Lower prices and volumes will impact Nucor Corp.’s earnings in the current quarter, the steelmaker said in fourth-quarter earnings guidance on Thursday, Dec. 14.
All three of the company’s product segments saw lower pricing and volumes this quarter, with the decrease in realized pricing expected to be most distinct at its sheet and plate mills.
Decreased selling prices and lower volumes in most product groups within the steel products segment will impact earnings, Nucor said.
Additionally, planned outages at Nucor’s direct-reduced iron (DRI) facilities and lower raw materials pricing will hit earnings in the raw materials segment.
Charlotte, N.C.-based Nucor anticipates Q4 earnings to be between $2.75 and $2.85 per diluted share. This will be down notably from earnings of $4.57 per diluted share in the prior quarter, when net income amounted to more than $1.14 billion on sales of $8.77 billion, and down from $4.89 per diluted share in the year-ago quarter.
Nucor will issue its complete Q4 earnings statement after the market closes on Monday, Jan. 29, 2024.
Last week in Chicago, we hosted several metals companies for our bi-annual Metals Price Management Seminar (“MPMS”). During the class, we heard feedback we believe is important to address here, as our readers continue to install and implement their respective hedge programs.
During our two-day education session, there was some discussion around the role a hedge plays in the related physical transaction. It’s important to remember that a hedge is a separate, but related, financial transaction. This transaction represents an expected physical transaction that will occur at some future date. An important note: a company’s hedge position does NOT have to alter the regular operations between its suppliers or its customers.
As an example, see the diagram below:
This physical + hedge structure can be extrapolated out in time for all committed future transactions. As an example, let’s say we are a hedger that has committed to buying 500 tons/mo. for 2024, all to be priced using CRU Index Week 1 monthly prices (Market Price).
Based on these terms, we know we will have material that we need to purchase in each month throughout 2024. Knowing our future raw material quantity, we can have confidence in the quantity of the finished product we’ll be able to sell. However, we don’t have enough information to have confidence in a sales price for those finished goods.
By using the HRC futures price in each corresponding month, our company should have confidence to make sales at the right price. Once a sale has been made, prudent risk management would have us place a hedge to protect against a rise in the raw material from now until the time the supplier will issue the invoice for that respective month.
Alternatively, our company could buy futures to take advantage of lower prices before the supplier is ready to set the price. As a result, the company would have an average inventory cost for each time period, that they could then use in their sales process.
We will use the diagram from above to illustrate how a futures gain and a futures loss is ultimately the same thing.
The above illustration shows the entry point of the hedge, and its ending point. In reality, the hedge’s price and value will fluctuate throughout time, from entry to end.
Once a hedge is established, astute hedgers will re-evaluate and manage the hedge position as the market and the hedge value fluctuates. While there are many things to contemplate with futures and options, one of the advantages is their flexibility. Unlike an agreement on physical delivery with a supplier or customer, futures and options can be entered and exited at any time before expiration.
By utilizing the full suite of risk management tools available to you, hedgers can capitalize on market volatility through adjusting their hedge positions as the market rises and falls. When making these decisions, it’s important to consider the trade-offs between strategies, and how your risk management goals are being addressed.
If you’d like to learn more about things to consider when using these tools, please visit the following link, CPE Accredited Metals Hedging Class.
There is a risk of loss in futures trading. Past performance is not indicative of future results. © 2023 Commodity & Ingredient Hedging, LLC. All rights reserved.
Most steel markets will be more balanced in 2024, according to the latest sector outlook from Fitch Ratings.
The New York-based credit ratings agency expects demand for steel to be stable in most regions, aside from China. Fitch noted in its Dec. 12 report that improving demand and decreasing raw material prices contribute to the neutral outlook.
Fitch anticipates the North American steel market to increase at an average rate. It said that new domestic supply coming online will support demand and displace imports.
“US steel producers continue to pursue investments focused on expanding higher value-added production, which Fitch expects to improve profitability on a per ton basis,” the agency added.
Overall, the ratings provider expects manufacturing, auto, infrastructure, and energy transition to be driving forces behind increased demand. However, it noted that the construction sector will continue to be affected by elevated interest rates.
The US Department of Commerce’s International Trade Administration (ITA) has updated the antidumping duties on coated sheet imports from South Korea and Taiwan.
The periods of review in these cases were July 1, 2021, through June 30, 2022.
For corrosion-resistant sheet products imported from South Korea, the ITA set final weighted-average dumping margins of 0% for Hyundai Steel and 0.53% for seven specific companies: Dongkuk Coated Metal, KG Dongbu Steel, Posco, Posco International, Posco Steeleon, SeAH Coated Metal, and SeAH Steel.
The rates differ slightly from the 0% margins set in the preliminary results of the review.
For the prior one-year period, Hyundai’s dumping margin was 0%, while certain other companies had margins of 1.79%.
For corrosion-resistant sheet imports from Taiwan, the ITA set final weighted-average dumping margins of 0.71% for several specific companies: Prosperity Tieh Enterprise, China Steel Corp., Chung Hung Steel, Great Fortune Steel, Great Grandeul Steel, and Sheng Yu Steel.
The margins are higher than the ones the ITA found in its preliminary findings.
The new 0.71% rate is lower than the rates set by the ITA for the prior one-year period. They were 3.74% for Prosperity Tieh, 4.14% for Sheng Yu, and 4.89% for Yieh Phui Enterprise.
On Monday and Tuesday of this week, SMU polled steel buyers on a variety of subjects, including steel sheet prices, demand, inventory, imports, and what people are talking about in the market.
Rather than summarizing the comments we received, we are sharing some of them in each buyer’s own words.
We want to hear your thoughts, too! Contact david@steelmarketupdate.com to be included in our questionnaires.
“I don’t think we’re quite there yet – maybe January.”
“Steel prices will continue to increase. They will peak in March or April.”
“No. This is likely to continue until the beginning of the second quarter in 2024.”
“I think prices will peak in February or March around $1,150, then we will see a rapid decline.”
“I believe they will peak at the end of the first quarter. 2024 will be a repeat of 2023.”
“I think they are nearing peak. As scrap bumps up in December and possibly again in January, mills may try another round of increases pushing towards $1,200 per ton.”
“We will see a peak of $1,050 to $1,100 by mid-January.”
“Demand is remaining the same. I’m hearing some folks slowing down due to the holidays, but we’re actually slightly up.”
“For now, demand is stable. By the end of this week, most customers start to push off until January.”
“Discrete plate is stable to improving and will remain on that track through Q1 2024.”
“Demand is improving as buyers are restocking and working to beat the increase. Buying is primarily driven by contract buying on trailing prices.”
“Our demand is stable to seasonal trends.”
“Stable due to contract buying.”
“Inventory is doing the same seasonal dance as usual, although escalating mill and service center pricing is causing some headaches.”
“Slower due to high interest rates and many jobs shelved until the economy improves.”
“Inventory is moving around the same. If you remember pricing was starting to rise in this period last year, which led to increased buying.”
“Was moving faster but should start to slow down going into the holidays and into January.”
“Slower because of interest rates and price increases.”
“Very attractive for March/April arrival for coil and tube.”
“Absolutely more attractive. And whenever that is the case, we’re normally very close to an actual peak domestically.”
“Imports are attractive price-wise but lead times are into when prices will adjust downward.”
“No to me. Too many uncertainties still in the domestic market.”
“Yes, pricing still has a significant gap versus domestic.”
“Imports are attractive for early Q2 vs. domestic material based on pricing.”
“Imports are NOT attractive in discrete plate at all.”
“How tight will material be in Q2 2024.”
“AHMSA restarting, large service center consolidation, and Evraz.”
“What are the delays at Nucor Brandenburg?”
“Imported finished goods of steel intensive products are flooding in.”
“A potential shake up in supply chains if/when Cliffs buys USS. Do they keep Big River? Does Cliffs keep driving steel prices up next year regardless of macroeconomic conditions??”
“How the US presidential election may affect the steel market.”
U.S. Steel has received multiple bids valuing the company at more than $40 per share, CNBC reported on Wednesday.
That’s a steep premium to $22.72, where shares of the Pittsburgh-based steelmaker closed on Friday, Aug. 11 – shortly before the sales process spilled into public view on Sunday, Aug. 13.
CNBC, citing anonymous sources, said the U.S. Steel board was meeting on Wednesday and that “the sale process is coming to a conclusion” – even if an announcement might not be imminent.
Cleveland-Cliffs went public with its bid for U.S. Steel in August. SMU understands that ArcelorMittal – perhaps along with Nippon Steel, its joint venture partner at AM/NS Calvert – is also among the potential bidders.
The three companies either could not be reached for comment or did not respond to requests for comment on Wednesday from SMU.
Timna Tanners – equity research analyst, metals and mining – at Wolfe Research said there were three likely scenarios in a note on Wednesday morning.
“While we do not believe in a robust bidding war and think valuation looks steep, the outcome is unknowable,” Tanners said.
Recall that Cliffs acquired ArcelorMittal USA and AK Steel in 2020. Those deals gave Cliffs a commanding position in automotive, one rivaled only by U.S. Steel. As SMU has previously reported, the Alliance for Automotive Innovation – a lobbying group for automakers – has sought government intervention to prevent further consolidation.
ArcelorMittal teamed up with Nippon in 2014 to buy the former ThyssenKrupp mill in Calvert, Ala. That mill is now its flagship in the US. ArcelorMittal also has HBI capacity near Corpus Christi, Texas, that it could use to supply the EAF it plans to start up Calvert next year and, potentially, Big River Steel in Arkansas as well.
Also worth noting: the United Steelworkers (USW) union could play a bigger role in any U.S. Steel sale than has been the case in past mega-steel deals.
The spread between hot-rolled coil (HRC) and prime scrap prices widened slightly this month, according to SMU’s most recent pricing data.
SMU’s average HRC price increased this week, while the average price for busheling scrap jumped in December month over month.
Our average HRC price was $1,040 per ton as of Dec. 12, up $20 per ton from the prior week.
Busheling tags climbed $85 per gross ton from November to an average of $500 this month. Figure 1 shows price histories for each product.
After converting scrap prices to dollars per net ton for an equal comparison, the differential between HRC and busheling scrap prices is $594 per net ton as of Dec. 12, rising $25 from a month earlier (Figure 2). Widening for the third consecutive month, we’ll see if this becomes a trend going into the new year.
By the way, did you know SMU’s Interactive Pricing Tool has the capability to show steel and scrap prices in dollars per net ton, dollars per metric ton, and dollars per gross ton?
Figure 3 explores this relationship in a different way: We have graphed HRC’s premium over busheling scrap as a percentage. HRC prices now carry a 108% premium over prime scrap, down from 127% a month ago.
Steel is up again this week. Scrap is up by a lot this month: $85 per gross ton for busheling, by our calculations.
Let’s put that huge gain in December scrap prices context.
Cleveland-Cliffs sparked the current bull market for sheet when it announced it was seeking a minimum of $750 per ton hot-rolled coil (HRC) on Sept. 27. The steelmaker announced just last week that it was seeking $1,100 per ton for hot band. (You can follow along with SMU’s price increase calendar.)
That’s a targeted gain of $350 per ton. And you could make the case that it’s more like $450 per ton given that our HRC price was $645 per ton on average when that first September increase was announced.
So, yes, scrap is up a lot. But steel is up a lot more. And even if higher coil costs are largely why scrap has gone up by so much, I wouldn’t be shocked if we see those very costs used to justify additional sheet increases.
And make no mistake, mills are dug in around $1,100/ton for HRC and $1,300/ton for cold-rolled and coated. Buyers might say, “Yes, but there are few tons transacting at those levels.” Mills might say, “Not yet. But just wait until buyers are ready to commit to booking February HRC.”
In other words, I wouldn’t be surprised if Ethan Bernard’s holiday poem about steel prices proves to be an accurate forecast of steel prices for Christmas and New Year’s.
But I continue to hear from some of you that prices might peak in Q1. That’s also what our latest survey results reflect:
Most people think prices will peak in January or February. That makes some sense.
Imports fell to their lowest level in nearly three years in November. That’s probably supporting high domestic prices now. But imports arriving last month would have been ordered in September. That’s when US prices were among the lowest in the world, which explains why not much arrived from abroad last month.
We’ve seen more interest in imports over the last six weeks or so, especially as the gap has widened between US sheet prices and those abroad:
So why do people think US sheet prices will peak in January-February? Tack current lead times onto a date in January or February – and that puts you into Q2. Q2 is also when US mills could come under pressure from competitively priced imports slated to arrive in roughly March-May.
Maybe imports ordered for spring delivery will start to eat into mill order intake at some point in Q1. I can’t tell you how many tons of imports might arrive in Q1 and Q2. I think it’s safe to assume that material from Asia might not make a significant impact in Q1. That’s especially true with congestion in the Panama Canal adding approximately two weeks, I’m told, to lead times for imports from the region.
That said, I’m also told to keep an eye on import licenses starting in late December and in January. My understanding is that some US buyers bought material from Europe in October – and that should start showing up in import license data in late December and January.
We should also see material ordered this fall – whether from domestic mills or from foreign producers – arriving into service center inventories. We’ll release figures for November service center inventories to our premium subscribers on Dec. 15. Could we see inventories tick upward for the first time since July? We’ll see.
The good news? Most of you continue to report that you’re meeting or exceeding forecast:
And that’s remained true despite some worrisome big-picture data points – like the ISM Manufacturing PMI being in contraction since October 2022, and the ABI declining for five consecutive months.
My Christmas wish is that the trend of meeting or exceeding forecast continues for all of us!
SMU doesn’t do forecasts. So we’ve asked our readers to say what the New Year might bring.
We’ve had some good responses to date. If you haven’t added your voice yet, it’s not too late. We’ll keep the survey open until the end of this week.
Don’t forget to register for the Tampa Steel Conference before the end of the year. It will be held on Jan. 28-30, 2024, at the JW Marriott Tampa Water Street.
We’re on track to beat last year’s record attendance. And our room blocks are almost entirely sold out.
If you can’t find a room at the conference hotel, consider some of these alternatives:
Embassy Suites – Convention Center
Sheet prices increased again this week on the heels of higher costs for scrap, pig iron, and iron ore.
The sharply higher raw materials costs have sparked chatter about whether US mills might roll out another round of price increases later this week or early next.
Weighing against that upward trend: hot-rolled coil lead times have slipped for the first time since September amid an uptick in the number of steel buyers reporting that mills are willing to negotiate lower prices.
What gives? Is the modest dip in HRC lead times and increased willingness to cut deals a reflection of the typically slower holiday period? Or are those trends early signals that the bull run steel has been on since September risks running out of steam in Q1?
We’ll see. In the meantime, SMU’s hot-rolled coil price averages $1,040 per ton ($52 per cwt), up $20 per ton from last week. Cold-rolled averages $1,290 per ton, up $40 per ton from a week ago. Galvanized stands at $1,270 per ton on average, up $20 per ton from last week. And Galvalume is at $1,295 per ton, up $10 per ton week over week.
SMU’s plate price averages $1,400 per ton, down $10 per ton from last week – but effectively unchanged given how high base price are.
Our sheet price momentum indicators continue to point upward. Our plate price momentum indicator remains in neutral.
The SMU price range is $980–1,100 per net ton ($49–55 per cwt), with an average of $1,040 per ton ($52 per cwt) FOB mill, east of the Rockies. The bottom end of our range increased $40 per ton vs. one week ago, while the top end of the range was unchanged. Our overall average is up $20 per ton week over week (WoW). Our price momentum indicator for HRC continues to point higher, meaning SMU expects prices will increase over the next 30 days.
Hot Rolled Lead Times: 6–8 weeks
The SMU price range is $1,250–1,330 per net ton ($62.50–66.50 per cwt), with an average of $1,290 per ton ($64.50 per cwt) FOB mill, east of the Rockies. The lower end of our range was up $50 per ton vs. the prior week, while the top end of our range was up $30 per ton. Thus, our overall average is up $40 per ton vs. the week prior. Our price momentum indicator for CRC continues to point higher, meaning SMU expects prices will increase over the next 30 days.
Cold Rolled Lead Times: 6–12 weeks
The SMU price range is $1,240-1,300 per ton ($62–65 per cwt), with an average of $1,270 per ton ($63.50 per cwt) FOB mill, east of the Rockies. The lower end of our range was up $40 per ton vs. the prior week, while the top end of our range was unchanged. Our overall average is up $20 per ton vs. the week prior. Our price momentum indicator on galvanized steel continues to point higher, meaning SMU expects prices will increase over the next 30 days.
Galvanized .060” G90 Benchmark: SMU price range is $1,337–1,397 per ton with an average of $1,367 per ton FOB mill, east of the Rockies.
Galvanized Lead Times: 6-11 weeks
The SMU price range is $1,250–1,340 per net ton ($62.50-67.00 per cwt), with an average of $1,295 per ton ($64.75 per cwt) FOB mill, east of the Rockies. The lower end of our range was up $30 per ton vs. the prior week, while the top end of our range was down $10 per ton. Our overall average is up $10 per ton vs. the week prior. Our price momentum indicator on Galvalume steel continues to point higher, meaning SMU expects prices will increase over the next 30 days.
Galvalume .0142” AZ50, Grade 80 Benchmark: SMU price range is $1,544–1,634 per ton with an average of $1,589 per ton FOB mill, east of the Rockies.
Galvalume Lead Times: 6-15 weeks
The SMU price range is $1,370–1,430 per net ton ($68.50–71.50 per cwt), with an average of $1,400 per ton ($70 per cwt) FOB mill. The lower end of our range was up $10 per ton WoW, while the top end of our range was $30 per ton lower. Our overall average is down $10 per ton vs. one week ago. Our price momentum indicator on steel plate shifted from neutral to higher, meaning SMU expects prices will increase over the next 30 days.
Plate Lead Times: 4-7 weeks
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.
United Auto Workers (UAW) President Shawn Fain outlined the union’s strategy to unionize non-union auto workers in the US. Fain named it the “30:50:70 strategy” in a Facebook Live update on Dec. 11.
SMU has previously reported that non-union workers at 13 automakers are making moves to join the union.
The first step involves workers at a non-union plant forming a union organizing committee.
“When 30% of your coworkers sign union cards, you’re ready to go public with your organizing committee,” Fain said.
He stated that when 50% have signed union cards, “I will personally join you for a rally in your town.”
“When 70% have signed cards … we will demand that your company recognize the union,” he concluded.
He said the non-union automakers operating in the US have so far responded with both the “carrot and the stick.” This is in response to non-union workers’ reaction to contracts obtained by UAW with the “Big Three” Detroit-area automakers.
Fain described the carrot as the raises and bonuses offered at automakers like Honda and Toyota in the US.
As for the stick, he said this was allegedly punitive action by the automakers as non-union workers attempt to organize.
In a press release also on Dec. 11, the UAW said organizing workers at Honda in Indiana, Hyundai in Alabama, and Volkswagen in Tennessee have filed charges against management for “illegally union-busting as workers organize to join the UAW.”
Honda workers “report being targeted and surveilled by management for pro-union activity at the company’s Indiana Auto Plant in Greensburg, Ind.,” the union said. “Hundreds of workers at the facility have signed union cards and are organizing to join the UAW.”
A spokesperson from Honda told SMU in an emailed statement that “Honda encourages our associates to engage and get information on this issue.
“We have not and would not interfere with our associates’ right to engage in activity supporting or opposing the UAW,” the spokesperson added.
As previously reported, at Volkswagen’s Chattanooga, Tenn., plant, more than 1,000 workers have signed union cards. Employees there have also reported harassment from management, according to the UAW.
Meanwhile, workers at Hyundai’s Montgomery, Ala., plant have reported “interference and intimidation,” the UAW said.
Spokespersons for Hyundai and Volkswagen did not respond to requests for comment by the time of publication.
US apparent supply climbed to 8.11 million net tons in October, up 4% from 7.82 million tons in September, according to data from the US Department of Commerce and the American Iron and Steel Institute (AISI).
Apparent steel supply is determined by combining domestic steel mill shipments and finished US steel imports, then deducting total US steel exports.
October’s apparent supply total was 381,849 tons lower than the same month one year ago when supply was 8.50 million tons. Figure 2 shows October trade statistics year over year (YoY) for each of the past three years.
Apparent supply has varied throughout the year, a trend displayed in the chart below (Figure 3). In February, apparent supply dipped to 7.56 million tons, still the lowest total year to date, though May and September, were not far off at 7.82 million tons each. Figure 3 shows monthly statistics over the last three months.
Figure 4 shows year-to-date (YTD) monthly averages for each statistic over the last five years. The average monthly apparent supply level for 2023 thus far is 7.58 million tons.
To see an interactive graphic of our Apparent Steel Supply history, click here. If you need any assistance logging into or navigating the website, contact us at info@steelmarketupdate.com.
US scrap prices shot up in December and are expected to continue their rise in January, market sources told SMU.
“Dealers dug in, and export prices continued to rise through the December trade to push domestic US prices considerably higher than initially expected,” one source told SMU.
The first source commented that cut grades rose only about $30 per gross ton (gt) “as other grades for flat-rolled mills were in better demand.”
He said that prime increases, though, were generally $50-60 per gt in most areas, though there were deals for prime in the Midwest that caused the indexes to jump higher.
A second source noted that some dealers “naively” sold at up $50, not realizing the supply constraints for prime scrap.
“Going forward, if the mills want to buy anymore scrap for December, they’ll have to make up this difference, and then some,” he said.
As for what drove the hike, the second source cited the lack of supply of automotive industrial grades like busheling and #1 bundles due to the now concluded United Auto Workers strike, along with increased demand for those grades.
“Also, stockpiling for severe winter months to a lesser degree,” he added.
Looking ahead to the new year, he said, “Everybody knows prices will continue upward in January.”
The first source agreed, expecting that scrap prices will move higher next month.
“But I would not expect December-style increases as more tons will come to market in January albeit to feed likely better demand too,” he added.
A third source noted a lot of “drama” in December pricing. He said December was “certainly a very strong increase, with every expectation that January will be higher.”
SMU’s December scrap pricing stands at:
The number of open construction jobs reached a record high in October as workforce shortages persist, the Associated General Contractors of America (AGC) reported.
The AGC said the 457,000 open construction positions as of the end of October represented the highest October total in the 23-history of the series maintained by the government.
The Arlington, Va.-based organization said the construction industry added only 2,000 jobs from October to November, with employment reaching a seasonally adjusted 8,033,000 positions. About 200,000 jobs have been added over the past year – a 2.6% increase vs. 1.8% job growth in the overall economy, the AGC noted.
The AGC said the 457,000 open construction positions as of the end of October represented the highest October total in the 23-year history of the series maintained by the government.
“The steep rise in pay for craft and other hourly workers, along with an earlier report of record job openings heading into November, indicate that contractors are still struggling to find enough skilled workers,” commented AGC Chief Economist Ken Simonson.
“The slowdown in employment is a sign of how tight the job market is, not an indication that construction demand is lagging,” he added.
Growth in construction continues to be constrained by labor shortages, the AGC said.
“Construction workforce shortages are a problem not just for contractors, but the broader economy because they limit job growth and make it harder to build infrastructure and economic development projects,” said AGC CEO Stephen E. Sandherr.
Spending on construction projects grew by 0.6% from September to a seasonally adjusted annual rate of $2.027 trillion in October. While spending on both residential and nonresidential projects increased overall, segment results were mixed.
“It is apparent that the construction market overall remains healthy,” Simonson stated.
“But a rotation is occurring among nonresidential segments as manufacturing construction expands, while commercial construction slumps and highway and street spending stagnates. On the residential side, single-family construction is picking up, while multifamily is descending from record highs,” he noted.
Join Steel Market Update at the Tampa Steel Conference next month to hear Ken Simonson present the AGC’s construction forecast for 2024.
Domestic steel production slipped for the week ended Dec. 9 but rose in three regions, according to the American Iron and Steel Institute’s (AISI’s) report on Monday, Dec. 11.
Raw steel production totaled 1,697,000 net tons, down 0.3% from the 1,702,000 tons produced the week prior. The largest fluctuation happened in the West, falling 4.3% week over week.
However, US output was a 7.7% increase from 2022 when 1,576,000 tons were produced.
The mill capability utilization for the week was 73.8% compared to 74.1% the week prior. During the same week in 2022, the mill capability utilization rate was 70.6%
Adjusted year-to-date production through Dec. 9 was 83,640,000 tons at a capability utilization rate of 75.5%. That is 0.2% less than the 83,802,000 tons produced during the same period last year when the rate was 77.5%.
Production by region is shown below with the week-over-week change shown in parentheses:
The International Trade Commission (ITC) made its final injury determination in a sunset review of import duties on circular welded pipe from a handful of countries.
While the duties will remain in place for another five years for six countries, the duties are being revoked for Brazil.
The agency found that revoking the existing antidumping and countervailing duties (ADs and CVDs) on the pipe imports from India, Mexico, South Korea, Taiwan, Thailand, and Turkey would likely continue injuring the domestic industry. As a result, those duties will remain on the books for at least another five years.
Earlier this year, the US Department of Commerce found that allowing the duties to expire would lead to the continuation of dumping at margins of 87.83% for India, 1.2% for Mexico, 1.2% for South Korea, 3.91-27.65% for Taiwan, 15.6% for Thailand, and 23.12% for Turkey.
For Brazil, Commerce determined dumping margins of 103.38% would likely persist if the duties were continued.
Despite Commerce’s findings for Brazil, the ITC found that allowing the country’s AD import duties on circular pipe and tube to sunset would not likely injure the domestic industry within a reasonably foreseeable time. Therefore, the duties are being revoked.
The ITC will issue a public report on its findings late in January.
Allowing import duties on Brazilian steel to sunset while at the same time maintaining duties for other countries has become a trend in recent years.
The ITC allowed duties on Brazilian steel plate to expire earlier this year. And in October 2022, it permitted duties on Brazilian hot-rolled coil to also expire.
This is notable because it could allow the South American country to become a more important sheet, plate, and welded tube supplier to the US market, especially since Brazil does not face a 25% Section 232 tariff. Brazil is instead limited by its Section 232 quota.
‘Twas two weeks before Christmas, and at our publication
We kept logging steel price increases from across our fair nation.
Up hot rolled, up cold rolled, and galvanized coil.
On Galvalume and plate — gushing skyward — like a geyser of oil.
Blink for a moment and you might miss a hike,
Oh what a change from the United Auto Workers strike.
Discuss prices at your holiday party but do practice moderation
As you sip on spiked eggnog and discuss decarbonization.
Will the EU and US agree, or will we see some global sheriff
Ride into Washington and pronounce a world carbon tariff?
Maybe start a little smaller, a more realizable goal,
Hang up our stockings and receive metallurgical coal.
Though it’s true some say Old Saint Nick is not real,
The same can’t be said for the much vaunted “green steel.”
Lower and lower the carbon goes, the greener it gets,
Are we reaching net zero soon, is anyone taking bets?
Carbon capture, hydrogen, the only limit’s the sky
As long as we don’t end up getting taken over by AI.
Here at SMU, we wish you all a joyful holiday season.
Join us soon in Tampa, in Florida, the weather sure is pleasin’.
There’ll be much to learn and discuss, old and new friends aplenty,
It will be 2024, a real blank slate, let’s finally forget 2020.
So two weeks before Christmas, and if you’ve also got that holiday feel
Don’t hesitate to drop us a tip: Who’s going to buy U.S. Steel?
Are you shivering through the season? Beat the winter blues and get a jump on all things steel at our 35th Annual Tampa Steel Conference. Rooms are filling up fast. Register here.
This year saw a huge increase in debate and proposals for addressing greenhouse-gas emissions, not only here in the US but around the world.
All the angst about a climate catastrophe, including rising sea levels, more intense and frequent hurricanes, etc., has not led the world closer to an effective program to do something about it. The global climate conference (COP 28 in Dubai) reflects that reality. While many world leaders are attending, China’s President Xi and US President Biden are not.
Each country has its agenda for addressing climate change. Those policy responses, here and elsewhere, reflect the interests of each country’s government and private-sector participants. The divide between authoritarian regimes and democracies also reflects these differences. Authoritarian governments promote their strategic ambitions more effectively than global interests, such as addressing climate change.
In the US, the response fits the interests of its politicians and private interests. The International Trade Commission is currently studying, at the request of the Biden administration, the “carbon intensity” of steel and aluminum production. The Commission conducted a hearing on Dec. 7 on this issue. A report on the steel and aluminum industries is due in January 2025, after the next presidential election. This does not reflect a sense of great urgency and crisis. Nor does the inability of the US and EU to agree, after two years of talking, on a common response to the global challenges of steel and aluminum.
The steel industry is mostly united, but some gaps in policy are starting to appear. Steel production is of two basic types: a basic oxygen blast furnace (BOF) and an electric-arc furnace (EAF). The US has embraced EAF production to a greater extent than any other major steel producer. As a result, the US can justly claim to be at the forefront of “clean steel.” This is because EAF production produces lower carbon emissions than BOF production.
Pioneered by Willy Korf (direct-reduced iron and scrap as raw materials for steelmaking) and Ken Iverson, the founder of Nucor, EAF steelmaking has largely taken over steel production, and has completely captured the construction of new steel mills in this country.
BOF has its advantages, both commercial and political. First, certain grades of steel (armor plates for ships) and high-technology flat-rolled steel (such as tin mill products) are not practical for EAF mills. Second, BOF mills are monuments to heavy industry, employing thousands of workers and providing votes for their members of Congress. The United Steelworkers union has overwhelming support from BOF mill workers, but few EAF workers are members.
BOF steel production has completely replaced open-hearth production that held sway from the 19th century until after World War II. It is a major improvement over open-hearth technology.
But BOF production is not as clean from a climate point of view. It requires carbon to separate iron from oxygen. When that happens, the result is CO2! End of chemistry lesson. CO2 is disposed of largely through chimneys, spewing large amounts of CO2 into the atmosphere.
The advantages of EAF production are quite different. EAF started with “long” products, meaning rails, bars, wire rod, I-beams, etc., because the purity of steel scrap was not suitable for making flat-rolled steel (plate and sheet). But since about 1990, Nucor and others have expanded into flat-rolled steel. Largely for this reason, EAF steelmaking now is nearly three-quarters of US production.
EAF production is significantly less carbon-intensive than BOF. Recent estimates peg BOF production at about five times the carbon intensity of EAF production. This is the most important reason the US can claim the “clean steel” title. The rest of the world still mostly uses blast furnaces.
The domestic steel industry has two principal trade associations that speak to the issue of reducing carbon emissions—the EAF sector is often seen speaking through the Steel Manufacturers Association (SMA) and the BOF sector through the American Iron and Steel Institute (AISI). Both are effective and have developed many policy proposals jointly.
Regarding restricting international trade in “dirty” steel, they propose that the US hit such steel with tariffs based on a benchmark that, domestically, only EAF mills meet. But the tariff would protect BOF and EAF production in the United States.
But cracks are appearing. In government procurement, for example, the agency charged with overseeing the construction of nonmilitary government buildings and infrastructure (GSA) proposed “clean steel” regulations setting a more lenient emissions standard for BOF-produced steel than for EAF steel, based on the production capabilities of the two sectors (and based, clearly, on political considerations). But SMA advocates a single standard, which would benefit EAF mills and set BOF mills back.
The reason behind the “double standard” published by GSA has more to do with domestic politics than cleaning the air. According to a recent survey, there are only 10 BOF steel mills in five states (Michigan, Indiana, Ohio, Illinois, and Pennsylvania). By contrast, the US has 83 EAF mills in 28 states. One of the two BOF mills in Illinois, U.S. Steel’s Granite City, idled iron- and steelmaking last month “indefinitely,” at the cost of hundreds of jobs. That mill was constructed in 1897.
Politically, closing a steel mill is a bitter pill. On average, BOF mills employ many more people than each EAF mill and have generally been around for many decades. Politicians will do almost anything to keep them up and running, including things that only postpone their inevitable closure for a few years.
Reducing carbon emissions in steel and aluminum is a worthy goal. A viable global solution is elusive at best. But the government wants to appear capable of handling it because many in the electorate believe that it is an existential threat to our planet.
The EAF and BOF segments of the US industry are not in lockstep, and things may get more divisive, especially if there are international agreements on carbon emissions. The trade impacts of such global agreements could further open the US market to cleaner steel from other countries.
Editor’s note: This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.
U.S. Steel will continue to operate the hot strip mill and finishing lines at its Granite City Works in southern Illinois.
The Pittsburgh-based company told SMU that those operations would continue despite the “indefinite” idling of iron- and steelmaking at Granite City.
“Rolling and finishing lines will continue to run using slabs from other facilities in order to meet the needs of our customers,” a U.S. Steel spokeswoman said in an email to SMU.
Granite City sports an 80-inch hot-strip mill, a 51-inch pickle line, a 56-inch four-stand cold-reduction mill, and a 49-inch hot-dip galvanizing and Galvalume line, according to U.S. Steel’s website.
Recall that U.S. Steel announced the indefinite idling of steelmaking at Granite City in late November, including its ‘B’ blast furnace. Granite City has two blast furnaces: ‘A’ and ‘B’. The ‘A’ furnace was indefinitely idled in April 2020, according to SMU’s blast furnace status table.
The mill makes hot-rolled, cold-rolled, and coated sheet for customers in the construction, container, pipe and tube, service center, and automotive sectors. The facility, before the idlings, had annual raw steelmaking capacity of 2.8 million net tons, per U.S. Steel’s website.
US steel exports declined for the second month in a row in October, falling to the lowest monthly total so far in 2023.
Exports of all steel products totaled just over 728,200 net tons in October, the latest figures from the US Department of Commerce’s International Trade Administration show. October’s exports are 7% lower than the month prior and 20% lower than the recent high of 914,018 tons recorded in May.
Looking at exports on a three-month moving average (3MMA) basis, we can see exports falling off from the recent high of more than 886,600 tons in July. October’s 3MMA was just over 799,100 tons.
The 12-month moving average (12MMA) of exports, meanwhile, continues to trend upwards, rising to more than 793,000 tons in October.
Table 1 shows an analysis of flat-rolled steel exports for the month of October. Of note in the export data are coiled plate exports at a 10-month low and hot rolled exports at a six-month low. Exports of cut-to-length plate and cold-rolled sheet inched up during the month.
Looking at the 12MMAs of exports by product, we can see galvanized, hot rolled, cold rolled, and cut plate exports trending upwards to levels even with or even higher than exports during 2018. Exports of coiled plate, meanwhile, have been trending downward, while other metallic-coated exports are generally flat.
We have a graphing tool available on our website where readers can further investigate historical export data in total and by product.
The latest SMU market survey results are now available on our website to all premium members. After logging in at steelmarketupdate.com, visit the pricing and analysis tab and look under the “survey results” section for “latest survey results.”
Historical survey results are also available under that selection.
If you need help accessing the survey results, or if your company would like to have your voice heard in our future surveys, contact david@steelmarketupdate.com.
Register for Dec 13 Community Chat with BoA M&A guru Ira Kreft
Bank of America SVP Ira Kreft will be the featured speaker on SMU’s Community Chat webinar on Wednesday, Dec. 13, at 11 am ET. You can register here.
We’ll discuss M&A in the steel and metals industries. Is there still room for consolidation in flat-rolled steel?
We’ll also talk about the trend of historically carbon steel service centers diversifying into stainless and specialty metals. They are adding great value-added capabilities, including downstream fabrication. How durable is that trend, and what does it mean for M&A at the service center level?
Finally, mills are focused on decarbonization. Beyond record piles of cash, what financing is available to fund their path to net-zero?
We’ll take your questions too. So think of some good ones, and throw them in Q&A box on Dec. 13.
Ira Kreft is a senior vice president at Bank of America Business Capital and national metal industries executive. His office is in Chicago and he works and collaborates with Bank of America’s bankers and investment bankers with respect to companies from Main Street to Wall Street across the metals spectrum from metal recyclers to mills to service centers to fabricated metal and metal intensive manufacturers.
He serves as a subject-matter expert in metals for BoA’s Global Commercial Banking division. He comes by the metal industries naturally because his father spent his career with U.S. Steel and he was indoctrinated into the industry at an early age.
Editor’s note: If you’d like to see recordings or slide decks from past Community Chat’s – including a very good one recently with Algoma Steel CEO Michael Garcia – you can find those here.
A count of November license applications suggests steel imports were at their lowest monthly level in 33 months (see Figure 1).
Import license applications fell below the 2-million-net-ton mark in November, coming in at just under 1,983,000 tons, according to data from the US Department of Commerce’s International Trade Administration. That’s a 10% decline from October’s final import count of almost 2,201,000 tons, and just 2% lower than November 2022 imports of 2,013,420 tons.
Licenses to import semi-finished steel bounced back after dipping in October, with November’s license count of 385,285 tons 17% higher month on month (MoM). Compared to the same month of 2022, November licenses are 63% higher.
Finished steel import licenses, meanwhile, were 15% lower MoM and 10% lower year on year (YoY) at almost 1,597,700 tons in November. Products seeing significant increases included line pipe greater than 16 inches in diameter, other metallic-coated sheet, hot-rolled bars, and galvanized sheet (see Table 1).
Licenses for other metallic-coated sheet products rose on higher monthly shipments from Mexico, South Korea, Taiwan, and Japan.
Imports of line pipe with diameters greater than 16 inches look to have been at their highest monthly level so far this year, with 50,726 tons of licenses in November. The increase is due to a spike in shipments from Turkey, with nearly 23,530 tons of licenses counted in November.
As SMU has been reporting, domestic hot-rolled coil (HRC) prices have been surging, creating a growing gap in domestic vs. import pricing. SMU has been hearing of increasingly more attractive import offers coming from multiple countries. Because of this, an increase in imports is possible in the coming months.
Note that license counts can differ from preliminary and final figures, as import licenses are required to be obtained before actual importation.
We’ll take a deeper dive into November imports when preliminary figures are released later this month.
Active rotary rigs in the US and Canada are up for the second consecutive week, according to Baker Hughes.
For the week ended Dec. 8, US rigs moved up by one to 626 vs. the previous week. Oil rigs dropped by two to 503, but gas rigs inched up by three to 119. Miscellaneous rigs were unchanged at four.
Compared to the same period one year ago, the US count is down by 154. There are 122 fewer oil rigs, 34 fewer gas rigs, but two more miscellaneous rigs.
Canada’s rig count for the same week inched up by two to 194 active rigs. Oil rigs dropped by two to 120 but gas rigs moved up by four to 74.
Year over year there are 11 fewer oil rigs but three more gas rigs. Overall, there are eight less rigs than there were at the same time in 2022.
The international rig count is updated monthly. The total number of active rigs during the month of November was 978, up 16 from the previous month, and increasing by 68 from November 2022.
The Baker Hughes rig count is important to the steel industry as 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. Wells are drilled to explore for, develop, and produce oil or natural gas. Baker Hughes’ rotary rig count includes only those rigs that are significant consumers of oilfield services and supplies.
For a history of the US and Canadian rig counts, visit the rig count page on our website.
The US presidential elections will take place on Nov. 5, 2024. After lagging behind Biden throughout most of this year, polls in key swing states are now very close, and a Trump victory is now seen as an equally likely possibility by betting markets (Figure 1). In this Insight, we evaluate potential impacts of the US elections on key parts of the economy. Overall, although some policies might be rolled back or adjusted if a Republican was to replace Biden, 180-degree turns are unlikely in most areas. A White House that promotes either free trade or fiscal conservatism is very unlikely to emerge from these elections.
The single most important policy change under a Trump presidency might be the lack of predictability. Under Biden, the direction of US policy is relatively clear – use the US’s economic and political sway to try and contain Chinese power, while using subsidies, trade restrictions and regulation at home to decarbonize the economy and boost the industrial base. Having not participated in the debates and having given little indication of concrete policy proposals, it is highly unclear what direction a Trump White House would take on many issues.
One of Trump’s first acts as president in 2017 was to pull the US out of the Paris Agreement on climate change (, which Biden re-joined upon taking office). It is highly likely that Trump – or another Republican – would do the same were they to win in 2024. At minimum, this would be a huge symbolic blow to the decarbonization agenda worldwide and would weaken prospects for demand growth in the many commodities linked to the energy transition.
However, this would not automatically mean reversal of actual Federal policy. The president alone cannot reverse existing legislation such as the Inflation Reduction Act (IRA). New legislation to cancel or repurpose IRA funding would have to pass Congress. Moreover, according to the White House, about $337 billion of investment under the IRA will go on solar, wind, and storage projects located in the “red” states, and so Republicans in congress will have strong reasons to maintain much of the IRA incentives. A plausible outcome, however, might be that the IRA gets re-written and made somewhat less generous, and even more protectionist.
State-level policies pushing decarbonization – in particular, in California and other – would also probably continue under a Republican administration. These have been an important part of the policy picture in the US.
The construction sector is likely to grow stronger over the next few years (Figure 2). The Infrastructure, Investment and Jobs Act was a bipartisan piece of legislation that is unlikely to be rolled back, and US manufacturing is investing heavily. A president might affect what is built but both a Republican and a Democrat will likely be pro construction.
In 2021, Biden signed an executive order stating a commitment to end sales of new internal combustion engine (ICE) vehicles by 2035. It is highly likely a Republican president will delay or overturn this. However, at least nine states plan to ban ICE sales separately from federal plans. Moreover, other factors are probably more important for the speed of the EV transition over the next few years. For example, Although US EV sales have grown at rapid rates (from a low base), to reach market share of around 7%, the next stage of moving from early-adopters to mass market is proving more difficult. Concerns over cost, financing and charging infrastructure (as well as the difficulties of trying to reduce China’s role in supply chains) are the most important factors holding back consumers. How policy tackles these – or doesn’t – will determine whether the US catches up with China and Europe in EV adoption.
The US is now the world’s largest oil producer, with production of 20.3 million barrels per day (mbpd) (21% market share). During Trump’s term, oil production increased by almost 2.5 mbpd – the largest increase in any presidential term. However, it is also true that dozens of oil companies fell into bankruptcy under Trump’s watch (Figure 3, left-hand side).
Meanwhile, since the beginning of Biden’s term, he has green-lighted some projects and struck down others, but overall oil production continued growing since early 2021. While a president might influence US oil supply, given the dominance of OPEC (Figure 3, right-hand side), we believe it is OPEC and Saudi Arabia in particular that will be more important in influencing oil supply. Demand will also be important, for example in October the Brent Crude price dropped from nearly $100 /bbl to $77 /bbl and we expect oil prices to average $85 /bbl over 2024 as more major economies, including the US, slow down thereby reducing their demand for oil.
The regulatory environment had tightened post the GFC under Obama, giving Trump an edge on the elections to win some support by promising to relax regulation, providing a boost to companies in terms of spurring investment. The markets responded very positively to his election for that reason, including commodity markets. However, there is no longer such a perception of a heavy regulatory environment in the US, and as for scrutiny on Chinese investment, US companies, by and large, approve of it. Hence, we expect the re-ordering of supply chains away from China (which has been underway since the pandemic) to continue, regardless of whoever is in the White House. However, the anti-trust push and moves to monitor emissions would likely be rolled back under a Republican president.
Both parties agree that China poses a major threat to US interests and are willing to use trade policy as part of the toolkit to contain Chinese influence.
We do not expect this hawkish attitude to China to change under either party, but a détente could – counterintuitively – be more likely under a Trump presidency. In his first term, Trump pursued a more transactional approach to foreign policy, and may be tempted by the optics of striking a deal with Beijing. There would certainly be less focus on building multi-lateral alliances designed to contain China than under Biden.
The “Buy American” agenda that is gaining steam in the US, is to a large extent a “don’t buy China” agenda. The Buy American agenda is a leftover from the 1980s and was sidelined after NAFTA and the globalization of the 2000s. Recently it made a comeback as part of requirements for many projects funded by IRA. This is likely to continue under either party.
The tariffs imposed on China and some American allies by Trump in 2018 have been largely continued under Biden. For instance, in March 2022, 352 product exclusions from the US Section 301 tariffs – that were originally imposed under Trump – were reinstated. Section 232, the act that investigates the effects of imports of steel, is also still in place.
Nonetheless, there is probably a greater risk of protectionism and reshoring intensifying under Trump. Recently, Trump has proposed a new 10% blanket tariff on all imported goods. As with most Trump public policy announcements, there is no guarantee this would actually happen if he were to win – it may be a negotiating gambit. If it was to be introduced, such a tariff would almost certainly trigger retaliation from trading partners, and be a major blow to globalization.
We expect the US to run a fiscal deficit of almost 7.5% in 2023 – a huge number considering the economy is close to or at full employment. US debt has been growing rapidly over the last few decades under both Republican and Democratic presidents (Figure 4), so we have little expectation that the US will copy Europe in attempting to bring down deficits. Perhaps the most likely scenario for fiscal consolidation would be if a more ‘traditional’ Republican wins, although given the extent of the increase in debt seen under George W. Bush shows even this cannot be counted on.
The Congressional Budget Office (CBO) estimated that cumulative deficits from next year to 2033 will come as high as $20.3 trillion, crowding out investment and weighing on growth; while interest costs are projected to expand from $476 billion in 2022 to $1.4 trillion by 2033. In 2023, spending on net interest costs outpaced spending on Medicaid and Income Security Programs. According to Peter G. Peterson Foundation, in 2022, 72% of Democrats, 74% of Independents and 86% of Republicans felt the mounting debt should be a top-three priority. Hence, it cannot be completely ignored by a president from either party.
This article was first published by CRU. Learn more about CRU’s services at www.crugroup.com.
October saw domestic heating and cooling equipment shipments drop for a second consecutive month, according to the latest data released from the Air Conditioning, Heating, and Refrigeration Institute (AHRI).
Shipments declined 12% month on month and 11% year on year to 1.5 million units in October.
On a 12-month moving average (12MMA) basis, shipments were down to 1,791,429 units vs. 1,808,331 units the previous month.
The chart below shows the total heating and cooling shipments on a three-month moving average (3MMA) basis. Shipments fell 7% through October compared to the same period one year ago. The 3MMA declined nearly every month in 2023, with April seeing the largest decline at 12%.
Shipments of residential and commercial storage water heaters increased 8% MoM to a combined 818,262 units. YoY, shipments jumped 15% from 708,572 units.
Shipments of central air conditioners and air-source heat pumps were down 30% both MoM and YoY. A total of 306,735 AC units and 225,834 heat pump units were shipped in October.
This year has seen more water heater and air conditioner/heat pump units shipped out of any of the last five years. However, the most warm air furnaces were shipped in 2021.
The full press release of this data is available on the AHRI website.
An interactive history of heating and cooling equipment shipment data is available on our website. If you need assistance logging in to or navigating the website, please contact us at info@steelmarketupdate.com.
At the COP28 UN Climate Change Conference currently underway in Dubai, a group of stakeholders introduced the Steel Standards Principles, calling for the establishment of common methodologies for measuring greenhouse-gas emissions in the sector.
SMU asked the two major US steel associations for their thoughts on the standards. Here’s what they had to say.
In an interview, SMA President Philip Bell told SMU the association was very pleased to endorse the principles. If the industry is serious about decarbonizing globally, then there needs to be a real attempt at coming into agreement on some basic concepts, he said, and these standards are a good start.
With the SMA Board of Directors voting to support the standards, Bell believes the association now has a seat at the table to be able to influence and guide policy in this area.
Different groups have come out with different standards, and all are clamoring to have their thoughts and opinions heard on the matter. Two of the big ones thus far are the Global Steel Climate Council (GSCC) (of which the SMA is a founding member) with its Steel Climate Standard and ResponsibleSteel with its International Standard V2.0.
The idea of the Steel Standards Principles put forward at the WTO is taking some of the best elements of all these standards and groups and coming together to start to coalesce around a coherent policy, Bell said. The principles will continue to evolve and improve, he noted.
“What’s most important is these principles agree on something that is core to SMA: That whatever we do, it needs to be process- and technology-agnostic,” Bell said. In other words, it doesn’t matter how you make the steel, what your raw materials are, or what region of the world you’re in, the focus ultimately needs to be on reducing CO2 emissions, he said.
An important aspect of the technology-agnostic performance-based measures, he commented, is that there are still technologies evolving and yet to be commercialized and/or discovered that will need to be considered. The principles have to adapt to these emerging processes and technologies, such as the combination of DRI and natural gas in steelmaking, as well as hydrogen-based steelmaking.
Noting that American steelmakers continue to be the most energy-efficient steel producers in the world, “By becoming a part of these principles, we’re going to be able to share our ideas and successes with the rest of the world,” Bell concluded.
Although the AISI did not sign on to endorse the Steel Standards Principles at this time, it does not mean the association may not consider doing so in the future. The Washington, D.C.-based organization has been actively working on a variety of GHG-related issues for a number of years for its members and the American steel industry.
Last year, AISI recommended its own guidelines for calculating GHG emissions from steel production.
“We remain committed to working with partners in government, industry and other interested groups to reach consensus on the most appropriate methodologies for ensuring consistent and comprehensive data on GHG emissions in the steel industry,” AISI’s president and CEO Kevin Dempsey told SMU in an email.
“This requires detailed work on a number of complex issues that cannot be resolved simply through reference to high-level principles that do not address the many technical questions currently under analysis and debate,” he noted.
The LME Aluminum 3-month price is moving up again on the morning of Dec. 8 and was last seen trading at $2,157 per metric ton. The way the price increased first thing in the morning suggests a support may have finally been found, but resistance could hit quickly at $2,200 /metric ton.
SHFE cash was broadly stable on Dec. 8, but gains were seen resuming over the late session. The cash contract settled at RMB18,500 /t and last traded at RMB18,580 /metric ton.
US Midwest premium steady at the start of December
The US Midwest premium continues to trade between the 18.7–19.2 ¢/lb and little has changed for much of the back half of 2023. The market is still looking ahead to 2024 and working on forecasting when and how quickly demand will return. There are various thoughts floating around that mimic the current macro conversations on hard, soft, or no landing. The health of the overall economy remains not overly negative and GDP growth has surprised to the upside.
Most importantly, the prevailing opinion is that rate hikes have stopped and the cost of borrowing should be at, or near, its peak. This will help overall consumer spending on big ticket, aluminum-intensive items but also reduce the cost of carry. Trading activity has been climbing in recent weeks after months of dormancy, which has helped January’s level firm up to be almost a cent and a half higher than where the market is currently.
Rio Tinto reaffirms decarbonization objectives at investors’ day
On Dec. 5, Rio Tinto held its 2023 Investor Seminar in Sydney, where it updated on progress in its long-term strategy of investing to strengthen operations, deliver growth in a decarbonizing world, and continue to generate attractive shareholder returns.
Rio Tinto’s Chief Executive, Jakob Stausholm, said: “We are making real progress in shaping our portfolio for the future, through entering new markets like recycled aluminum in North America, developments in technology and one of the most exciting exploration pipelines we’ve had for many years.”
Rio Tinto remains committed to meeting its ambitious decarbonization target to halve Scope 1 and 2 emissions by 2030 on the road to net zero by 2050; and a well-defined pipeline of initiatives is indeed progressing. The Group has made project commitments in 2023 which will deliver abatement of around 2 million metric tons of CO2 per year. This includes renewable energy contracts in Australia and Africa, and the transition to 100% renewable diesel at Boron in California in 2023, and at Kennecott in Utah from 2024. Rio Tinto has updated its total capital guidance on decarbonization from $5 to $6 billion for the period to 2030 (previously ~$7.5 billion), including around $1.5 billion from 2024 to 2026, and weighted to the latter part of the period.
Hydro wins changemaker recognition at COP28
Hydro received recognition from the COP28 UAE presidency as an Energy Transition Changemaker for pioneering the green aluminum transition. The acclaim comes as Hydro makes the push to construct a test facility for the zero-emission HalZero technology, with the aim to start producing by 2025.
HalZero is part of Hydro’s technology roadmap to reduce the emissions associated with aluminum production. Existing electrolysis technology emits CO2 as an inevitable part of the process, but the technology under development is designed to emit oxygen instead of CO2. If successful, HalZero could be implemented in new aluminum smelter capacity around the globe, removing emissions from one of the world’s hard-to-abate sectors.
Rio Tinto acquires 50% of aluminum recycler Matalco
Mining-metal group Rio Tinto has completed a transaction to purchase half of US Aluminum recycling company Matalco from owner, the Giampaolo Group, for $700 million (€638 million), subject to final closing adjustments. The companies will turn Matalco into a 50:50 joint venture. The investment will expand Rio Tinto’s aluminum business in the US, where demand for recycled material is forecast to increase by more than 70% in the decade to 2032, driven by the transportation, construction and packaging sectors, the company said. CEO Jakob Stausholm added: “We look forward to working in partnership with the Giampaolo Group to support the drive to net zero by expanding recycled production and providing closed-loop recycling solutions to help our customers reduce their carbon footprint.”
Norsk Hydro and Padnos collaborate to introduce advanced aluminum sorting technology in the United States
Norwegian aluminum producer Norsk Hydro and Michigan-based recycling firm Padnos have established a 50/50 joint venture called Alusort LLC to implement Hydro’s proprietary sorting technology, HySort, in the United States. The venture aims to industrialize the advanced aluminum sorting technology by installing a Hysort sorting machine at Padnos’ facility in Grandville, Michigan. Production is set to commence next year, with Hydro’s share of the capital investment estimated at around $4 million. The initiative, known as Alusort, seeks to enhance recycling capabilities, reduce emissions, and create value-added, low-carbon products for key aluminum end markets such as automotive, construction, and more.
This article was first published by CRU. Learn more about CRU’s services at www.crugroup.com.
SMU’s Current and Future Steel Buyers Sentiment Indices both fell during the week of Dec. 6, based on our most recent survey data.
Every other week, we poll steel buyers about sentiment. The Steel Buyers Sentiment Indices measure how steel buyers feel about their companies’ chances of success in the current market and three to six months down the road. (We have historical data going back to 2008. Check out our interactive graphing tool here.)
SMU’s Current Buyers Sentiment Index stood at +66 this past week, off four points from +70 two weeks prior (Figure 1). However, except for the previous market check, this week’s reading is still above any other recorded since the beginning of May.
SMU’s Future Buyers Sentiment Index measures buyers’ feelings about business conditions three to six months in the future. This week, the index dropped six points from two weeks earlier to +69 (Figure 2).
Our next market check is the last of the year, so we’ll see if either current or future sentiment will crack +70 to end 2023.
Measured as a three-month moving average, the Current Sentiment 3MMA rose to +63.50 from +61.83 two weeks earlier. (Figure 3).
Last week’s Future Sentiment 3MMA edged down slightly to +72.33 from +72.67 at the previous market check (Figure 4).
“Who isn’t (successful) in a rising market?”
“Buyers have been encouraged to place orders ahead of increases announced in the middle of this month.”
“Price has been going up, but demand hasn’t improved.”
“Automotive is expected to be big in January and contract buying is robust.”
“We consider it a good year.”
The SMU Steel Buyers Sentiment Index measures the attitude of buyers and sellers of flat-rolled steel products in North America. It is a proprietary product developed by Steel Market Update for the North American steel industry. Tracking steel buyers’ sentiment is helpful in predicting their future behavior.
Positive readings run from +10 to +100. A positive reading means the meter on the right-hand side of our home page will fall in the green area indicating optimistic sentiment. Negative readings run from -10 to -100. They result in the meter on our homepage trending into the red, indicating pessimistic sentiment. A reading of “0” (+/- 10) indicates a neutral sentiment (or slightly optimistic or pessimistic), which is most likely an indicator of a shift occurring in the marketplace. Sentiment is measured via SMU surveys twice per month. If you would like to participate in our survey, please contact us at info@steelmarketupdate.com.
We have seen a wave of service center transactions announced since the beginning of the month.
Ryerson acquired Hudson Tool Steel. Russel Metals bought seven service centers from Samuel. And Worthington Steel completed its spinoff.
There is of course one mill transaction that we were, when this was published, still waiting for news on. Namely, the potential sale of U.S. Steel.
I never thought, as some did, that a deal would come on Nov. 1. But I did think that one might be announced – or at least some update disclosed – before the holidays. Does that remain the case?
Congestion on the Panama Canal is becoming an issue for the US flat-rolled steel market.
The canal allows shipments to pass from the Pacific Ocean through the central American nation to the Atlantic Ocean. A drought has led to lower water levels on the canal and congestion that harks back to what we saw on the West Coast two years ago. Companies are paying millions of dollars to move ships up to the front of the line.
That jam means delayed shipments to the Gulf Coast, not only of finished steel from Asia but also of slabs from places like western Mexico. And, as we noted last week, the issue has already led to higher freight rates.
Just one more inflationary data point, right? A few others: Scrap prices are likely to settle up again this month, lead remain times stretched, and US mills continue to announce price increases.
Also, and a little to my surprise, I’ve been hearing more mantras about maintenance, maintenance, maintenance at domestic mills – this time in Q1.
I’m told Asian steelmakers might divert shipments to the West Coast to avoid the time and trouble of passing through the Panama Canal or going around Cape Horn. The issue might be more acute for nations, like South Korea, subject to a Section 232.
So what are prices to the West Coast? I’m also told that South Korean material is available for less than $1,000 per ton for February/March shipment to West Coast ports. Add a few weeks for transit across the Pacific, and you’re looking at March/April delivery. I’ve also heard that South Korean galvanized is available from $1,040-1,080 per ton – or less than the $1,100 per ton US mills are seeking now for HRC – for spring delivery to the West Coast.
I should in addition note that it’s not just the West Coast that could see competitively priced imports this spring. My understanding is that cold-rolled from Southeast Asia, for example, will be available for approximately $1,040-1,060 per ton for April/May deliveries to Gulf Coast and East Coast ports.
It’s starting to make sense to me why more people are saying that US sheet prices will peak this winter. Approximately 64% of respondents to our latest steel market survey think sheet prices will peak in January or February, according to a preliminary count. (Note: We will release a final tally and full results to our premium subscribers on Friday afternoon.)
Why? Pick a date in January or February, add current lead times, and you’re into March-April, depending on the product – which is around when competition from imports could heat up.
Also, we often write about increased hot-rolled capacity. Let’s not forget that there is more coated capacity coming online in 2024 as well.
Then there is the matter of inventories. They’ve been decreasing since the summer. Could we see that trend reverse in November because of all the material that was ordered in September? We’ll have a better idea of that when we release service center inventory figures to premium members next week.
In short, domestic mills might not have many spot tons now, especially when it comes to coated products. And prices will probably continue to rise. But could it be a different story as lead times stretch into the spring?
Frankly, that seems like an eternity from now. In the meantime, enjoy the holiday parties – and thanks from all of us at SMU for your continued business.
The Dodge Momentum Index (DMI) slipped in November due to slightly weaker commercial and institutional activity, according to the latest Dodge Construction Network (DCN) data.
The DMI declined 1% to 179.2 in November from October’s revised reading of 181.7. November’s reading is 14% lower than the same time last year.
“While both portions of the Momentum Index saw slower momentum in planning, overall levels remain steady and will support construction spending in 2024 and 2025,” Sarah Martin, DCN’s associate director of forecasting, said in a statement.
“Nonresidential planning activity will remain constrained from stronger growth amidst ongoing labor and construction cost challenges,” she added.
All commercial segments except data centers saw declines in November. Improved momentum in healthcare and public projects on the institutional side was offset by ongoing weakness in education planning, the report said.
Month over month, the commercial segment of the DMI fell 1.4%, while the institutional component fell 1.5%. Year over year, the commercial portion was down 20%, while the institutional area rose 2%.
Dodge is the leading index for commercial real estate, using the data of planned nonresidential building projects to track spending in the important steel-consuming sector for the next 12 months. An interactive history of the DMI is available on our website.