 1, is based on weekly data from the AISI. It is displayed here as four-week moving averages through June 3, 2022.

Monthly shipment data for all rolled steel products and exports are noted in Figure 2. Measured as a three-month moving average (3MMA) of the monthly data, June’s total was 8.140 million tons, down just 1% versus 8.224 million tons in May. Monthly shipments have increased only once monthly over the past eight months for the 3MMA analysis. Shipments were down 2.6% in June versus the year prior when shipments were 8.354 million tons. The recovery from Covid-related shutdowns just over two years ago was meaningful. But June’s shipments fell below the same pre-pandemic period in 2019 by 2.4%.

All rolled product exports totaled 815,568 tons in June, up 0.3% MoM but 22.2% higher versus the same year-ago period. June’s total is the third-highest export mark since May 2017, when the US exported a total of 884,314 tons.

Shipment and supply details for all product groups and individual sheet products are noted in Table 1. Domestic supply (shipments and imports) is shown in Table 2. Total supply (a proxy for market demand) as a 3MMA was up year-on-year (YoY) in June, but well behind of the 34% growth seen the year prior—when the market was recovering ground lost during the early pandemic-related disruptions.

Apparent supply is defined as domestic mill shipments to domestic locations plus imports. Mill shipments were down nearly 3% and a far cry from the 41% growth seen during the year-ago period in the same 3MMA comparison. The recovery has varied significantly among various products. But it should remain relatively on a similar trajectory due to steady domestic output, even as foreign material continues to trickle into US ports at current or similar rates.

Total sheet and strip apparent supply is down year-to-date (Table 2) compared to 2021. It is down 2.3% over the past three months and approximately 1.4% lower MoM. Total rolled product apparent supply is up over the same year-ago period but is trending down on a three-month moving average basis. Note that year-over-year comparisons have seasonality removed.

The supply picture for HRC, CRC, and HDG since January 2009 as three-month moving averages versus the long-term comparison between flat and long products is shown side-by-side in Figure 3. On the left chart, all three sheet products are displayed. They had experienced some improvement since mid-2020 but have now been trending downward despite a slight recovery in June. When compared to the same pre-pandemic period in 2019, all three are down. Supplies of cold rolled have seen the largest percentage decline (-16.4), followed by hot rolled (-7.3%) and galvanized (hot dipped and electrolytic) down just 0,4% from the same pre-pandemic period in 2019. In the right chart, note that these are monthly numbers (not 3MMAs), which show the trend difference between longs and flat products including plate.

By David Schollaert, David@SteelMarketUpdate.com