Final Thoughts

Have Prices Found a Floor?

We’ve gotten used to wide spreads between highs and lows over the last 2.5 years. The current market is no exception despite chatter in some corners about things returning to normal.

Pre-increase discounts contributed to a sloppy late June market. (It didn’t help that there might have been some deal-making to try to juice Q2 results too.) You know the old trick: Drop prices to bring in orders from larger buyers so you can stretch out lead time and gain more leverage to enforce higher prices.

The result: In mid/late June, you could have the same mill responsible for both the lowest and highest price points in the market. A mill might have cut a deal for buyers ordering tens of thousands of tons at ~$750 per ton while also offering post-increase prices of as much as $950 per ton, a $200-per-ton spread between high and low.

The increases might have taken sub-$800 deals out of the market. It remains to be seen whether mills will succeed in pushing spot HRC tags above $900 per ton after the holidays, especially amid chatter that some are struggling to close out July.

Keep an eye on lead times and mill negotiations. If lead times start to push out as mills try to “hold the line,” it could be a sign that the increases are taking hold. If lead times stay where they are or contract while mills continue to negotiate, it’s a sign that the price hikes flopped.

Note: We’ll be updating prices on Wednesday and lead times on Thursday.

UAW Contract Negotiations

Some of you are paying close attention to upcoming contract talks between the United Autoworkers union (UAW) and the “Big Three” automakers – General Motors, Ford, and Stellantis. But some of you have told me it wasn’t on your radar.

If it’s just now on your radar, here’s a quick timeline. Contract negotiations begin on July 13. Contracts between the UAW and the Detroit-area automakers expire on Sept. 14 at 11:59 pm. Talks between the Big Three automakers and union workers in Canada, represented by Unifor, are also coming up. Those negotiations are slated to begin in August.

Talks in the US might not be officially underway yet. But rhetoric from the UAW is already heated. We saw something similar last summer in negotiations between the United Steelworkers (USW) union and flat-rolled steel mills in the US and Canada. Union-represented steelmakers and the USW in both countries ultimately reached deals – even if there was no shortage of sharp words and brinksmanship.

We might see a similar pattern in the UAW talks. That said, there are some extenuating circumstances. Prior UAW leadership, as has been widely reported, became embroiled in a corruption scandal. I’m told new leadership is under pressure to clean house and to prove to the rank-and-file members that it can and will fight for their interests.

Are we already seeing some evidence in the physical market of preparations for a strike or lockout?

I ask because Reuters reported last week that Stellantis had put three assembly plants involved in SUV and Jeep production on “critical status” – meaning those plants can run for seven days a week for up to three months. UAW members, according to Reuters, said the move was to build stock ahead of the negotiations. Stellantis said it was in response to strong demand.

USW members negotiated generous terms last year – like a 20% increase in base wages in some cases. Would UAW members be willing to settle for a generous pay raise, and would US automakers be willing to offer one?

We’ll see. As I’ve noted before here, a strike at the USW-represented mills last year would have squeezed supplies. A strike or lockout at domestic automakers would have the opposite effect, hammering demand.

Imports

I’ve been writing for a while now that imports could move higher over the summer months as material ordered in Q1, when US prices were high and lead times long, hits US docks.

We’re already seeing some evidence of that. The US imported 863,451 metric tons of flat-rolled steel in May, according to preliminary figures from the Commerce Department. That’s up 44% from 676,733 tons in April. It also marks the highest level since 974,006 tons in August 2022.

Some of you think the trend won’t continue, noting import offers for HRC for October delivery to the US as high as $800-820 per short ton – not an attractive price given uncertainty over whether domestic mill price hikes will stick.

But could the trend of higher imports continue into the summer? June data from Commerce isn’t complete yet. It’ll be interesting to see what the numbers are once it is.

Steel 101: July 18-20 (Virtual)

Our next Steel 101 training course will be virtual. We’re holding if over three days – July 18-20.

It’s a great way for people new to the industry to learn the basics of steelmaking and key end markets. We’ll discuss more advanced things like coating extras and futures too. The course can also be helpful for industry veterans, or those not directly involved in steelmaking, to get a broader understanding of the industry.

You can learn more and register here.

PS – A belated happy Canada Day to our friends north of the border!

By Michael Cowden, michael@steelmarketupdate.com