Raw steel output from US mills has slipped for a fourth consecutive week, according to the latest figures released by the American Iron and Steel Institute (AISI). This marks a 20-month low for production.
Total US raw steel output was estimated at 1,606,000 short tons (st) in the week ending Oct. 5. This was off 2.4% from 1,646,000 st the previous week.
Production fell 4.6% compared to the same week last year when mill output totaled 1,684,000 st.
The mill capability utilization rate dropped to 72.3% vs. 74.1% the prior week and 73.8% a year earlier.
Year-to-date production stood at 67,818,000 st at a capability utilization rate of 76.6%. This was a 1.7% decline from the 69,009,000 st produced in the same time frame last year.
Weekly production by region is shown below, with the weekly changes noted in parentheses:
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.
Slowing growth in data center planning caused the Dodge Momentum Index (DMI) to pull back in September. The index’s decline followed five months of growth since hitting a two-year low in March.
Dodge Construction Network (DCN) reported a DMI of 208.6 in September, a 4.2% drop from 217.7 the month before. Despite a 5.2% improvement in institutional planning, commercial planning contracted 7.8%.
“A surge in data center activity drove much of the recent rapid growth in the DMI – so as planning for that sector moderated over the month, overall commercial planning fell back,” explained Sarah Martin, DCN’s associate director of forecasting.
On the commercial side, planning for warehouses, offices, and stores slowed. Hotel planning, meanwhile, has been accelerating over the past five months and expanded further in September. And while data centers continued to account for the bulk of large projects, their growth rate slowed, according to DCN.
Education, healthcare, and recreational projects drove the September expansion in institutional planning, while religious planning declined.
Despite the index’s monthly decline, Martin pointed out that it “remains at very robust levels.”
Compared to a year ago, September’s DMI was 21% higher, with the institutional segment rising 4% and the commercial segment surging 31%.
“By mid-2025, the Fed’s rate cuts should spur planning projects to reach groundbreaking more quickly – leading to stronger nonresidential activity as 2025 progresses,” Martin added.
The DMI tracks the value of nonresidential construction projects entering the planning stages and typically leads construction spending by about 12 months.
Nucor’s consumer spot price (CSP) for hot-rolled (HR) coil is unchanged this week at $730 per short ton (st).
This marks the third consecutive week the Charlotte, N.C-based steelmaker has kept its spot HR price at $730/st. The weekly price is up just $20/st since the start of September. It’s up a more significant $80/st from a low of $650/st in July.
This week’s CSP from Nucor remains at the top of SMU’s current price range of $680-730/st for HR coil. The average HR price established in our Oct. 1 check of the market was $705/st. We will again update prices this Tuesday.
Nucor also told customers on Monday that it would maintain the $790/st CSP for HR purchased from its West Coast joint venture subsidiary, California Steel Industries (CSI).
Check out SMU’s mill price announcement calendar on our website to track this and other flat-rolled steel price notices.
Surprise, surprise. Forget Halloween; the trend this October is all around the unexpected. Known as the “October Surprise,” you never know what is in store for you in the month before a US presidential election. Still, if we pull the dial back date-wise a little bit, a familiar theme has been added to the mix: Kick the can.
You may remember this from such hits as The Global Arrangement on Sustainable Steel and Aluminum. The US and EU had a deadline of Oct. 31, 2023. One particular sticking point was the carbon border adjustment mechanism (CBAM) that goes into effect in Europe next year. It’s widely viewed as a non-starter in the US. What would happen? Who would bend?
Turns out no one. A compromise never came. Both sides merely extended their existing trade arrangements for 15 months. One thing of note for those expert in math calculations: 15 months after Oct. 31, 2023… is after the US presidential election.
Nippon Steel’s play for Pittsburgh-based U.S. Steel was first announced last December. Most people thought of it as a sure thing; at least, that was the general consensus. A US ally that already had investments here and a big pocketbook. It just made sense. What could go wrong?
Cleveland-Cliffs and the United Steelworkers (USW) union were against the deal almost from the start. Soon, notable politicians piled on. And then, current and former presidents (Joe Biden and Donald Trump, respectively) joined the fray. And when Biden said he wouldn’t run for re-election, Democratic nominee and current Vice President Kamala Harris said she opposed the buy.
The tension mounted. It seemed like it was fourth and goal, and the crowd was on its feet. At least we were here at SMU. How would it affect the country when people went to the polls?
Well, in this case, the decision was punted. Last month, it was reported that no decision would come before the election.
We all remember United Auto Workers (UAW) President Shawn Fain’s colorful language during the union’s strike last year. Apparently, he wasn’t fond of billionaires. International Longshoremen’s Association (ILA) President Harold J. Daggett took a look at Fain’s playbook and said: Hold my beer.
The ILA and the United States Maritime Alliance (USMX) were locked in contract negotiations that affected thousands of workers along the East and Gulf Coasts. The deadline was Oct. 1.
In an interview in September, Daggett promised that a strike would “cripple” the US economy. His language on other matters was colorful as well. And there was an implicit promise of doom. I’m sure the incumbent administration wasn’t thrilled about such an event unfolding in the October surprise time frame.
A reprieve never came, though, and the strike went ahead on Monday. Supply-chain snarls? Would other unions, notably the Teamsters (also fond of colorful language), join in?
And then the strike ended on Thursday. That is, a tentative agreement was reached to extend the current contract until Jan. 15.
While that’s after the election, keep in mind that Inauguration Day is Jan. 20. I’m sure everything will be fine.
So, as this month unfolds, what other surprises could be in store for us? In an effort not to tempt fate, perhaps it’s best not to speculate. Still, let’s just hope the ultimate kick the can doesn’t take place.
I mean, they can’t suspend the election until after the election. Good logic must always prevail. Until Nov. 5, though, we’ll just be keeping an especially close eye on things, and carrying a rabbit’s foot.
On Thursday, the International Longshoremen’s Association (ILA) and the US Maritime Alliance (USMX), representing carriers and port operators on the East and Gulf Coasts, announced a three-and-a-half-month extension of the recently expired collective bargaining agreement.
The extension kicks the can down the road until Jan. 15, 2025, after the 2024 election and the certification of the results on Jan. 6.
The extension grants (at least temporarily) a $24-per-hour increase in income for ILA members. (Top pay would increase over six years to $63 per hour). But the issues that gave rise to the strike remain.
Longshoremen are very well paid. They work only part of the time because the number of longshoremen vastly exceeds the ports’ labor requirements. Average salaries before the strike were said to be about $150,000 per year, with much of that coming from overtime pay. Some longshoremen earn well above the average.
Not that I begrudge them that. They work hard. And they are under an increasing threat of losing jobs because of automation of the ports.
Longshore work is in transition because of automation. And it’s been that way for a long time. International shipping has been totally transformed in the last 60 years due to containerized shipping. One might assume that the huge increase in international trade over that period would add jobs, but it hasn’t. The reason—increasing mechanization of the handling of imported and exported goods.
The ports that were on strike for three days last week were primarily container ports, where longshoremen operate machines to hoist shipping containers on and off huge container ships. Goods that are not in containers (such as many types of steel and other metals) tend to arrive at ports that were not shut down by the strike. SMU reporter Laura Miller explained this in a recent article (Oct. 3).
When containers took over a large percentage of international commerce more than 50 years ago, the ILA tried to stem the loss of jobs by requiring shippers to empty the containers and then fill them up again at the ports. The picket signs at the ports from Oct. 1-3 brought back memories of the resistance to change all those years ago. The automation of ports, especially the screening of trucks and rail cars entering and exiting ports are a source of concern by the union. Some ports have installed digital scanning equipment that replaces manual inspection of containers.
Where you stand on issues like automation, of course, depends on where you sit. Issues are almost never as simple as they first appear. It may seem to some that replacing a human inspector with a digital scanner is simple progress. But an industry in transition needs to be careful that these changes don’t undermine the structure of a complex collective bargaining agreement.
The Wall Street Journal recently pointed this out by noting that there are many more dock workers than are needed. Many earn handsome salaries by not working much. That sounds wasteful—but the cities where they work need time to adjust to fewer workers on the job. The situation is similar to that of railway workers when steam locomotives were phased out in favor of diesel and electric. Many of the more modern engines had firemen on board for years after the steam engines were gone—even though the traditional job of a fireman was to shovel coal.
A protracted strike would have potentially impacted the 2024 election. President Biden declined to take action under the Taft-Hartley Act to end the strike with an 80-day “cooling off” period. But the extension of the contract and suspension of the strike had an almost identical effect.
Now that the strike has ended, the pressure is off. This is widely seen as benefiting Democrats. We’ll see.
Many issues are more complex than they appear at first glance. For example, I read with interest Barry Zekelman’s article responding to my column last month about electrical conduit from Mexico. It’s true that there is a controversy about the correct tariff classification of certain conduit.
The Court of International Trade decided that one importer’s classification was incorrect. It happened that the classification that importer chose was not covered by the Section 232 tariffs, while the classification that the court ruled to be correct is covered by the Section 232 tariffs.
Of course, no imports of product from Mexico are taxed under Section 232. Requiring the subject classification would put more product from Mexico into the “potentially taxed” category, if certain steel interests succeed in re-imposing tariffs on Mexican steel imports.
The issue remains: Should Mexican steel imports be hit with tariffs? The “surge” in imports of Mexican conduit is pretty minor, even considering the dispute about which tariff classification is correct. It’s fair to say that at least one side thinks the controversy over the right tariff classification is a legitimate disagreement about interpreting the tariff schedule. A decision is expected in the next few months out of the Court of Appeals for the Federal Circuit.
The price gap between US-produced cold-rolled (CR) coil and offshore products narrowed slightly in the week ended Oct. 4, mainly due to a price jump in Asian markets.
Domestic CR coil tags remain higher than offshore prices on a landed basis. US prices recovered week on week (w/w), while movements in offshore tags were mixed.
US CR coil prices averaged $960 per short ton (st) in our check of the market on Tuesday, Oct. 2, up $15/st vs. the prior week. Despite some improvement as of late, CR tags are still down roughly $365/st from the year-to-date high of $1,325/st in January.
Domestic CR prices are, theoretically, 23% more expensive than imports. That’s down from 24.6% last week and 31.5% in early January.
In dollar-per-ton terms, US CR is now, on average, $176/st more expensive than offshore products (see Figure 1). That’s down $3/st from last week and is 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 shows prices over the last two years. The right-hand side zooms in to highlight more recent trends.
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.)
As of Thursday, Oct. 3, the CRU Asian CR price was $535/st, up $36/st w/w and ~$27/st higher than a month ago. Adding a 71% antidumping duty (Japan, theoretical) and $90/st in estimated import costs, the delivered price to the US is $1,005/st. The theoretical price of South Korean CR exports to the US is $625/st.
As noted above, the latest SMU CR price is $960/st on average, which puts US-produced CR theoretically $45/st below CR product imported from Japan and $335/st above CR imported from South Korea.
Italian CR prices were down $14/st to ~$660/st this week. After adding import costs, the price of Italian CR delivered to the US is, in theory, $750/st.
That means domestic CR is theoretically $210/st more expensive than CR coil imported from Italy. The spread is up $29/st from last week but is still $243/st below a recent high of $453/st mid-December.
CRU’s German CR price was down $14/st vs. the previous week. After adding import costs, the delivered price of German CR is, in theory, $756/st.
The result: Domestic CR is theoretically $204/st more expensive than CR imported from Germany. The spread is up $29/st w/w and still well below a recent high of $428/st in the first week of 2024.
General Motors is temporarily stopping production at a plant in Michigan and one in Texas due to supply-chain fallout from Hurricane Helene.
“Production at Flint Assembly (in Mich.) is cancelled for all shifts on Oct. 4, and Arlington Assembly (in Texas) is canceled for all shifts on Oct. 4 and 7 because of impacts to suppliers as a result of Hurricane Helene,” a spokeswoman for GM said in a statement to SMU.
“We are working with these suppliers to resume operations as quickly and safely as possible for their employees and communities, as we seek to minimize impacts on our plants,” she added.
Flint Assembly has 4,617 employees and manufactures heavy-duty crew and regular cab trucks. These include the Chevrolet Silverado HD and the GMC Sierra HD Denali and Sierra HD.
Arlington Assembly has 5,410 employees and builds full-size SUVs such as the Chevrolet Tahoe and Suburban, GMC Yukon and Yukon XL, as well as the Cadillac Escalade and Escalade-V.
Hurricane Helene made landfall in Florida on Sept. 26 and sowed damage across the Southeast, with western North Carolina particularly hard hit. The death toll has topped 200, according to a story in USA Today.
UPDATE: On Monday, Oct. 7, GM sent the following statement to SMU: “After a brief pause in production at GM’s Flint and Arlington assembly plants due to supplier-related issues in the aftermath of Hurricane Helene, production will resume at both plants.”
The automaker said Flint has already resumed operation, while Arlington will resume Monday evening on third shift.
“Our teams are confident we can make up any lost production over the coming days and weeks,” GM added.
China is challenging Canada’s decision to impose tariffs on imports of Chinese steel, aluminum, and electric vehicles.
The 25% tariffs on Chinese steel and aluminum, announced by the Canadian government in late August, won’t go into effect until Oct. 15.
But collection of the 100% tariffs on EVs began on Oct. 1.
China wasted no time in responding. On Wednesday, Oct. 2, China’s Ministry of Commerce announced its intentions to dispute the tariffs at the World Trade Organization (WTO).
“China has filed a lawsuit against Canada’s unilateralism and trade protectionism in the WTO and has launched an anti-discrimination investigation into Canada’s restrictive measures,” a Ministry spokesperson said.
“Canada should view bilateral economic and trade cooperation rationally and objectively, respect facts, abide by WTO rules, and not go further and further down the wrong path,” they added.
After Canada first announced the tariffs in late August, China retaliated by launching an antidumping investigation into its imports of canola oil from Canada.
“China’s antidumping investigation on canola imports from Canada is fundamentally different from the discriminatory measures taken by Canada in violation of WTO rules,” the Ministry spokesperson said. They added that AD cases are legitimate and WTO-compliant.
Canada has provided lists of the products covered under the new tariffs: The metals items can be found here, and the EV list can be found here.
The Canadian government noted that “the surtaxes will not apply to Chinese goods that are in transit to Canada on the day on which these surtaxes come into force.”
It said it would review the surtaxes a year after implementation to consider extending them or supplementing them with additional measures.
Canada’s steel industry had previously called for the alignment of tariffs with the US and welcomed the levies.
“With this tariff alignment with our CUSMA partners, the US and Mexico, we are protecting the North American trading space against China’s state-sponsored excess capacity and its destructive effects on our markets,” said Catherine Cobden, president and CEO of the Canadian Steel Producers Association (CSPA).
The tariffs “will align us with our largest trading partner and protect our highly integrated North American supply chains,” she added.
US drilling activity fell to a four-week low last week and remains near multi-year lows, according to the latest data released from Baker Hughes. Meanwhile, Canadian counts increased for the second consecutive week, now at one of the highest levels recorded in seven months.
Through Oct. 4, there were 585 drilling rigs operating in the US, two fewer than the week prior. Oil rigs counts were down five to 479, gas rigs rose by three to 102, and miscellaneous rigs were unchanged at four. There were 34 fewer active US rigs last week compared to the same week last year, with 18 fewer oil rigs and 16 fewer gas rigs.
There were 223 active Canadian drilling rigs as of last week, five more than the previous week and the highest count recorded since early March. Compared to the week prior, oil rigs rose by five to 157, gas rigs eased by two to 63, and miscellaneous rigs were up two to three.
There are currently 43 more Canadian rigs in operation than levels one year ago, with 49 more oil rigs, nine fewer gas rigs, and three more miscellaneous rigs.
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 September rose to 947, up 16 from the August count and seven more 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.
George Adams said he feels fortunate to be able to work with his kids at SA Recycling, the company his family founded.
But that’s not the case with many family-owned businesses.
Adams said he’s often asked by peers in the industry how to get their children interested in joining the company.
“At the end of the day, there’s nothing you can do to make your son want to go into the business,” Adams said during a panel discussion at the Recycled Materials Association’s Roundtable in Chicago recently. “They have to make that decision on their own. And I must say I was surprised when they told me they wanted to come into the business.
“When I was growing up, I didn’t really have a choice, because if you didn’t work you didn’t eat,” Adams laughed. As CEO of SA Recycling, he helms the California-headquartered company with his own siblings.
“So often money destroys a business, right? And I am very lucky that I had the support of my parents, my siblings, two who are still working with me in the company today, and now my sons, and my wife, who I met at the company.”
Fellow panelist, Frank Cozzi, CEO of Cozzi Recycling, said the secret to building any business is to have a good team around you.
“What better place to start and build a nucleus than within your own family, people you can trust and who have the same goals,” Cozzi said.
Cozzi Recycling began as a rag-and-junk business founded by the Cozzi family in 1945 in the Chicago area. It has since grown to be one of the largest scrap companies in the Midwest. Now headquartered in Bellwood, Ill., the company is a mill-direct supplier of both ferrous and nonferrous scrap metal.
Cozzi said the younger generation was familiar with the history of the company and the challenges it faced at different times.
“Trying to teach them not to make the same mistakes that we made, that’s been a challenge in some respects, but they have the work ethic and knowledge of the industry,” Cozzi said. “Many of my sons have been around the business now for 30 years. They’re pretty much what drives things today.”
Adams said he and his kids don’t always agree on what direction they should go. He noted how much they rely on technology to aid decision making.
“Business today is all data driven,” Adams said. “I’m 68 so I didn’t grow up with a computer. I didn’t have a cell phone until I was 30.
“You can’t run an organization as big as ours without data,” Adams said. “They have a huge advantage over me on that, but, at the end of the day, it’s going to be their company. So I don’t take it personal. Some fathers say it’s their way or the highway. It’s just not that way with me.”
Editor’s note: This column appeared first in Recycled Metals Update (RMU), SMU’s new sister publication. RMU is devoted entirely to the ferrous and nonferrous recycled metals markets. If you’d like to learn more, visit RMU’s homepage and register for a free 30-day trial.
The LME three-month price was moving up again on the morning of Oct. 4 and at the time was seen trading at $2,663 per metric ton (mt).
Oct. 3 was marked by heavy profit-taking after the LME price reached a high of $2,688/mt in early trading. The price has since stabilized and is actually moving higher again at the time of writing. The focus will be on the US non-farm payroll report for September. The market expects slightly fewer jobs created in September (140,000) vs. August (142,000).
The US Commerce Department has determined final anti-dumping (AD) and anti-subsidy (CVD) duties on aluminum extrusions from China, Colombia, Ecuador, India, Indonesia, Italy, Malaysia, Mexico, South Korea, Taiwan, Thailand, Turkey, the United Arab Emirates, and Vietnam. The AD levies range from 2.02% to 376.85% and CVD tariffs from 1.44% to 168.81%.
“These final determinations are another key step in remedying the harm caused by illegal dumping by foreign producers of aluminum extrusions, many of which have also benefited from unfair subsidies,” said lawyer Robert DeFrancesco, who represented the joint petitioners, the US Aluminum Extruders Coalition and multi-industry United Steelworkers (USW) union.
The antidumping and countervailing duty cases were filed on behalf of the US Aluminum Extruders Coalition, a coalition of 14 leading aluminum extruders in the US. The final say rests with the US International Trade Commission (ITC).
How is this case affecting the market? In August, the total volume of US imports of bars, rods, and profiles or pipes and tubes reached 24,000 mt, reflecting an 11% m/m increase. Interestingly, imports of these products from the 14 countries involved in the ongoing trade case have not shown any significant change during the same period. Additionally, the share of imports compared to domestic production has remained steady. Together, these factors suggest that the effects of the trade case have not yet had a noticeable impact on the market.
The latest shipment report by the US Aluminum Association also shows weaker trends for August. According to the association, shipments of extruded products in North America totaled 369 million pounds in August, representing a decline of 4.8% y/y and down 5.5% for the year-to-date (YTD) period up to August. More significantly, this is weaker than the decline of 0.6% reported in July 2024 vs. July 2023.
Overall, the sector has been in contraction mode since June 2022, with the trend looking weaker recently. This comes in contrast with rolled products as shipments have shown y/y growth consistently every month since August 2023. However, the recovery remains fragile, with the latest report for August showing a small growth of 1.6% y/y. This is down from the 4% y/y growth reported in July and much less than the peak of over 14% seen in February this year.
Rio Tinto’s previously announced acquisition of Mitsubishi Corp.’s (Mitsubishi) 11.65% interest in Boyne Smelters Limited (BSL) was completed on Sept. 30. BSL owns and operates the Boyne Island aluminum smelter in Gladstone, Australia. Following completion of the transaction, Rio Tinto’s interest in BSL is now 71.04%.
Rio Tinto added that previously announced acquisitions by Rio Tinto of Sumitomo Chemical Co.’s (SCC) 2.46% stake in BSL, and SCC’s 20.64% interest in New Zealand Aluminum Smelters (NZAS) – which owns and operates the Tiwai Point aluminum smelter in New Zealand – continue to advance through different conditions that must be met.
The acquisition of Mitsubishi’s stake in BSL was for an undisclosed price, as is also the case for the agreed acquisitions of SCC’s stakes in BSL and NZAS.
Hydro celebrated the expansion and relocation of its technology centre from Zeeland, Mich., to Cassopolis, Mich. The new technology center is located next to the aluminum recycling plant Hydro opened in November last year. The new center will allow Hydro to meet the growing demand for low-carbon aluminum products in the US with the appropriate technical resources.
Accredited by the American Association for Laboratory Accreditation, the new technology center will serve as the only testing laboratory in the Hydro system capable of providing third-party certified testing for strength, corrosion resistance, and other aspects of aluminum performance. In addition to this center, Hydro also operates a technology center in Troy, Mich., supporting Hydro’s extrusion plants throughout North America.
Editor’s note: This article was first published by CRU. To learn more about CRU’s services, click here.
Scrap declines caused US rebar prices to edge down m/m in October, while all other products remained flat. The appetite for longs imports stayed low as domestic suppliers can meet current demand. Still, uncertainty surrounding scrap prices and seasonal declines in downstream construction activity have market participants shifting their focus on securing their year-end requirements.
While merchant bar and structurals prices were unchanged from last month, the US rebar assessment fell $0.75/cwt ($15/st), largely because of weaker shredded scrap prices in some regions. With mill maintenance outages slowing, suppliers noted slightly better activity, but buyers are becoming more inclined to shop around for pricing. However, as Q4 begins, buyers are also being mindful of year-end inventory management and not taking on too much supply.
Low-carbon wire rod prices were flat m/m as producers are unwilling to reduce prices further due to higher production costs and narrowed margins. As a result, wire rod prices have largely decoupled from scrap movements amid continued declines. Competitively priced domestic material has kept imports at bay, with September license volumes down 33% from August, according to the US Department of Commerce.
A recent topic of conversation among market participants is how leading indicators of market demand have diverged. The Architecture Billings Index (ABI), which measures architecture firm billings as a lead indicator of non-residential construction activity over the next 9-12 months, fell in August. At the same time, the Dodge Momentum Index (DMI), which measures the value of non-residential construction projects in the planning stage over 12 months, rose m/m. While the timing of when these indices are assessed could play a part, the likely reason is that one measures the revenue an architecture firm will receive for non-residential construction projects (ABI), whereas the other measures the value of the projects themselves. For instance, a $450 million data center that broke ground would boost the Dodge Index for that month, but a slowdown in designs for projects like the retail or office sectors would cause the ABI to decline.
Nonetheless, the US Census Bureau reported that construction spending (not seas. adj.) rose in August to nearly $197 million, up 7.6 % y/y. Residential spending was nearly flat from July levels, while non-residential rose 1.2% m/m. The main non-residential sectors driving this activity were public safety, manufacturing, and water supply.
In Brazil, domestic long prices increased 3.7% m/m as demand improved, even after the central bank increased interest rates during its September meeting. According to IABr, the production of long products remained stable in August compared to July but rose by 19% y/y, with the year-to-date production increasing by 4.3% y/y. Market participants said this increase in production is in response to expectations of better demand in the coming months. In terms of trade, imports rose in August by 36% m/m to 112,000 mt, with the main sources of imports being China and Egypt, while exports decreased by 18% m/m to 68,000 mt.
Learn more about CRU’s services at www.crugroup.com.
The International Longshoremen’s Association (ILA) union and the United States Maritime Alliance (USMX) reached a tentative agreement on wages on Thursday evening.
The move ends a strike at East Coast and Gulf Coast ports that began on Tuesday and that had threatened significant supply-chain disruptions.
“Effective immediately, all current job actions will cease and all work covered by the Master Contract will resume,” ILA and USMX said in a joint statement on Thursday.
The union and USMX, which represents maritime employers, agreed on wages. They also agreed to extend the current contract until Jan. 15, 2025. The two sides said they would use that time to negotiate other outstanding issues.
USMX had offered a 50% wage increase over the life of a proposed six-year contract. The ILA wanted 77%. The two sides ultimately agreed to a 62% increase in hourly pay, according to media reports.
The other big sticking point is automation. The joint statement did not address that issue.
The strike had targeted container terminals and not the breakbulk facilities that handle the bulk of steel shipments. But parties across the steel and ferrous scrap supply chain could have been severely impacted if the strike had dragged on.
Another day, another massive gap between the news and market sentiment.
On the news side, we’ve got war in the Middle East. The devastation facing western North Carolina is coming into tragic focus. And the outcome of the presidential election remains a coin toss, according to current polling.
How do things look on the steel side? “Boring and dull” is how FGM Founder and CEO Jeremy Flack described the steel market during SMU’s Community Chat on Wednesday. And take a look at “Market Chatter” – one of our most-read sections. Not a lot of enthusiasm there, either.
Most respondents to our survey reported that inventory was moving more slowly than a year ago. They also said demand was stable or declining. Few said it was improving.
When it comes to pricing, most said prices were stable. Some expected modest declines, others modest gains. None predicted a price spike.
Here are a few quotes from ‘Market Chatter’ that caught my attention:
Why those ones? For starters, it’s not just “meh” when it comes to what people are saying. We also see that in our survey data. (See slide 18 here.)
Most people expect prices to be roughly where they are now or a little higher two months from now. (SMU is at $705 per short ton (st) on average when it comes to hot-rolled coil.)
Few (13%) think we’ll pop over $800/st by then. And even fewer (6%) think we’ll fall into the low $600s, as we did in July. Flack made a good point that this might reflect the “recency bias” that humans, including us in steel, tend toward. We pretty much expect that the next 90 days will look more or less like the last 90 days.
It’s usually a safe bet that tomorrow will look more or less like today. But given current events – and that we have an election in just over 30 days – maybe less so now.
Take the ports strike. I’ve had some people tell me that breakbulk shouldn’t be impacted. That means most steel should be OK. Except perhaps for some galv coming in via containers. But others tell me that the longer the strike drags on, the more potential for other unions to refuse to cross picket lines, which could mean disruptions for breakbulk as well.
Even if breakbulk isn’t impacted, how long is it before imports of auto parts, which do come in containers, start to slow automotive assembly lines? As Steve Miller notes in a good article for Recycled Metals Update (RMU), exports of containerized scrap could grind to a halt. What happens to that material? Does it flow inland instead and pressure prices in the Midwest or Southeast?
It’s hard to handicap the impact of strike without know how long it will last. And that might hinge on whether President Joe Biden unleashes the Taft-Hartley Act to break it. Taft-Hartley was invoked by President George W. Bush in 2002 to end a West Coast ports strike. What wins out in that calculation for Biden now, the potential economic damage of a prolonged strike or the potential loss of union support for Democrats just before the election?
The question about near/friend-shoring with Mexico is another one that’s hard to answer. USMCA, which replaced NAFTA, was negotiated under the first Trump administration. The idea at the time seemed to be what I’ll call “Fortress North America.”
And you could make the case that billions in investments were made accordingly. Ternium invested in a new mill, and new melt capacity, in Mexico. SDI built a new mill in Sinton, Texas, with part of the justification being to serve a growing and steel-intensive Mexican market. Other EAFs have also done well in Mexico.
And yet some of those same companies have joined the coated trade case against Mexico. I don’t think anyone was shocked to see Vietnam and some overseas sources of coated products targeted. But it was a little surprising to see Mexico (and Canada) among those hit with high alleged dumping margins.
Is that an indicator of what’s to come for US trade policy more broadly speaking? Could a second Trump administration or a Harris administration – to steal a talking point from Cleveland-Cliffs’ CEO Lourenco Goncalves – really take the ‘M’ out of USMCA? Or, for that matter, would Congress really reinstate Section 232 tariffs on Mexico?
It’s hard to answer these questions until we know who will be in the White House on Inauguration Day. And given how closely knit North American supply chains are – not just in steel and manufacturing but also in agriculture and other industries – how would that work in practice?
Speaking of letters by US lawmakers, we now have another related to steel. Sen. Elizabeth Warren and Sen. Sherrod Brown are against the acquisition of U.S. Steel by Nippon Steel. They cite the potential $72-million payout to David Burritt, the CEO of the Pittsburgh-based steelmaker, a criticism echoed by the United Steelworkers (USW) union.
Yes, but what happens to the workers at U.S. Steel if the deal doesn’t go through? A “golden parachute” like that might not be fair. But I think most people in the industry (OK, probably not Cliffs and definitely not the USW) are in favor of the deal. Is there a plan B if it doesn’t happen?
Basically, all of these stances – whether it’s the strike, trade policy, or the USS-Nippon deal – might make for good sound bites as more votes are cast. (Early voting is already underway in many states.) But is anyone thinking about the day after?
Let me know if you have any thoughts. And in the meantime, all of us here at SMU truly appreciate your continued support.
While the English language is vast, there is not an endless number of ways to say, “no major changes have transpired.” And if anyone has been tasked with talking about steel price changes in the physical and futures US domestic steel market over the last four months, they are probably stretching their ability to its limit. So, after a very quiet two weeks of trading, let’s look at the overall month of September. The chart below shows Thursday’s (Oct. 3) CME Midwest HRC futures settlement curve in white, with the highest settlement from September trading in blue (Sept. 12), and the lowest in orange (Sept. 4). The lower panel shows where those periods stood vs. today’s pricing.
Before looking more closely at the range and months, let’s evaluate the overall shape, which is essentially unchanged and in contango. What this means for the physical market is key, a contango curve signals that the market is currently oversupplied (i.e., “tomorrow’s” value of the commodity is higher because the surplus will be resolved). While this structure is not entirely abnormal (it has happened nine times in the last decade), the length of time we have been in contango is starting to be higher than normal, currently week 26, with an average period of 19 weeks (excluding 2015-16 when we were in contango for 61 weeks).
Beyond overall structure, the current curve essentially sits in the middle of recent activity, with the widest range of trading over the month of September coming from the December contract with a total range of $60. The chart above does not provide the context of the full story of what has really happened in September, so we move to the chart below.
The overall one-year price chart above shows the structural decline in pricing for Q4’24, beginning in April, as the market slipped into contango/surplus territory. Zooming in on September, let’s talk about the dynamics that drove trading below:
As a variety of sparks from blast furnace idling, impending trade cases, and interest rate cuts fail to drive prices in either direction, one logical conclusion could be that a lack of participation is the culprit. However, when we look at open interest and the 21-day moving average (below), it started to come to life, which makes it doubly confounding to see such a tight trading range in prices.
So, what gives? The summer demand doldrums extended into the early fall as all measures on the supply side are somewhat elevated. Weekly raw steel domestic production (until two weeks ago) had been holding above 1.7 million short tons since January. Imports are easing more slowly than anticipated (with Vietnamese coated products reaching an all-time high in August) and a two-year high in May. While inventories (when considering service centers and downstream consumers) have also been hovering around the highest levels since mid-2022. All else considered, the most likely conclusion is that much like in the physical market, we are waiting to see a recovery in demand.
It’s been a little over a year since our last Community Chat with Flack Global Metals (FGM) founder and CEO Jeremy Flack. Though he described the current steel market as “boring” and “not so much fun,” it’s been an exciting year for the company, and there was no shortage of topics to discuss.
On Wednesday he sat down with SMU Managing Editor Michael Cowden and talked about the recent closing of FGM’s majority ownership stake in Pacesetter Steel Service . (He explored many other issues as well. We highly suggest watching the whole thing here.)
Expanding on what’s happening in the domestic market now, Flack said, “They’re not buying things made out of steel right now, and I think we’re suffering through that.”
“So we need to find edible steel. Is that the solution?” Cowden quipped.
Flack laughed. “I mean it’s probably cheaper to eat a steel sandwich than a steak these days out there.”
(So, for all our readers with culinary inclinations, please take note and send over any recipe ideas.)
As previously mentioned, FGM recently closed on its majority stake deal for Pacesetter.
Flack dubbed it a “legendary” company founded by Steve Lebow. It operates service centers in Atlanta, Chicago, and Houston.
“Steve is still going to be with us. He’s going to continue on and help us transition the business, help us regrow that business,” Flack said. “Steve is brilliant man, and he’s got a wonderful team of people at Pacesetter.”
Flack noted that Pacesetter will remain its own brand and its own business.
“We are not going to go in there with a wrecking ball in any way, shape, or form. We want to continue to support the great things that Pacesetter does for its customers,” he said.
Flack noted two other acquisitions, metal roofer Fabral and Windsor America, parent of Windsor Door, Garage Door Services of USA and Lodi Door, both from 2023. But the Pacesetter announcement has already made a bigger splash in the market, he said.
“This thing set a bomb off both with our mill suppliers and with the community at large,” he said.
“You know, we didn’t do Field of Dreams at FGM,” Flack said. “We built a nice distribution business using the tolling route.” He noted that FGM didn’t have its own processing equipment until early last year, when the company developed its Houston facility.
“And so this (buy) smacked the industry in the forehead, saying: ‘OK, we actually are for real. It’s not just a futures and options game, but we are in the steel business,” he said.
Flack noted that prior to Pacesetter, FGM was the 30th largest steel service center in the US, even without having much of a physical footprint. He hasn’t crunched the numbers yet on where this puts FGM post-acquisition.
One thing is certain: “This now solidifies our physical footprint, allows us to control supply chains much better, and is much better for our customers and for the community,” Flack said.
“Gratitude to Steve Lebow and his team. Incredible people!” he added. “The Pacesetter team is going to stay intact and come along on this ride. So we’re just super excited.”
SMU’s monthly review provides a summary of important steel market metrics for the previous month. This latest report includes data updated through Sept. 30.
Prices of sheet and plate steel showed little movement in September, as buyers reported lackluster demand, high inventories, and caution related to the upcoming election. Sheet mills attempted to raise prices via multiple increases but failed to gain much traction.
The SMU Price Momentum Indicator on sheet was adjusted from higher to neutral in the first week of the month, indicating no clear direction for prices in the short term. Our Price Momentum Indicator for plate remains as it has been since April, pointing lower.
September scrap prices were sideways to down from August, easing as much as $8 per gross ton for some products. Buyers are uncertain about what prices could do in October.
We saw a dip in Steel Buyers’ Sentiment in the middle of September, but it mostly recovered by the end of the month. Our Future and Current Buyers’ Sentiment Indices indicate that buyers remain optimistic about their companies’ chances of success now and in the future.
Steel mill lead times eased slightly through the month and remain near some of the shortest levels recorded in some time. The percentage of buyers reporting that mills were willing to negotiate on new orders edged lower from August to September but remains relatively strong.
See the chart below for other key metrics for September. Historical charts can be found here on our website.
All eyes are on the coastwide longshoremen’s strike, with many scrambling to assess the situation and understand its implications for their businesses and the economy.
The International Longshoremen’s Association (ILA) has been warning of a massive labor stoppage for some time. Despite the warnings, many thought talks would be extended or that such a widespread walk-off couldn’t really happen. So, the strike, which began on Tuesday, Oct. 1, came as a surprise to some.
Whether a surprise or not, there is a lot at stake. All supply chain stakeholders, including consumers, retailers, manufacturers, truckers, logistics companies, and even the White House, are watching for a deal to be struck between the ILA and the United States Maritime Alliance (USMX). And while we’re all waiting, we’re bracing for the impacts of what could be a destructive supply-chain storm.
The ILA strike is happening at container terminals of ports on the East and Gulf Coasts, so general cargo and breakbulk terminals are open and operating.
Materials that move in containers, like ferrous and nonferrous scrap, aluminum, and stainless pipe, are more likely to be affected, sources said. As most steel is shipped overseas in bulk carriers, the impact on steel should be less severe.
There’s a potential for the strike to cause a container shortage. As SMU’s sister publication, Recycled Metals Update, reports, it’s because of that fear that buyers in the scrap export business have stopped offering prices for containerized scrap.
The real threat for steel is if sympathy strikes pop up and spread to affect breakbulk shipping, according to Jose Gasca, managing director of Swiss-based trading house Metrading International.
Other unions, like the Teamsters, have pledged solidarity to the ILA and said their members will not cross ILA picket lines. The International Longshore and Warehouse Union (ILWU) sent a “solidarity delegation” to join the ILA picket lines. If you recall, last year, ILWU negotiated a new contract covering the 22,000+ dockworkers it represents at West Coast ports. Those talks were extended well beyond the contract’s expiration, but there was no work stoppage.
The outside support is also coming from international unions: the International Dockworkers Council, which has more than 120,000 affiliated port workers worldwide, has emphasized, “The IDC is mobilized alongside our brothers and sisters at the ILA, and we do not rule out any form of coordinated global action if necessary.”
Should other unions join and bulk stevedores strike, steel prices would be impacted within 5-10 days, according to Gasca, who is also the current chairman of the American Metals Supply Chain Institute (AMSCI). “Any situation that adjusts the normal flow of materials creates an issue,” he noted. “It’s going to be a mess.”
Another trader commented that the strike would only benefit the dockworkers. “Everyone else will suffer from it, especially steel trading companies that are being harmed in so many directions by multiple issues,” they lamented.
The domestic steel industry is in a watch-and-see mode, according to most sources contacted for this story.
SSAB, for example, said it is monitoring the situation but declined to comment beyond that.
The American Iron and Steel Institute (AISI) said it is working with its members to keep abreast of the situation.
“AISI is continuing to monitor developments for any potential impacts of the strike on the steel industry supply chain,” AISI President and CEO Kevin Dempsey told SMU.
He noted that a “resilient and nimble” steel industry will make sure its “customers – the largest ones being in the auto and construction markets – continue to receive the materials they need from the domestic industry.”
The Conference Board said even a one-week strike could cost the US economy $3.78 billion and cause supply chain disruptions for weeks.
“A port strike would paralyze US trade and raise prices at a time when consumers and businesses are starting to feel relief from inflation,” noted Erin McLaughlin, senior economist at The Conference Board.
She said some cargoes have already been diverted to the West Coast, but shippers have limited options: “There’s no easy Plan B.”
President Biden has urged USMX to make a fair offer “appropriately in line with their invaluable contributions” during the Covid-19 pandemic.
“Collective bargaining is the best way for workers to get the pay and benefits they deserve,” Biden said on the strike’s first day. “It’s only fair that workers, who put themselves at risk during the pandemic to keep ports open, see a meaningful increase in their wages as well.”
On Tuesday, Transportation Secretary Pete Buttigieg said the administration is monitoring for impacts on supply chains and assessing how to address them. And Biden said they would be watching for price gouging by foreign ocean carriers.
Many ocean carriers have already announced strike surcharges of $800-$4,000 per container, most to be implemented later this month. Some companies, like Maersk and Hapag-Lloyd, publicized the additional fees before the strike began.
“Our administration is calling on ocean carriers to withdraw their surcharges,” Buttigieg declared on Tuesday. “No one should exploit a disruption for profit, especially at a time when whole regions of the country are recovering from Hurricane Helene.”
Meanwhile, some ports have said they won’t charge ocean carriers for storage while container terminal gates are closed.
Construction spending in the US declined for a third month in August but showed an increase year over year (y/y).
The US Census Bureau estimated construction spending to be $2.131 trillion in August on a seasonally adjusted annual rate (SAAR). While this was 0.1% below July’s revised spending rate, it was 4.1% higher than spending in August 2023.
Residential construction outlays, at $911.4 billion in August, were off 0.3% month on month (m/m) but 2.7% higher y/y.
August spending on nonresidential construction projects was up marginally m/m and was 5.2% higher y/y.
Within the non-res category, spending was highest on highway construction. Expenditures in this subcategory rose 1.1% m/m to $141.4 billion in August. State and local government spending grew by 0.3%, and outlays on federal government projects rose by 0.5%.
Census figures show a notable rise in total construction spending in recent years (see Figure 1). Spending on residential projects has more or less leveled out over the past year after peaking in 2022. At the same time, spending on nonresidential projects has continued to move higher in recent years.
The US scrap market has been in a steady decline for the first nine months of this year. As we enter Q4, there seems to be scant hope things will change in October. However, some players are seeing a bit of light after this month, depending on steelmaker appetite for scrap.
RMU contacted a scrap executive in the Chicago district who supervises several Midwestern facilities. He humorously said, “October will be the last scrap shopping month before Christmas.”
He believes there is a 10% chance scrap prices will rise, a 70% chance they will trade sideways, and a 20% chance they will fall.
That 20% chance of falling is related to the potential effects of the longshoreman’s strike that began Tuesday.
If the market does go sideways and prices remain at this relatively low level, this may be the last chance to buy major tonnages of scrap before the market tightens up prior to winter.
He added that on his travels to various scrap processing sites, there is very little inventory on the ground, but obsolescent scrap flows into the yards were decent.
Regarding demand in Chicago and the Ohio Valley, he related his concern about the number of steel mill outages still scheduled, noting integrated steelmakers in Chicago and Cleveland would have smaller programs this month. However, EAF plants in these same regions should have moderate-to-full buying agendas for October. According to him, mills have shown more interest in #1 HMS, which, as RMU has reported, has been underpriced when compared to shredded scrap. This interest has resulted in $30-40 per-gross-ton (gt) increases vs. published mill prices in the Great Lakes region.
So far, RMU has not been advised that steel mills are canceling unshipped orders from September. We have heard mills are going try to take down shredded, but dealer resistance is expected if that happens. In September, several mills initially priced shredded down $15-20/gt. However, they could not cover and had to buy sideways from larger suppliers.
Heading down South, RMU spoke with an executive with multiple yards that supply both the domestic and export markets. He offered his handicap of the market as 50/50, sideways or down. He indicated obsolescent scrap flows into his facilities were off but not too severely. Flows of industrial scrap have also decreased. However, he thought there was not sufficient demand for prime scrap to force prices up.
On the bright side, he said most of the outages in the Southeast are over and most mills are back to operating. Still, several of them have enough inventory to restrict their October buys unless they want to lay in more inventory. Regarding export, with the strike at the ports, buyers in the export arena have ceased offering prices for containerized scrap for fear they will not be able to obtain containers, much less being able to ship.
Needless to say, there are several issues facing the ferrous raw materials markets for October and the rest of the year. Some are optimistic but most seem pessimistic. We’ll cover them either way.
Editor’s note: This column appeared first in Recycled Metals Update (RMU), SMU’s new sister publication. RMU is devoted entirely to the ferrous and nonferrous recycled metals markets. If you’d like to learn more, visit RMU’s homepage and register for a free 30-day trial.
US hot-rolled (HR) coil prices moved slightly higher again this past week but remain marginally higher than offshore material on a landed basis.
Since reaching parity with import prices in late August, domestic prices have been slowly pulling ahead of imports. This has been driven by a slight deviation in price movements – slow but steady stateside gains vs. mixed changes overseas.
SMU’s check of the market on Tuesday, Oct. 2, put average domestic HR tags at $705 per short ton (st), up $10/st from last week. US hot band has rebounded from July’s 20-month low, but the rise has been slow, with average prices increasing $70/st over the past 10 weeks.
Domestic HR is now theoretically 5.8% more expensive than imported material. That’s a touch higher than last week’s reading of 5.1%. While the gains have been negligible at times, prices have seen a notable shift since late July, when stateside products were almost 12% cheaper than imported HR.
In dollar-per-ton terms, US HR is now, on average, $41/st more expensive than offshore product (see Figure 1), compared to $36/st more costly last week. Prices have swung $113/st from late July when US tags were ~$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.
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 weekly US HR assessment to the CRU HR weekly indices for Germany, Italy, and East and Southeast Asian ports. This is only a theoretical calculation. Import costs can vary greatly, and that can influence 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.
As of Thursday, Oct. 3, the CRU Asian HRC price was $472/st, a $37/st jump 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 $680/st. As noted above, the latest SMU US HR price is $705/st on average.
The result: US-produced HR is now theoretically $25/st more expensive than steel imported from Asia. That’s a $36/st decline from last week because prices in Asia increased at a sharper pace than domestic tags. Still, it’s a far cry from late December, when US HR was $281/st more expensive than Asian products.
Italian HR prices declined $12/st to $560/st this week. After adding import costs, the delivered price of Italian HR is, in theory, $650/st.
That means domestic HR coil is theoretically $55/st more expensive than imports from Italy. That’s up $22/st from last week. Recall that US HR was $297/st more costly than Italian hot band just five months ago.
CRU’s German HR price moved down $20/st to $572/st. After adding import costs, the delivered price of German HR coil is, in theory, $662/st.
The result: Domestic HR is theoretically $43/st more expensive than product imported from Germany. Stateside hot band was at an $18/st discount just three weeks ago. At points in 2023, in contrast, US HR was as much as $265/st more expensive than imported German hot band.
The United Steelworkers (USW) union has named Kevon Stewart to be director of District 6, which represents members in Ontario and Atlantic Canada.
The USW said that appointment was effective on Oct. 1. It also noted that Stewart became the first black district director in the union – not only in Canada but in the United States as well.
“I intend to build on our union’s work by helping more workers gain union representation with the USW, bargaining industry-leading strong contracts, and continuing as the go-to organization for community partnerships,” Stewart said in a statement.
Born in St. Thomas, Jamaica, Stewart moved to Canada with his family when he was a child. He graduated from York University in Toronto and initially intended to teach, the USW said.
Stewart instead found work as a machine operator at Samuel Strapping in Scarborough, Ontario. He then went on to become the first black rank-and-file member to hold a leadership role in the USW in Canada, the union said.
Stewart succeeds Myles Sullivan, who has taken on a new role as assistant to David McCall, international president of the USW, which is based in Pittsburgh.
Note that the USW has a strong presence across North America. It has also been increasingly active in trade petitions – including one filed in September against imports of coated flat-rolled steel.
Reliance Inc., the largest service center chain in North America, has picked Douglas Stotlar as the next chairman of its board.
The move will be effective Jan. 1, 2025. Mark Kaminski, the current chair, will step down from that role but remain on the board.
The change is part of a long-term succession plan, the Scottsdale, Ariz.-based company said on Wednesday.
Stotlar has been on Reliance’s board of directors since 2016, according to the company’s website. He previously served as CEO and director of Con-way Inc., a freight and logistics company.
Kaminski has been chairman of Reliance’s board since July 2016. Before that, he was president and CEO of Commonwealth Industries Inc., a producer of aluminum rolled products.
Reliance also said it had named James Kamsickas to serve as an independent director of its board. That appointment was effective Oct. 1. Kamsickas is chairman and CEO of automotive parts supplier Dana Inc.
“We look forward to benefitting from his vast experience and expertise in industrial manufacturing, with a strong emphasis on safety,” Reliance CEO Karla Lewis said in a statement.
Join SMU’s next Community Chat webinar with Barry Zekelman, executive chairman and CEO of Zekelman Industries – the largest independent steel pipe and tube manufacturer in North America.
The webinar will be on Wednesday, Oct. 16, at 11 a.m. ET. It’s free to attend. A recording will be available only to SMU subscribers. You can register here.
Zekelman is known for his straight talk. And his company is one of the largest steel buyers in North America. That alone is good reason to tune in.
We’ll also be discussing everything from the current steel market and end-use demand to trade policy and the upcoming election.
We’ll take your questions too. So think of some good ones and bring them to the Q&A! As usual, we’ll keep it to approximately 45 minutes, so you can learn a thing or two and then get on with your day.
Flack Global Metals (FGM) has closed on its majority ownership stake in Pacesetter Steel Service.
Terms of the deal, first announced in June, were not disclosed.
Pacesetter operates service center locations in Atlanta, Chicago, and Houston. FGM is a hybrid industrial company that buys, sells, manufactures, trades, and invests in flat-rolled steel.
“FGM’s investment thesis revolves around growing the Pacesetter platform while keeping Pacesetter a stand-alone vertical within the FGM platform,” Flack said in a statement on Wednesday.
The company noted the investment marks the first addition of a distribution and processing service center to its portfolio of direct equity investments.
Atlanta-based Pacesetter’s joint venture with Nippon Steel Trading Americas Inc., NSPS Metals LLC, was not a party to the transaction. Its assets were not included in the Pacesetter deal. Note also that Nippon Steel Trading Americas is an affiliate of Nippon Steel.
Earlier this week, SMU polled steel buyers on an array of topics, ranging from market prices, demand, and inventories to imports and evolving market events.
Below are some of the comments we collected, shared in each buyer’s own words rather than summarizing them in ours.
Want to share your thoughts? Contact david@steelmarketupdate.com to be included in our market questionnaires.
“I expect prices to stay pretty flat. I don’t feel there is anything to drive them up or down.”
“They’re “firm-ish”. They seem to be staying at these current levels, but I would argue they aren’t on solid footing. The fall outages really didn’t result in pricing spiking upward as most folks thought.”
“Stable.”
“Flatline.”
“Flat demand is stable but not robust.”
“Demand side is down, prices won’t move much.”
“I would expect that near-term prices are stable but will fall under pressure as we hit the holidays and outages finish up.”
“Plate will be flat to maybe down slightly, then climb Q1’25.”
“HR soft/up, plate soft/down.”
“Will trend up if ports go on strike; will maintain if they do not.”
“They will try to go up, but they will succeed just barely.”
“They will increase by 10% due to demand increasing and tariffs being announced along with maintenance shutdowns.”
“Slow but steady increases.”
“Stable – in general I feel people are waiting for the election.”
“Stable, as election in US is holding back new orders and economy is weaker than expected.”
“Stable at best.”
“Plate demand is stable to down due to instability of prices.”
“Demand is stable to declining, with so many buyers already cutting inventory, but some automotive is down.”
“All I hear from OEMs, SSCs and automotive folks is how poor demand is. When we go 0-3 in those sectors, we’re in trouble.”
“Demand appears to be declining as we enter Q4. Year-end inventory draw down, soft demand, soft prices, short lead times, the election.”
“Improving.”
“Slower due to projects getting delayed.”
“Slower as the election and environment are down.”
“Slower… demand is lower.”
“Slower.”
“Slower, lower demand.”
“Same.”
“Faster, as last year demand was weaker than today.”
“Inventory is moving faster for us, but we’re maintaining such tighter/smaller inventory levels.”
“Faster.”
“They are not advantaged enough to make a long-term play.”
“Plate imports are not even a consideration due to quality, price, and lead times.”
“No, lead times are too long, inventory is fine now.”
“Not attractive, our customers require domestic.”
“No, lead time to price gap in soft market.”
“Not as long as the Euro stays this strong.”
“Domestic pricing is higher, but with lead times that are more than half the offshore timelines.”
“Imports are looking better and better, but only to the West Coast. I don’t envy those who are going to be depending on the Gulf ports in the immediate term.”
“Yes, some imports are good buys.”
“Imports are always priced better.”
“How new tariffs will affect overall pricing in North America.”
“How will the election really impact the market, seems like people are waiting and driving down inventories just because.”
“How does the rhetoric around ‘protectionism’ impact the near/friend-shoring in Mexico? And could it cause a whipsaw effect in the US manufacturing space?”
“Increased amount of mill outages.”
“Chinese stimulus isn’t enough to improve global steel demand yet.”
“News on Evraz NA and AHMSA have both gone quiet, as USS/Nippon steals all of the headlines.”
“Nucor monthly plate price no longer is an indication of spot market pricing.”
There are markets where the headlines and the prices are both crazy. This does not appear to be one of them, at least not yet.
So far we’ve got a sweeping trade case, a massive ports strike, and a deadly hurricane. These events deserve the coverage they’re getting. But the reaction on the price side and among steel buyers I’ve spoken with this week has been mostly ho-hum.
Generally speaking, sheet prices continue to tick upward, if unevenly. But that’s not necessarily the case at the service center level – where some of you tell me you’re struggling to increase prices because your competitors aren’t. Others think it’s just a matter of time before we’re back to the low prices we saw in July.
The gap between headlines and sentiment isn’t so hard to explain when it comes to the International Longshoremen’s Association (ILA) strike. The strike so far appears to be targeting containers and consumer goods. If you’re bringing in something perishable or timely – say bananas or holiday ornaments – it’s time to panic. But breakbulk, as best as I can tell from some of you, hasn’t been impacted so far. This means steel imports have mostly been spared, as far as I can see.
I don’t know whether that remains the case. (Remember the chip shortage? It will be hard to keep making cars if parts stop coming in.) But while there might be concern, there isn’t a sense of panic among steel buyers. Especially among those who tell me that demand remains weak.
In the end, I think it’s a debate about supply and demand.
Steel production, as measured by the American Iron and Steel Institute (AISI), is at its lowest point since January 2023. The coated trade case has all but eliminated Vietnam from the market and caused other sources of foreign material to pull in their horns for now. (That’s even if some countries think they’ll ultimately be dropped from the case or will face significantly lower duties than the ones alleged.)
All of those factors should squeeze supply. And there is evidence that lead times have extended at some mills. One EAF producer, for example, posted hot-rolled (HR) coil lead times into mid/late November. That kind of six- to seven-week lead time is typically associated with an integrated mill.
As it stands today, however, the supply chain isn’t tight. As we’ve reported before, service center inventories aren’t lean. I realize the numbers we report aren’t one size fits all. They might not match your experience if you’re heavily tilted toward the galvanized side. But if you’re stocking commodity HR, they probably do. That’s not necessarily a bad thing – especially since you probably bought that material back in July-August in the high $500s or low $600s.
That catch is demand. Service centers are releasing less steel. Automotive, the most concentrated market for steel, is struggling – as reflected in Stellantis revising its 2024 guidance lower on weakness in North America. (It’s not just Stellantis. General Motors, for example, has announced sweeping layoffs.)
And it’s not just in automotive. Nucor is closing the original Independence Tube location in Chicago and relocating production. The company says that it is replacing older capacity with newer, more efficient capacity. Zekelman Industries, meanwhile, is closing a Chicago tube facility. The company said the closure stemmed from a surge of imports from Mexico.
Those are valid reasons. But in a strong market, such facilities would probably stay open. Also, it’s not just Chicago. We’ve seen WARNs for other tube mills as well. But more on that in future editions of SMU. Does that tell us something about nonresidential construction demand?
You could also make the case that sprawling trade cases aren’t exactly the signal of a strong market. The last time we had a wave of trade cases on par with the coated one was in 2015-16. Those were generally leaner times for steel. It wasn’t uncommon at the time to see HR prices in the $400s, sometimes the high $300s, as SMU’s pricing records show.
That said, we live in unprecedented times. That word again. President Biden has said he won’t intervene in the ILA strike. And there are rumors that other unions might join in. The Teamsters is now more or less explicitly saying as much.
“The US government should stay the f**k out of this fight and allow union workers to withhold their labor for the wages and benefits they have earned,” the Teamsters said in a statement. (Yes, they really dropped the f-bomb.)
“Don’t forget—Teamsters do not cross picket lines. The Teamsters Union is 100% committed to standing with our Longshoremen brothers and sisters until they win the contract they deserve,” the union added.
Is that bluster? Or does October have room for more surprises? In other words, is the consensus that this is a so-so market correct? Or could be buyers be caught off guard as they were this time last year when prices rallied?
If you haven’t already, don’t forget to register for our next Community Chat with Flack Global Metals Founder and CEO Jeremy Flack. You can do that here.
We’ll talk about the current steel market, entrepreneurship in the industry, as well as Flack’s acquisitions in the physical market. We’ll take your questions, too.
I look forward to seeing you there.
Steel prices ticked higher this week for most of the sheet products SMU tracks. Meanwhile, plate prices edged lower following three weeks of stability.
SMU price indices for hot-rolled, cold-rolled, and galvanized steel all increased this week. Our Galvalume index remained unchanged week over week (w/w), while plate prices eased. Prior to this week, each of our indices had fluctuated within a relatively narrow range throughout September.
A few factors could be driving this upward movement in sheet prices. Notably, mill price increases, declining domestic production, and the coated trade case. There has been no noticeable impact yet from the port strike.
Our hot-rolled steel index increased $10 per short ton (st) w/w to $705/st. It is now up to levels last seen in June. Cold-rolled steel prices recovered $15/st from last week to $960/st, the highest average recorded since early July.
Our galvanized index jumped to a 14-week high of $945/st this week, up $25/st w/w. Galvalume base prices held steady from last week at $940/st, the highest rate recorded in the past 12 weeks.
Following a brief pause, plate prices resumed their downward movement this week, declining $10/st w/w to $940/st on average. Plate prices have overall trended downward since their mid-2022 peak. The last time plate prices were in this territory was the first week of 2021.
SMU’s sheet price momentum indicator remains at neutral following our Sept. 10 adjustment. Our plate price momentum indicator remains at lower.
The SMU price range is $680-730/st, averaging $705/st FOB mill, east of the Rockies. The lower end of our range is up $20/st w/w, while the top end is unchanged w/w. Our overall average is up $10/st w/w. Our price momentum indicator for hot-rolled steel remains at neutral, meaning we see no clear direction for prices over the next 30 days.
Hot rolled lead times range from 3-6 weeks, averaging 4.9 weeks as of our Sept. 25 market survey.
The SMU price range is $920–1,000/st, averaging $960/st FOB mill, east of the Rockies. The lower end of our range is up $30/st w/w, while the top end is unchanged w/w. Our overall average is up $15/st w/w. Our price momentum indicator for cold-rolled steel remains at neutral, meaning we see no clear direction for prices over the next 30 days.
Cold rolled lead times range from 5-9 weeks, averaging 6.9 weeks through our latest survey.
The SMU price range is $900–990/st, averaging $945/st FOB mill, east of the Rockies. The lower end of our range is up $40/st w/w, while the top end is up $10/st w/w. Our overall average is up $25/st w/w. Our price momentum indicator for galvanized steel remains at neutral, meaning we see no clear direction for prices over the next 30 days.
Galvanized .060” G90 benchmark: SMU price range is $997–1,087/st, averaging $1,042/st FOB mill, east of the Rockies.
Galvanized lead times range from 5-9 weeks, averaging 7.3 weeks through our latest survey.
The SMU price range is $900–980/st, averaging $940/st FOB mill, east of the Rockies. Our range is unchanged w/w. Our price momentum indicator for Galvalume steel remains at neutral, meaning we see no clear direction for prices over the next 30 days.
Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,194–1,274/st, averaging $1,234/st FOB mill, east of the Rockies.
Galvalume lead times range from 6-9 weeks, averaging 7.3 weeks through our latest survey.
The SMU price range is $900–980/st, averaging $940/st FOB mill. The lower end of our range is unchanged w/w, while the top end is down $20/st w/w. Our overall average is down $10/st w/w. Our price momentum indicator for plate remains at lower, meaning we expect prices to decline over the next 30 days.
Plate lead times range from 2-6 weeks, averaging 4.0 weeks through our latest survey.
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.
Wheatland Tube, a subsidiary of Zekelman Industries, is closing a tube facility in Chicago, with nearly 240 workers being laid off.
An Illinois WARN Notice filed on Sept. 6 showed the first layoff date was scheduled for Nov. 1.
Zekelman Industries said a significant contributing factor for the closing is the “surge” of imported steel conduit from Mexico, according to a statement sent to SMU dated Sept. 25.
“All we ask is for our trade agreements to be enforced,” Barry Zekelman, executive chairman and CEO of Zekelman Industries, said in the statement. “Instead, there will be Americans out of work at a company that pays life-sustaining wages and benefits.”
Jennifer Murphy, vice president of HR at Zekelman, said that to the greatest extent possible, the company has offered impacted employees the opportunity to transfer to positions matching their skill sets at other company facilities.
“For employees who are not interested in transferring, or for whom opportunities are not available, we will offer broad transition support inclusive of severance and outplacement services,” she added.
US manufacturing activity contracted for the sixth consecutive month in September, according to the latest report from the Institute for Supply Management (ISM). The index has indicated a contracting industrial sector for 22 of the past 23 months.
The ISM Manufacturing PMI, at 47.2% in September, was unchanged from August. A reading above 50% indicates growth in the manufacturing economy, while a reading below 50 indicates contraction. The index has been bleak since December 2022 on a three-month moving average basis.
Despite this, ISM said the overall economy continued to expand in September for the 53rd month. (The institute notes that a Manufacturing PMI above 42.5% over some time generally indicates that the overall economy is expanding.)
“Demand remains subdued, as companies showed an unwillingness to invest in capital and inventory due to federal monetary policy … and election uncertainty,” said ISM Chair Timothy R. Fiore. He remarked that suppliers still have available capacity and lead times are improving, though product shortages have reappeared.
ISM reported growth in September in five of the 16 manufacturing industries it tracks. Primary metals and fabricated metal products were two identified as in contraction.
ISM’s report shared multiple comments from survey respondents.
One executive in the primary metals industry expressed their company’s difficulties: “Still hiring to fill vacant positions in production/management. Not adding new jobs. Automotive original equipment manufacturers (OEMs) are starting to slow or cancel orders. The pace is slowing.”
Another respondent within the fabricated metal products sector shared his uncertainty about the future, commenting, “We won’t realize the effect of interest rate adjustments with new project starts until the first quarter of 2025.”
The full September Manufacturing PMI report is available here on the ISM website.