The US International Trade Commission (ITC) held a hearing on Dec. 7 with testimonies from members of the domestic steel industry. The USITC is leading a fact-finding investigation on US greenhouse-gas (GHG) emissions.
American Iron and Steel Institute (AISI) president and CEO Kevin Dempsey presented at the hearing.
“AISI welcomes this fact-finding investigation on greenhouse-gas (GHG) emissions intensities of the steel and aluminum industries in the United States,” Dempsey said in a statement to SMU.
“We believe that the data collected through this investigation will be critical to developing effective trade policy measures that take the GHG emissions-intensity of imported and domestic products into account,” he added.
A letter sent by US Trade Representative (USTR) Katherine Tai on June 5 requesting a Section 332 investigation initiated the investigation.
Recall there are ongoing negotiations between the US and EU. The two parties seek a global arrangement for carbon emissions from the global steel and aluminum industries.
Part of the fact-finding investigation includes a survey issued by the USITC. The USITC will send questionnaires to steel and aluminum producing companies in the US. The commission will collect data on the companies’ production of the goods and GHG emissions emitted.
Per the USITC website, the report will include the GHG emissions-intensity estimates of steel and aluminum produced in the US. The report is broken down by product category and production stage from 2022. Data on Scope 1, 2, and 3 emissions defined as:
Upon completion of the investigation, the USITC will submit its report to the USTR by Jan. 28, 2025.
The percentage of steel buyers saying mills were willing to budge on spot pricing has risen for all sheet products SMU surveys, according to our most recent survey data.
The negotiation rate for hot rolled jumped 11 percentage points to 40% vs. two weeks earlier. However, steel plate’s negotiation rate edged down three percentage points to 65% in the same comparison.
Every two weeks, SMU asks steel buyers whether domestic mills are willing to negotiate lower spot pricing on new orders. This week, 50% of participants surveyed by SMU reported mills were willing to negotiate prices on new orders, up from 29% from two weeks prior (Figure 1). This is the first time the reading has hit 50% since the middle of October.
Figure 2 below shows negotiation rates by product. Cold rolled’s rate soared to 45% of buyers saying mills were willing to talk price vs. 8% at the previous market check; galvanized rose 14 percentage points to 40%; and Galvalume increased 28 percentage points to 33%. We have averaged Galvalume with the previous market check because of fewer market participants and to reduce volatility.
“Mills are happy with their current spot order books (on galvanized) as their contract order books have been very strong.”
“More about negotiating the increase announcements (on plate).”
“I think there is minimal room to negotiate (on hot rolled), just depends on mill and size of buy.”
“I think there is some negotiation to be had here (on galvanized), based on HRC and CRC substrate differences and the mill.”
“Galvalume spot is still in extremely tight supply.”
“I believe that pricing (on plate) is negotiable, if determined mutually beneficial for the buyer and seller, and perhaps a third party.”
Note: SMU surveys active steel buyers every other week to gauge the willingness of their steel suppliers to negotiate pricing. The results reflect current steel demand and changing spot pricing trends. SMU provides our members with a number of ways to interact with current and historical data. To see an interactive history of our Steel Mill Negotiations data, visit our website.
Movements in lead times were mixed in SMU’s check of the market this week – a reflection of the seasonal dip in ordering that is typically seen during the winter holiday season. More meaningful direction will likely be seen once we enter the new year.
Buyers reported lead times for hot-rolled sheet ranging from 4 to 9 weeks. Contracting by 0.2 weeks from our Nov. 22 market check, hot rolled lead times this week averaged 6.76 weeks. At this time last year, lead times for HRC averaged 4.35 weeks.
Lead times for cold-rolled sheet were between 6 and 12 weeks. The average of 8.50 weeks is just slightly shorter than the last market check’s average of 8.64 weeks. During the same week of 2022, CRC lead times were 5.90 weeks.
Buyers this week reported lead times for galvanized sheet to be between 6 and 12 weeks. The average of 9.15 weeks extended by 0.27 weeks from our market check two weeks earlier. Compared to this week last year, lead times for galv are 3.15 weeks longer than the Dec. 7, 2022, average of 6.00 weeks.
Lead times for Galvalume remain highly extended, averaging 11.00 weeks in this market update. Buyers reported a range of 8 to 15 weeks. The average contracted by a week from our Nov. 22 market check. Galvalume lead times are considerably longer than at this time last year when they averaged 6.07 weeks. The incredible extension in Galvalume lead times since September can be clearly seen in Figure 1 below.
Note that our data for Galvalume is more volatile due to the smaller sample and market size. If you are a buyer of Galvalume and would like to share your lead time and pricing data with SMU, please contact david@steelmarketupdate.com.
Plate lead times were reported by buyers in SMU’s survey this week to be between 4 and 9 weeks. The average of 6.14 weeks is just slightly longer than the 6.00-week average we saw two weeks earlier. At this time last year, lead times for plate averaged 4.80 weeks.
To smooth out the variability in SMU’s biweekly readings, we can look at lead times on a three-month moving average (3MMA) basis.
The 3MMAs for all sheet products were pushed out once again in this week’s market check, coming in at 6.1 weeks for hot rolled, 7.9 weeks for cold rolled, 8.0 weeks for galvanized, and 9.6 weeks for Galvalume.
As you can see in Figure 2, lead times for sheet products had been relatively steady for much of August and September but have been steadily rising since the end of September.
The 3MMA of plate lead times has also been increasing steadily since October, but to a much lesser degree than those for sheet products. Plate’s 3MMA lead time was calculated to be 5.6 weeks as of Dec. 6.
A majority (57%) of manufacturers and service centers in this week’s survey believe current mill lead times are ‘slightly longer than normal.’ Still, 29% would categorize them as ‘normal.’
A majority (57%) also believe that lead times will be flat from current levels two months from now.
Here are a few comments from respondents on whether lead times will be extending, flat, or contracting two months from now:
“Flat. Business will be steady but not overwhelming.”
“I see it contracting. A lack of true demand in the market. Once the OEMs and service centers fill up, demand will drop.”
“From my perspective, no indications that they will be extended at the present time and will remain flat.”
“Contracting. More capacity, less demand.”
“They are at this point increasing but then expected to slow with stabilizing demand and flatten.”
“I think lead times are very extended now, and in two months, they will be contracting based on contract prices and spot prices starting to be aligned.”
SMU’s last report on mill lead times for 2023 will be on Dec. 21.
Note: These lead times are based on the average from manufacturers and steel service centers participating in this week’s SMU market trends analysis. SMU measures lead times as the time it takes from when an order is placed with the mill to when the order is processed and ready for shipping, not including delivery time to the buyer. Our lead times do not predict what any individual may get from any specific mill supplier. Look to your mill rep for actual lead times. To see an interactive history of our steel mill lead times data, visit our website.If you’d like to participate in our survey, contact us at info@steelmarketupdate.com.
The prices for all grades of pig iron have dramatically risen since SMU’s last report from Nov. 18. During this period, there has been renewed interest in pig iron by US-based electric-arc furnace (EAF) mills. Over the last three weeks, the price of basic pig iron produced in Brazil has risen from $415 per metric ton (mt) to $440/mt FOB Brazil. The delivered price to the US Gulf coast has increased from the low $440s to $470-75/mt. Some of this increase could be freight related, even though the vessels do not pass through the Panama Canal, which has been impacted by drought.
SMU contacted a director for pig iron exports for several producers in southern Brazil. He said his organization sold to the US at $430/mt FOB, and they are now asking $440.
We contacted a large pig iron trader based in the US about current and future market conditions. He confirmed current prices have risen to $465-475/mt CFR. He went on to say, “Trend is rising – expect $500-525/mt CFR NOLA during Q1’24.”
The pig iron market here was given a boost when a US mill purchased a cargo from the Ukrainian producer Metinvest. That delivered price was reported at $475/mt. This material has a lower phosphorus content than S. Brazilian material and sells at a modest premium.
So, what effect will these increases have on scrap prices and flat-roll steelmaking in our domestic market? Pig iron prices rose before scrap prices started to rise here. With pig iron prices rising, prices for scrap, mainly prime grades, will have more room to rise. This week US mill scrap buyers increased prices for #1 Busheling by $50 for December delivery. If indeed pig iron prices do climb another $50/mt in the January/February months, you can bet HRC will rise in concert with scrap surcharges or outright book increases.
Back to Brazil. It’s being confirmed that Singapore-based trader PSU has purchased 150,000 mt of basic pig iron from S. Brazil on what could be a speculative basis since the FOB price was in the low $400s. This company was the main buyer when China entered the pig iron market 2-3 years ago and disrupted conventional trade flows to the US and Europe.
SMU has not been able to confirm the ultimate destination of these cargoes. Most feel it has to go to the US. If it is for China, it will be very disruptive again. However, pricewise, it doesn’t make economic sense for pig iron to ship to China from Brazil since China can buy much cheaper from other Asian producers. The main US buyers have sought to discourage speculation in the pig iron trade over the last 15 years. Will they make a deal with PSU to save some money? We’ll keep an eye on this.
The current price for Nodular Pig Iron (NPI) for use in American foundries is also on the rise. A US distributor assessed current NPI from Brazil at $550-575 mt CFR and sees it climbing to $625-50 in Q1.
On Dec. 6, US Senator Sheldon Whitehouse (D-RI) reintroduced the Clean Competition Act, an environmental trade directive that would impose charges on imports from more carbon-intensive manufacturers.
“There is bipartisan momentum for a carbon border adjustment in the Senate – this is a solution endorsed by industry and experts across the political spectrum,” Whitehouse said in an online statement.
The legislation, originally proposed on June 8, 2022, is meant to enable more American companies to better compete against other countries.
According to the senator’s website, “The Clean Competition Act would impose a carbon border adjustment on energy-intensive imports while incentivizing decarbonization of domestic manufacturing.”
The adjustment would apply to energy-intensive industries such as iron and steel, aluminum, hydrogen, fossil fuels, and fertilizer. Plans for a few years down the road would expand the act to include imported finished goods that meet certain weight or value thresholds.
The full text of the Clean Competition Act is here.
The discussion of carbon tariffs is an ongoing conversation. Recall the Steel Manufacturers Association (SMA) and the American Iron and Steel Institute (AISI) are also participating in initiatives concerning carbon emissions.
“As the American steel industry leads the world in low-carbon steel production, a carbon tariff approach will help level the playing field for American steel producers,” said AISI President and CEO Kevin Dempsey in an email to SMU.
He added that the bill would ensure that domestic industry investments in cleaner production processes are not undercut by high-carbon-emitting steel made overseas.
“AISI strongly opposes the Clean Competition Act’s proposed tax on domestic carbon emissions, however,” Dempsey noted. He said the provision would penalize domestic producers who are making great strides towards decarbonization. Additionally, it would deprive US steel producers of the capital necessary to proceed with investments for domestic decarbonization and innovation.
“By creating a low carbon checkpoint for the American marketplace that requires foreign steel producers to meet the low carbon intensity levels of our domestic producers, the bill will incentivize global production away from the high carbon production of traditional extractive steelmaking,” said the SMA in an email to SMU.
The SMA is pleased to see the introduction of the bill. However, it is firmly opposed to the imposition of new taxes on domestic steel production.
US Hot-rolled coil (HRC) prices keep rising on the heels of continued mill hikes, outpacing increases for offshore product. Domestic tags are now 26% more expensive than imports, the widest pricing gap since January 2022.
Domestic HRC tags have increased for the 10th consecutive week. While imports have been on a five-week rally, the gains have been a fraction of the increases seen in the US, according to SMU’s latest foreign vs. domestic price analysis.
Cliffs is also now targeting $1,100 per ton ($55 per cwt) base prices for HRC, according to a notice on Dec. 6, matching Nucor’s Nov. 27 notice. US HRC tags increased to $1,020 per ton on average based on SMU’s latest check of the market on Tuesday, Dec. 5. That’s a jump of $70 per ton from the week before and a surge of $375 per ton from their lowest point of the year, $645 per ton in late September.
Import prices, in contrast, had been largely trending downward since late April, increasing only over the past five weeks. The result: Imported product is now 26% cheaper than domestic material once freight and other costs are accounted for. That’s up from 21% a week earlier and a shift from late September, when imports were nearly 11% more expensive than US product.
This is how SMU calculates the theoretical spread between domestic HRC prices (FOB domestic mills) and foreign HRC prices (delivered to US ports): We compare SMU’s US HRC weekly index to the CRU HRC weekly indices for Germany, Italy, and East and Southeast Asian ports. This is only a theoretical calculation. Import costs can vary greatly, influencing the true market spread.
We add $90 per ton 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 HRC price. Buyers should use our $90-per-ton 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 don’t hesitate to get in touch with david@steelmarketupdate.com.
As of Thursday, Dec. 7, the CRU Asian HRC price was $535 per ton, up just $4 per ton from the previous week. Adding a 25% tariff and $90 per ton in estimated import costs, the delivered price of Asian HRC to the US is approximately $759 per ton. The latest SMU hot rolled average for domestic material is $1,020 per ton.
The result: US-produced HRC is theoretically $261 per ton more expensive than steel imported from Asia, a seven-month high.
Italian HRC prices were largely sideways vs. last week, up just $1 per ton to roughly $649 per ton, and are now up just $71 per ton over the past month vs. a $150-per-ton surge in the US. After adding import costs, the delivered price of Italian HRC is in theory $739 per ton.
That means domestic HRC is theoretically $281 per ton more expensive than HRC imported from Italy. US prices haven’t been that expensive since early Feb. 2022. The current price gap is also a $330-per-ton swing from late September when US prices were $49 per ton cheaper than prices for Italian hot band.
CRU’s German HRC prices increased by just $8 per ton week over week (WoW) to $678 per ton. After adding import costs, the delivered price of German HRC is in theory $768 per ton. The result: Domestic HRC is theoretically $252 per ton more expensive than HRC imported from Germany, a $62-per-ton jump WoW.
Figure 4 compares all four price indices. The chart on the right zooms in to highlight the difference in pricing from the second quarter of this year to the present.
Notes: Freight is important in deciding whether to import foreign steel or buy from a domestic mill. Domestic prices are referenced as FOB the producing mill, while foreign prices are CIF the port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Inland freight, from either a domestic mill or from the port, can dramatically impact the competitiveness of both domestic and foreign steel. It’s also important to factor in lead times. In most markets, domestic steel will deliver more quickly than foreign steel.
Effective Jan. 1, 2022, the traditional Section 232 tariff no longer applies to most imports from the European Union. It has been replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25% tariff. SMU still includes the 25% Section 232 tariff on foreign prices from other countries. We do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.
Volkswagen Group of America workers in Chattanooga, Tenn., have launched a campaign to join the United Auto Workers (UAW) union.
“Over 1,000 workers have signed union authorization cards in less than a week and gone public with their union drive at Volkswagen’s only US plant in Chattanooga,” UAW said in a press release on Thursday.
The union called the move “a surprise breakthrough in the UAW’s national campaign to organize all non-union autoworkers at 13 companies.”
The UAW noted that over 30% of VW workers in Chattanooga have joined the movement, “marking a major milestone in their organizing campaign.”
The union added that this growing trend among non-union autoworkers across the US “builds off the success of the UAW’s ‘Stand-Up’ Strike” at the Detroit-area “Big Three” automakers. Around 50,000 workers struck for over 40 days starting in mid-September to “win record contracts at Ford, General Motors and Stellantis.”
“People are standing up like never before,” Steve Cochran, a VW employee and a leader of the workers moving to unionize at the automaker, said in the release. “There are a lot of young workers in the plant now and this generation wants respect.”
A spokesperson for VW USA did not return a request for comment by time of publication.
A group of organizations and stakeholders introduced a set of Steel Standards Principles at the COP28 UN Climate Change Conference. The event is being held in Dubai and runs from Nov. 30 through Dec. 12.
The group of 42 steel producers, industry associations, standard-setting bodies, and international organizations developed the principles, which call for establishing common methodologies to measure greenhouse-gas emissions in the steel sector.
Included among the organizations endorsing the principles are the Steel Manufacturers Association (SMA), Nucor Corp., SSAB, ArcelorMittal, BlueScope Steel, JSW Steel, the World Steel Association, H2 Green Steel, ResponsibleSteel, Boston Metal, and the World Trade Organization (WTO).
Some of the principles state:
All the principles and the endorsing organizations can be found on the WTO website.
The organizations acknowledge “that different methodologies may be needed at the project, production, and product levels, but that interoperability between them will drive faster decarbonization of the steel industry globally.”
The director-general of the WTO, Ngozi Okonjo-Iweala, welcomed the introduction of the principles, noting that, “Fragmented and uncoordinated trade policies make it harder for the steel industry to decarbonize. They add uncertainty for producers, hamper cross-border movement of green technologies and inputs, and slow investments in clean technology.”
American steel mills sent out more tons of steel in October than the previous month, according to the latest monthly data from the American Iron and Steel Institute (AISI).
Domestic mills shipped 7,346,373 net tons in October, up 1.3% from the 7,252,942 tons sent out in September. Shipments were also up 1.9% compared to the 7,210,301 tons shipped in October 2022.
Year-to-date (YTD) shipments through October totaled 74,129,374 tons, down 2% compared to 75,675,222 tons shipped during the same period last year.
Comparing YTD shipments in 2023 to the first ten months of 2022 shows the following changes: hot-rolled sheet, up 8 %; cold-rolled sheet, unchanged, and corrosion-resistant sheet, down 2%.
On Monday and Tuesday of this week, SMU polled steel buyers on a variety of subjects, including steel sheet prices, lead times, scrap prices, performance, purchasing, and demand.
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.
“Momentum will carry the peak into late January followed by a short period of relative stability with the first signs of softening showing in about mid-March.”
“January or February, but hard to say which week. Once a new peak is established, will take a Black Swan to get the consensus to agree breaking the ceiling.”
“February, as that is normal market churn timing.”
“I believe that prices will continue to increase due to the rise in materials in demand. Prices will peak in March or later.”
“We believe we’ve got a few more weeks left for the indices and then they top out before NYE; it’ll be too quick/too drastic per usual.”
“The economy remains questionable in manufacturing. Demand is good but not great. Supply is under control but may not remain. I think prices will peak in January.”
“Prices are set to move higher into Q2 based on improved demand. They will peak in March or later.”
“Releases fell short and we did not meet forecast.”
“We met forecast, and we consider it a good year.”.
“Exceeded forecast with highest levels of volume.”
“Year over year there’s been steady growth, but we expect December to be flat.”
“We met forecast but are seeing softening.”
“There was a year-end spurt in the construction sector and we exceeded expectations.”
“We’re on the sidelines. Contract tons are keeping pace with demand.”
“Sitting on the sidelines. We buy according to our order book.”
“We are an active buyer. We buy every month and are keeping inventory balanced.”
“Only purchasing contract items and to meet backlog.”
“Active buyer. We need to maintain enough inventory to service just-in-time customers.”
“On the sidelines. Regarding spot, we are not in a hurry to load up. But on contract, buyers are pulling very heavy right now with the trailing prices.”
“We drove our inventory way down so we are actively buying.”
“Our demand has been up for months and has remained at that level of up.”
“Demand has been down.”
“Buyers have been encouraged to place orders ahead of increases announced in the middle of this month, so business has been stable.”
“It’s been declining. Price has been going up, but demand hasn’t improved.”
“Seasonally declining with flat outlook.”
“Stable at very high levels.”
A large Detroit-area scrap buyer entered the market on Wednesday offering to pay significantly higher prices than a month earlier.
The company offered busheling and shredded scrap up $50 per gross ton from November. Plate and structural were offered up $30 per gross ton from last month.
Recall that Detroit settled higher in November.
The Detroit-area offers are important because they often set the tone for scrap prices nationwide.
Scrap market participants predicted in late November that December would settle higher.
There was a similar consensus among SMU survey respondents, approximately two-thirds of whom said scrap would move higher this month. (Editor’s note: Full results of SMU’s steel market survey will be released on Friday to data providers and to our premium members.)
Here is what some of those survey respondents had to say:
“Short supply of low residual scrap coupled with the tight pig iron situation. New capacity demand will keep this tight.”
“Sounds like the market is expecting up in December and in January.”
“Business starting off (2024) will be strong.”
“Normal winter flows.”
“The price of scrap going up will also enable prices to go up on finished product.”
SMU will update its scrap price ranges once markets have settled.
Steel used to be cited as a big sticking point in the energy transition, but this is no longer the case. Fossil-fuel-free steel is real and is being produced. However, immediate and enabling policy support is needed to scale up and roll out new technologies at scale.
The production of steel represents some 7% to 9% of global emissions and steel is needed everywhere — including to produce the infrastructure on which a net zero economy will rely. In other words, transforming the steel industry to abate its carbon dioxide emissions is vital to reach the Paris Agreement. It is also necessary for jobs and the European economy — the steel industry contributes some €110 billion ($118.67 billion) a year to the EU economy, employs around 330,000 people and supports a further 1.6 million jobs in related sectors.
Until recently, the technology to use 100 % fossil-free hydrogen, instead of coal or fossil gas, for the direct reduction of iron ore had never been shown. SSAB’s Hydrogen Breakthrough Ironmaking Technology (Hybrit) technology has shown at pilot scale, however, that a near-zero emissions alternative is possible. Working with LKAB, a Swedish mining firm, and power company Vattenfall, we have solved the green steel conundrum and, in 2022, we made our first fossil-free steel shipments, including to Volvo, which produced the first vehicle to be made with fossil-free steel.
However, last year’s shipment of 500 metric tons of fossil-free steel is a mere drop in the ocean compared to the 153 million metric tons of steel produced every year in the EU. Nonetheless, the fact this technology works is incredibly exciting and if governments work fast to introduce the right enabling policy frameworks, we can swiftly scale up production and help eliminate emissions.
First, to create a level playing field, governments must handle state aid with care to ensure support goes where it is needed without causing geopolitical problems. If used as a tool to support near-zero emission steel, state aid should focus on research and development and the growth of new technologies, and not be used to subsidize already commercially available technologies. We need to avoid a subsidy race within the EU and between international trade blocs.
Secondly, the EU, and some national governments, have already made a good start, but we would like to see wider regulatory reforms to improve and speed up the approval of permitting procedures for industrial plants and supporting infrastructure, like power grids, in all EU member states.
Thirdly, policymakers can help create markets for near-zero emission materials and products by working with standardisation bodies to create common methodologies on how to measure, report and verify carbon emissions. This step is important to create transparency around decarbonisation efforts for all steelmaking production processes and to protect and enhance the credibility of the steel industry’s greenhouse gas emissions reporting. Customers and consumers need to be able to understand and compare the carbon intensity of all steel products.
Already, many companies, including Volvo, Mercedes-Benz, Alfa Laval and Polestar, are working with us on how fossil-free steel can help them create fossil-free value chains that enable them to reduce their Scope 3 emissions in line with reporting and disclosure rules. And it is clear that our customers are willing to pay a premium for fossil-free steel for this very reason.
Further, we need greater clarity from policymakers about the path away from fossil fuels and towards net zero. We need to see them implementing actions that make it more costly for companies which continue to emit in line with business-as-usual. To this end, global carbon pricing mechanisms are needed to set the foundation for faster industrial decarbonization.
Finally, the industrial transition is dependent on access to fossil-free energy inputs, especially electrification. We therefore call on governments to prioritize a faster roll-out of fossil-free electricity production and transmission grids.
Technology was a difficult barrier we had to overcome to decarbonize steel, and through dedicated research and development work, we have succeeded at pilot scale. Fossil-free steel is a reality. But to demonstrate that it can be produced at an industrial scale, we need both government and first movers to help aggregate demand. More demand-side interest and orders will bring down costs and justify a broader industry shift in production from fossil fuel to near-zero emission steel, with important benefits for the environment and the economy.
Cleveland-Cliffs is now targeting base prices of $1,100 per ton ($55 per cwt) for hot-rolled coil (HRC).
Cliffs said the move was effective immediately on all new orders and that it had also increased tags for cold-rolled and coated products.
The latest move by the Cleveland-based steelmaker represents an increase of $100 per ton from its previous notice on Nov. 7, according to SMU’s steel mill price increase calendar. It also matches Nucor’s Nov. 27 tag hike.
SMU’s HRC price stands at $1,020 per ton ($51 per cwt) on average, according to our check of the market on Dec. 5. Tags are up $70 per ton from last week and up $375 per ton (or 58%) from a 2023 low of $645 per ton in late September.
This marks the first time HRC prices have averaged more than $1,000 per ton since mid-May, nearly seven months ago, according to our pricing tool.
I want to thank the Heating, Air-conditioning & Refrigeration Distributors International (HARDI) for the opportunity to speak at their annual conference in Phoenix.
I enjoyed the proceedings and participating in a panel for HARDI’s sheet metal/air handling council.
I can’t recap all that we discussed in a few hundred words. But I’d like to share with you some of my thoughts on a couple of the questions we covered.
A quick visual of just how volatile: This snip is from SMU’s interactive pricing tool.
Another way to look at it: Annual average HRC prices for every year (and 2023 year to date) back to 2015:
The volatility over the last three years reflects some truly jarring world events. In 2020, the pandemic initially hammered demand, and prices plunged. Then, in late 2021, we saw a snapback in demand, and prices soared. In 2022, supply overtook demand, and prices fell. But, the outbreak of war in Ukraine and a panic over raw materials supply caused a historic price spike.
In early 2023, we saw another huge price spike. It was arguably a combination of overly bearish sentiment late in Q4’22, low imports, and AHMSA unexpectedly going out around Christmas. Certain buyers (and mills) realized what had happened and started buying up everything that they could. Also, some new capacity struggled to ramp up. The result was a shortage instead of the glut that had been anticipated. And by February, US mills were raising prices almost weekly – and by as much as $100 per ton.
We saw something similar happen this fall with the UAW strike. People expected prices to plunge and then spike after the strike was over. So when prices got low in mid/late Sept, savvy buyers figured the upside risk was greater than the downside risk. They pulled forward orders. And then there was a flurry of fall maintenance outages. The result: Lead times are now into January or February. And if you want spot tons, they won’t come cheap.
I’m going to set aside 2020-21 because they were so distorted by the pandemic. In 2022, HRC bottomed at $615 per ton on average. And we bottomed at $645 per on average in late September of this year. So is $600-650 per ton our new bottom?
True, prices fell into the $400s per ton in 2015. But there is one big difference between now and then. We have seen more consolidation among integrated mills. And there are fewer of them. A lot of that $400s per ton was driven by competing integrated mills running flat out. Basically, keeping costs low by maintaining high volumes. That makes sense, but it can be self-defeating if everyone is doing it.
What about new capacity now? Yes, there is a lot of it, and more to come, as our chart here shows. But almost all of it is EAF-based. Let’s use the analogy that integrated mills are like a light switch – they can only be on or off. EAFs are more like a dimmer. They can be turned up or down gradually.
So, yes, more supply and steady demand should lead to lower prices. But perhaps not as low as we’ve seen in the past if EAFs dial back supply when demand slips.
I know some of you think that sheet is fundamentally more sentiment-based than, say, plate. Buyers tend to leave the market and re-enter it all at once. That leads to wild gyrations in prices. And that behavior is unlikely to change.
I’m going to try to square those views this way: Yes, sheet prices might remain volatile. But could they be volatile in a narrower bandwidth over the next three years than what we’ve seen in the last three?
I’m tossing out ideas here. Want to get an expert analysis of where the steel market is headed in 2024 and beyond?
Register for the Tampa Steel Conference on Jan. 28-30! Leading steel industry analysts will present their steel price forecasts. They’ll be joined by mill CEOs as well as economists and experts on key end markets like automotive, construction, and energy.
You’ll come away with your finger on the pulse of the market, and with ideas on where to take your business in the years ahead.
Ryerson Holding Corp. announced Dec. 4 that it acquired Hudson Tool Steel Corporation.
The Cerritos, Calif.-based Hudson is a supplier of tool steels and high-speed, carbon, and alloy steels. The company has additional locations in Loves Park, Ill., and Dover, N.H. Terms of the deal were not disclosed.
“Hudson’s offering of high-quality standard and specialty-grade tool steel builds upon Ryerson’s expanding tool steel business,” said Ryerson’s chief operating officer, Mike Burbach in a press release.
Other acquisitions the Chicago-based metals service center made in 2023 include TSA Processing , Norlen Inc, and BLP Holdings LLC. Ryerson has approximately 100 locations throughout North America and China.
Sheet prices shot higher again this week on the heels of another round of mill price increases and on reports of production and supply chain issues at certain domestic producers.
Industry sources generally agreed that prices had nowhere to go but upward in the short term, especially should demand remain stable. In short, mills are in the driver’s seat. For how long is the question?
Some sources noted that spot volumes had slowed. That’s partly because of seasonality and heavy spot buying earlier in the fall. They said it’s also because buyers have been reluctant to purchase much outside of contract terms, given long lead times. Spot material ordered now might not be rolled until late January or February.
SMU’s hot-rolled coil price, in the meantime, stands at $1,020 per ton ($51 per cwt) on average, up $70 per ton from last week and up $375 per ton (or 58%) from a 2023 low of $645 per ton in late September. This marks the first time HRC prices have been above $1,000 per ton on average since mid-May, nearly seven months ago, according to SMU’s pricing tool.
Market participants said things were even tighter for cold-rolled and coated products. SMU’s cold rolled and galvanized base prices both stand at $1,250 per ton on average, up $75 per ton from last week. Galvalume is at $1,285 per ton on average, up $85 per ton from a week ago.
Plate prices are also rising following price increases announced by SSAB Americas and, more recently, by Nucor. Plate prices stand at $1,410 per ton on average, up $60 per ton from a week ago.
SMU’s sheet price momentum indicators continue to point upward. We have switched our plate price momentum indicator from neutral to upward following the price hikes noted above and on higher spot levels.
The SMU price range is $940–1,100 per net ton ($47–55 per cwt), with an average of $1,020 per ton ($51 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 up $100 per ton. Our overall average is up $70 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 $1,200–1,300 per net ton ($60–65 per cwt), with an average of $1,250 per ton ($62.50 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 $100 per ton. Thus, our overall average is up $75 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 $1,200-1,300 per ton ($60–65 per cwt), with an average of $1,250 per ton ($62.50 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 $100 per ton. Our overall average is up $75 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 $1,297–1,397 per ton with an average of $1,347 per ton FOB mill, east of the Rockies.
Galvanized Lead Times: 6-11 weeks
The SMU price range is $1,220–1,350 per net ton ($61-67.50 per cwt), with an average of $1,285 per ton ($64.25 per cwt) FOB mill, east of the Rockies. The lower end of our range was up $70 per ton vs. the prior week, while the top end of our range was up $100 per ton. Our overall average is up $85 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 $1,514–1,644 per ton with an average of $1,579 per ton FOB mill, east of the Rockies.
Galvalume Lead Times: 6-15 weeks
The SMU price range is $1,360–1,460 per net ton ($68–73 per cwt), with an average of $1,410 per ton ($70.50 per cwt) FOB mill. The lower end of our range was up $50 per ton WoW, while the top end of our range was $70 per ton higher. Our overall average is up $60 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.
Steel prices continued to rally last month on the back of repeated mill price increases after tags reached a 2023 low of $645 per ton in late September. Hot-rolled coil (HRC) prices ended November at an average of $923 per ton ($46.15 per cwt), rising by $140 per ton during the month.
The SMU Price Momentum Indicator for sheet products continued pointing Higher throughout November after shifting from the Lower in September. The trend remained in place as tags kept rallying in response to repeated mill price hikes throughout November.
The Price Momentum Indicator on plate, which had been pointing lower since September, shifted to Higher largely in response to mill increase notices at the close of the month. Despite the improvement, signs of weakness due to waning demand persist.
Raw material prices have fluctuated somewhat but were again mostly sideways last month, except for scrap. Scrap prices improved on average in November, up between $15-30 per ton. Despite some movement mid-way through the month, zinc and aluminum spot prices were largely stable, remaining within historical levels. You can view and chart multiple products in greater detail using our interactive pricing tool here.
The SMU Steel Buyers Sentiment Index remained positive and continued to recover a bit, edging up during the month. Current Buyers Sentiment rose from +61 in October to +67 on average in November. Future Sentiment hovered at an average of roughly +71, down slightly from the prior month’s reading of +75.
Our Steel Buyers Sentiment 3MMA Index (measured as a three-month moving average) had been eroding over the past four months, falling to +58 in October, but recovered to +61 on average last month.
Hot rolled lead times averaged 6.93 weeks in November, up from 5.83 weeks the month prior. SMU expects lead times to hover around current levels, but market chatter suggests they could increase a bit more through December and into the first quarter of 2024 as inventory management takes precedence at the year-end. A history of HRC lead times can be found in our interactive pricing tool as well.
About 31% of HRC buyers reported in November that mills were willing to negotiate on prices, down noticeably from roughly 63% in October as mills drove prices higher.
Key indicators of steel demand are still showing some signs of weakness overall and are nowhere near the bullish levels some had shown earlier in the year. While there are some backlogs in the energy and construction sectors, and the UAW strike on Detroit’s “Big Three” automakers ended, demand in December and into early 2024 seems controlled, especially as buyers appear to be pushing back on a bit on the most recent round of mill price hikes.
See the chart below for other key metrics for November:
The 2024 Tampa Steel Conference is less than two months away. It is one of the premier domestic steel conferences and a great compliment to our record-breaking SMU Steel Summit this past August.
In addition to our compelling program with the latest forecasts and intel from industry leaders, you’ll find all the great options Tampa, Fla., offers during the winter months: Outdoor networking receptions, a golf tournament, and a harbor tour of Port Tampa Bay.
The event runs from Sunday-Tuesday, Jan. 28-30, and will be at the JW Marriott Tampa Water Street hotel.
With just about 250 delegates already registered, we anticipate beating last year’s mark with more than 500 attendees. Accommodations are filling fast so you’ll want to book your room soon. This period is high season for tourism in Florida and the conference follows the Gasparilla pirate festival. You can learn more about the agenda, explore networking opportunities, and register here.
Below are some links for alternate hotels close by:
We will have attendees from all over North America talking about what’s happening in the steel industry. Here’s a list of companies that have already registered. Those with an asterisk next to their name are sending more than one person to the event:
A.R. Savage & Son, LLC*, ADM Investor Services, Al Ghurair Iron & Steel LLC, Algoma Steel Inc., All Metals, Alliance Steel LLC*, American Heavy Plates*, Ameristar Perimeter Security*, AMS Specialty Steel, ArcelorMittal, ArcelorMittal Dofasco*, ASSA ABLOY Door Group, Associated Terminals, BNSF Railway*, BofA*, Borroughs LLC, Celtic Marine and Logistics, Century Metals & Supplies, Inc., Chancey Metals LLC, CIH*, Civil & Environmental Consultants, Inc., Cleveland Steel Container*, CloudForge, Cooper Consolidated LLC*, C-River Logistics, Crown Products Co., Inc., CSX*, Dass Steel*, Diehl Tool Steel, Elgen Manufacturing, Friedman Industries, General Kinematics Corporation*, Gibraltar Industries, Inc.*, Goldman Sachs, Great Circle Shipping Corporation, Greenway Steel, Heidtman Steel*, Heritage Capital Group, Huntington Bank, Illinois Tool Works*, ITW Drawform, Jemison Metals, JIT Warehousing & Logistics, JSW Steel USA Inc.*, Klauer Manufacturing Company*, Kloeckner Metals*, Koch Supply & Trading LP, Lapham Hickey Steel, LB Steel, Magswitch Technology Inc.*, Marian Shipping Ltd., Marubeni-Itochu Steel America*, Metal Edge Partners LLC*, Misetal Trading Solutions*, North Star BlueScope Steel, Northview Advisors, Ohio Steel Sheet & Plate, Optimus Steel LLC*, Pacific Metals Trading, Inc., Peak Metals Inc., PGT Services, Pier 48 Stevedoring, Primetals Technologies, QSL – Americas*, Ram Steel Framing, Reynolds Services, Inc.*, Ryerson*, Second City Metals, South Jersey Port Corporation*, SSAB Americas*, State Plate LLC*, Steel Dynamics Inc., Steel Warehouse*, SteelSummit-Tennessee, Summit Global Trading*, Superior Steel Supply, LLC, Tata International, Ternium USA, Inc., The Bradbury Group, The Kinetic Company, Timber Products Trucking*, Tri County Metals, U.S. Steel*, Webco Industries, Wesman Salvage*, West Coast Metals, Wheeling-Nippon Steel, Inc.*
We hope to see you there!
TimkenSteel has begun utilizing artificial intelligence (AI) software from Worlds to gain insight into its steel manufacturing processes.
Worlds’ AI platform is enabling the Canton, Ohio-based SBQ steel producer to monitor and optimize operations in real time, the software company said in a statement sent to SMU.
As the AI platform has been embedded on top of TimkenSteel’s existing IoT network, there’s no need for additional hardware or special equipment, Worlds said.
“Our collaboration with Worlds is unlocking new possibilities within our industry – further emphasizing our dedication to achieving excellence in reliability and the production of high-quality, American-made steel,” commented Andrew Bissot, TimkenSteel’s VP of engineering, manufacturing excellence, and reliability.
“The ability to measure, collect, and act on real-time data enhances safety, operational efficiency, and overall performance within the steel industry,” he added.
“Our partnership with TimkenSteel has the potential to show an entire industry how it can re-imagine safer, more productive steel manufacturing through more human-centered AI,” noted Dave Copps, CEO of Dallas-based Worlds.
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.”
Matalco will remain operator of its six sites in the US and one in Canada, which have a combined capacity to handle around 900,000 metric tons per year of recycled aluminum and produce approximately 400,000 metric tons per year of primarily billet but also slabs.
The company has more than doubled its production capacity in the past five years. Together Rio Tinto and Toronto-headquartered Giampaolo will assess opportunities for continued growth, with an initial focus on North America.
The proposed JV was announced mid-year. Its completion follows receipt of all regulatory approvals.
This article was first published by CRU. Learn more about CRU’s services at www.crugroup.com.
AM/NS Calvert will continue providing hot-rolling tolling services for Outokumpu.
The two companies signed a long-term tolling extension agreement, which is good through Oct. 1, 2051. The earliest effective termination date is Oct. 1, 2042, and would require four years prior written notice, Outokumpu said in a statement.
Outokumpu is a stainless flat steel producer based in Helsinki, Finland. It operates a minimill in Calvert, Ala., which is also where AM/NS Calvert’s carbon flat-rolled mill is located.
The hot-rolling agreement between the two steelmakers is a legacy of Outokumpu’s acquisition of ThyssenKrupp’s stainless steel division, Inoxum, in 2012. As part of the deal, Outokumpu acquired a melt shop and cold rolling operations in Calvert, while hot rolling services continued to be sourced externally.
In August, Outokumpu announced it would be exploring its options to strengthen its presence in the US market, including the possibility of adding its own hot rolling mill.
“We have been carefully assessing how to best arrange our operations in the US to achieve our commercial ambitions in the North American market, and the extension to the existing tolling agreement is a capital-efficient solution,” Outokumpu CEO Heikki Malinen said.
“Building our own hot-rolling mill would have been a significant investment, at least one billion dollars,” he added, noting that the tolling agreement was the best option to allow the company to grow faster in North America.
“As we have extended the hot-rolling contract, we can now shift our focus more towards the evaluation of a possible cold-rolling capacity expansion, which would enable us to directly increase our cold-rolled deliveries and grow in North America,” Malinen said.
Raw steel production in the US rose in the week ended Dec. 2, according to the American Iron and Steel Institute’s (AISI’s) report on Monday, Dec. 4.
Domestic steel production of 1,702,000 net tons during the week was up 0.9% from 1,687,000 tons the previous week. The Midwest and Western regions had larger tonnage increases compared to the other regions.
Production was up 7.1% from the 1,589,000 tons manufactured during the same week on year ago.
The mill capability utilization for the week was 74.1% compared to 73.4% the week prior. During the same week in 2022, the mill capability utilization rate was 71.2%
Adjusted year-to-date production through Dec. 2 was 81,943,000 tons at a capability utilization rate of 75.5%. That is 0.3% less than the 82,226,000 tons produced during the same period last year when the rate was 78.1%.
Production by region is shown below with the week-over-week change shown in parentheses:
Activity in the US manufacturing sector contracted once again in November.
The Institute for Supply Management’s (ISM) Manufacturing PMI registered 46.7% in November, unchanged from October. A reading above 50 indicates the manufacturing economy is growing, while a reading below 50 indicates contraction.
The sector has been in contraction territory for the past 13 months. The last time it was above 50 was in October 2022 when the reading was 50.2.
“Demand remains soft, and production execution is slightly down compared to October as panelists’ companies continue to manage outputs, material inputs and — more aggressively — labor costs. Suppliers continue to have capacity,” said chair of the ISM Manufacturing Business Survey Committee, Timothy Fiore.
November’s report showed falling new orders, production, prices, order backlog, employment, supplier deliveries, inventories, imports, and exports.
One manufacturer of transportation equipment commented that, “Supply chain issues continue in several areas, resulting from difficulties during the United Auto Workers (UAW) strike.”
“Still waiting for orders to come in, and we also need to work down inventory levels that increased during the strike period. This will most likely happen in December,” said a manufacturer of fabricated metal products.
A manufacturer of primary metals noted that there are still issues “hiring quality candidates for both hourly and salaried positions.” Additionally, the company said that current inventory levels are too high, but the order book remains strong.
Only three manufacturing sectors out of 17 reported growth in November – food, beverage & tobacco products; nonmetallic mineral products; and transportation equipment. Primary metals, fabricated metal products, machinery, appliances and components, and miscellaneous manufacturing industries were all down.
A coalition of manufacturers, retailers, and stakeholders stands opposed to the imposition of import duties on tin mill products.
Recall that the International Trade Commission (ITC) and the Department of Commerce’s International Trade Administration (ITA) are conducting a trade case investigating the alleged dumping and subsidization of tin mill products from a host of countries. The case was requested by Cleveland-Cliffs and the United Steelworkers (USW) union.
On Nov. 30, a group led by the Consumer Brands Association sent a letter to the two agencies voicing their concerns about how the potential tariffs would hurt US manufacturing and raise consumer prices.
Among the 28 signers of the letter were the Can Manufacturers Institute, the American Coatings Association, the Agriculture Transportation Coalition, and the National Foreign Trade Council.
“Domestic tin mill steel producers currently have the capacity to supply only approximately 50% of total US demand,” the letter said. Additionally, “Certain types and widths of steel required by US can manufacturers, including two-piece can steel, are not available in sufficient commercial quantities from domestic suppliers,” the group pointed out.
“Certain types of steel required within the can industry … currently are only sourced through imports,” the letter notes.
“…We believe there is substantial product differentiation and reason for subject imports apart from cost,” it added.
“It is evident that the proposed tariffs would result in serious injury to American consumers and manufacturers in the form of lost jobs and higher prices at the grocery store. We, the makers of America’s favorite household products, urge the ITC and the Department of Commerce to follow the facts and reject this dangerous proposal,” stated David Chavern, president and CEO of Consumer Brands.
In June, a bipartisan group of 36 members of Congress also expressed their concerns over the potential tariffs due to the downstream impact on manufacturers.
The ITA made its initial ruling in the antidumping portion of the case in August. It found that Canada, China, and Germany dumped the subject goods at margins of 5.29-122.52%. It also said the Netherlands, Taiwan, Turkey, and the UK did not dump the product.
In the countervailing duty part of the case, the ITA determined preliminary countervailable subsidy rates of 89.02-542.55% for China.
The Global Steel Climate Council (GSCC) announced on Dec. 4 the appointment of an executive director.
Adina Renee Adler, the GSCC’s newest addition, will lead collaboration and growth efforts with GSCC members, policymakers, and stakeholders.
“I am honored to lead the GSCC and work closely with the GSCC Board, the members and partners to accelerate the industry’s greenhouse gas reductions to achieving a 1.5 degree Celsius scenario by 2050,” said Adler in a news release.
Adler was previously the deputy executive director at Silverado Policy Accelerator and VP of advocacy at the Institute of Scrap Recycling Industries (ISRI). ISRI is one of the founding members of the GSCC.
The Steel Manufacturers Association (SMA) applauded the GSCC’s selection.
“We are so pleased to welcome Adina Renee Adler to the Global Steel Climate Council at a pivotal time for the steel industry and global decarbonization efforts,” said SMA president Philip K. Bell. Her extensive background in trade policy, the recycling industry and metals manufacturing make her a great choice as the first full-time executive director of an exciting, young organization dedicated to helping consumers and policymakers identify the cleanest steel available.”
“We are fortunate to have Adina serve as GSCC executive director at a critical time in our industry’s decarbonization journey,” said Gregory Murphy, GSCC board chair and executive VP of business services and general counsel at Nucor.
Canadian metals distributor Russel Metals Inc. plans to acquire Samuel, Son & Co.’s service center operations in Western Canada and the US for roughly CA$225 million (US$165.5 million).
In total, Russel will acquire seven Samuel operations that generated revenues of CA$457 million for the nine months ended Sept. 30, 2023, according to a Russel press release on Monday, Dec. 4. The buy includes operations in Winnipeg, Manitoba; Calgary and Nisku, Alberta; and Langley and Surrey, British Columbia, in Canada; and facilities in Buffalo, N.Y., and Pittsburgh in the US.
“Our respective businesses are very complementary from both geographic and product mix perspectives,” said John Reid, Russel Metals’ president and CEO. “We look forward to having the approximately 340 Samuel employees join the Russel family.”
Russel said the purchase price is based on the working capital’s CA$186-million net book value and an additional CA$39 million related to equipment, machinery, and other sundry items.
The transaction is expected to close in Q1’24 or Q2’24 and will be financed from cash on hand – which totaled CA$569 million on Sept. 30, 2023, Russel said. It will be subject to Canadian regulatory clearance and customary closing conditions.
Samuel will retain its location in Delta, British Columbia, but will conduct an orderly shutdown of the facility.
“We are proud of the strength of the operations we are selling to Russel, which we believe can be made even stronger as part of this newly combined business,” said Samuel president and CEO Colin Osborne in a press release. “On behalf of Samuel, I would like to extend our appreciation to the team members who will be joining Russel for playing such an important role in our service center business.”
The acquisition strengthens Russel’s Western Canada presence with non-ferrous product lines and bolsters its existing operations in the US Midwest, the release said.
Toronto-based Russel is one of the largest service center groups in North America, with 46 Canadian locations and 17 US locations. It was ranked No. 5 in the Metal Center News Service Center Top 50 in 2023 with annual revenues last year of around CA$3.9 billion.
Correction: The original article posted on Monday, Dec. 4, incorrectly listed Russel Metals’ acquisitions as only carbon plate operations. The correct acquisitions include non-ferrous and carbon plate facilities. The updated article on Thursday, Dec. 7, reflects this.
It’s no surprise why spot prices are on the rise: Mills have been announcing higher flat-rolled tags for the better part of the past three months, according to our steel mill price increase calendar.
A leading cause of the $305-per-ton rally since prices reached a recent bottom of $645 per ton in late September has been a combination of extending lead times (helped by maintenance outages and idlings) and limited spot availability. That dynamic has squeezed the spot market even more with limited tonnages available for December.
But even while Nucor has been targeting a base price of as much as $1,100 per ton for hot-rolled coil since Nov. 27, buyers seem to be resisting those levels as best they can, according to our check of the market last Tuesday. SMU’s HRC price stands at $950 per ton on average, up $15 per ton from the week prior.
Some of our data could still be pointing to why there’s increasing resistance to the present price rally as we near the final few weeks of 2023.
SMU’s Steel Demand Index has slipped back into contraction territory, now at 49.3, down 4.2 points from a reading of 53.5 at the beginning of November.
The index, which compares lead times and demand, is a diffusion index derived from the market surveys we conduct every two weeks. This index has historically preceded lead times, which is notable given that lead times are often seen as a leading indicator of steel price moves.
An index score above 50 indicates rising demand and a score below 50 suggests declining demand. Detailed side by side in Figure 1 are both the historical views and the latest Steel Demand Index.
The measure had improved by more than 13 points back on Nov. 9 after reaching a recent low of 40 back in late August. Interestingly, the only time the index has moved into growth territory since late April has been for short-lived bumps when the market has responded to mill price hikes in mid-June and late September. This could potentially be an indication that the bump in demand has been driven by buyers trying to get out ahead of mill increases rather than an increase in fundamental demand.
SMU’s Steel Demand Index has been largely trending downwards and in contraction territory since early April.
While overall market sentiment is still somewhat bullish, there is growing talk of buyer resistance. A growing number of sources say they’ve been more reluctant to make HRC buys at current price points, especially with lead times extending well into 2024.
Many have noted that year-end buying has been completed, and some say that early Q1 buying has also already been secured. So what does that mean for lead times and prices as we near the year-end holidays?
I’m not going to speculate, but keep in mind that SMU’s demand diffusion index has, for nearly a decade, preceded moves in steel mill lead times (Figure 2), and SMU’s lead times have also been a leading indicator for flat-rolled steel prices, particularly HRC (Figure 3).
There’s no surprise there: Bids for U.S. Steel were due this past Friday, the same day when an NDA between the Pittsburgh-based steelmaker and Cleveland-Cliffs Inc. allegedly expired.
We’re all waiting on bated breath for what the potential sale of U.S. Steel means for the flat-rolled steel sector.
And while Cliffs has garnered much attention – and rightly so, with potentially more consolidation whittling the number of major domestic steel producers to just three and Cliffs cementing itself as the primary supplier of steel to domestic carmakers (something the auto companies are not fond of) – U.S. Steel has said that “numerous” potential buyers have come forth. It has not named them.
Also, what does the potential sale mean for the indefinite idling of U.S. Steel’s Granite City Works near St. Louis? The initial idling was in response to lower demand because of the UAW strike. But the extended shutdown was to “ensure melt capacity” and to help “balance” its order book – put another way, lower demand.
Lead times will ultimately be a guide for where prices go, so keep a close eye on them. Our hot rolled lead times are averaging just under seven weeks, setting a new high for 2023 after eclipsing this year’s prior high of 6.69 weeks set in mid-March.
The 2024 Tampa Steel Conference is less than two months away. It is one of the premier domestic steel conferences and a great compliment to the record-breaking SMU Steel Summit in August.
With just about 250 delegates already registered, we anticipate beating last year’s mark with more than 500 attendees.
The event runs from Sunday-Tuesday, Jan. 28-30, and will be at the JW Marriott Tampa Water Street hotel.
You can learn more about the agenda, explore networking opportunities, and register here.
Note: Demand, lead times, and prices are based on the average data from manufacturers and steel service centers who participate in SMU’s market trends analysis surveys. Our demand and lead times do not predict prices but are leading indicators of overall market dynamics and potential pricing dynamics. Look to your mill rep for actual lead times and prices.
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.
The Biden administration’s climate ambitions are laudable. Buy Clean programs have the potential to meaningfully reduce CO2 emissions, supporting the American steel industry and its workers.
In February 2022, the administration launched the federal Buy Clean initiative and established its Buy Clean Task Force. These programs prioritize the use of American-made, low carbon construction materials in federal projects. In the steel sector, a well-designed Buy Clean standard can accelerate decarbonization while supporting American manufacturing. Buy Clean programs include those funded through the Bipartisan Infrastructure Law and the Inflation Reduction Act (IRA). They are implemented through numerous federal agencies. One such agency is the General Services Administration (GSA).
The IRA provides $2.15 billion for the GSA “to acquire and install materials and products for use in the construction or alteration of buildings.” The materials purchased under this program are limited to those that “have substantially lower levels of embodied greenhouse gas (GHG) emissions.”
The EPA published an interim determination in December 2022, defining what constitutes “substantially lower” embodied emissions. On May 16, 2023, the GSA announced its interim emissions standards and established a pilot program. The program covers 11 projects and comprises an estimated $300 million of low carbon materials. For multiple steel product categories, the GSA set separate (or bifurcated) standards for steel products made by integrated mills and electric arc furnaces (EAFs). How these standards are developed form the basis of federal Buy Clean principles.
The US government should align itself with the Buy Clean and IRA principles to ensure it purchases the cleanest steel available. Using a dual or bifurcated scale to evaluate steel’s GHG emissions could lead to the purchase of products that are misleadingly classified as clean.
A bifurcated scale uses a methodology that favors steel produced by high-emitting processes, rather than steel made from recycled materials. It holds some steelmakers’ products to a weak carbon-intensity standard while holding other steelmakers’ products to a tough standard.
That’s not fair to anyone. It penalizes steelmakers who have invested in cleaner steelmaking routes. It hurts national and global efforts to reduce carbon emissions in core manufacturing sectors. And it shortchanges taxpayers whose elected officials voted for a bill containing Buy Clean requirements.
The government’s procurement policy adheres to the Buy Clean provision in the IRA. In our opinion the policy should be about one thing: getting the cleanest steel available. This is done by adopting a single standard for steel, regardless of how it is made. There is also growing support for this concept.
This year, the Global Steel Climate Council published the Steel Climate Standard.
The Steel Climate Standard is a single scale for measuring the carbon intensity of steel. It measures our progress toward a lower-emissions world. Buying steel that meets the standard ensures that you are getting the cleanest steel available.
The standard was designed to do three things:
The Steel Climate Standard lets no one off the hook. To meet the standard, every steelmaker must hit emissions reduction targets on the path to net zero emissions by 2050.
The GSA recently announced 150 construction projects tentatively selected for funding under the IRA. The $2 billion investment included $388 million for steel products.
The announcement reaffirmed the Biden administration’s commitment to “prioritizing the purchase of asphalt, concrete, glass, and steel that have lower levels of GHG emissions associated with their production, use, and disposal.” This is a positive development that shows the GSA’s commitment to funding and starting projects as the IRA mandates. We applaud the agency for that.
It is our sincere hope that the administration decides on a single scale for GHG emissions emitted by steel production. We urge the GSA to hold all steel to the same standard and ensure that the US government buys the cleanest products available.
Here’s the latest on the aluminum markets from CRU analyst Marziyeh Horeh.
The LME aluminum 3-month price was broadly unchanged on the morning of Dec. 1, last seen trading at $2,195 per metric ton.
SHFE cash was also broadly stable after falling to a three-month low on Nov. 30. The cash contract settled at RMB18,625 per metric ton and last traded at RMB18,640 per metric ton.
At Hydro’s Capital Markets Day 2023, the Norwegian producer lifted its ambitions regarding sustainability. Towards 2030, Hydro said it will step up growth in aluminum recycling and extrusions and in its ambitions within renewable power generation.
Among its key objectives are:
Hydro also increased its projection for capital expenditures to NOK15 billion annually, quoting global inflation and currency effects.
“Based on our leading position we are now shifting gear. Towards 2030 we are stepping up growth ambitions in extrusions, recycling and renewable power generation aimed at capturing market opportunities emerging from the green transition,” said Hydro President and CEO Hilde Merete Aasheim. The full online statement can be found on Hydro’s website.
In other news for Hydro, the Norwegian producer announced that it would join the First Movers Coalition “to signal demand for the clean technologies needed to reach zero.” The First Movers Coalition is a group of leading global companies combining their purchasing power to help commercialize low-carbon technologies. Led by the World Economic Forum and the US government, the FMC targets hard-to-abate sectors, including aluminum, steel, aviation, chemicals, concrete, shipping, and trucking, which are responsible for 30% of global emissions.
“I am proud to announce that Hydro is joining the First Movers Coalition, signaling our determination to taking responsibility and leading the way for the world to reach the climate targets. The challenge of climate change transcends borders and industries, and we can only maintain the critical climate pathway of 1.5ºC if we work together to create new markets for a sustainable future,” said Aasheim.
In particular, Hydro will participate in the FMC aluminum sector commitment via its extrusion business, annually committing to at least 10% of all primary aluminum procured externally to be near-zero emissions by 2030.
Alro SA recently announced two investment projects worth $4.22 million aimed at increasing product quality control capabilities. The company will acquire a second non-destructive ultrasonic examination (USL) system and an electrical conductivity measurement system for flat-rolled products. These new acquisitions allow a complete and automatic scanning of aluminum alloy plates on both surfaces (upper and lower), therefore ensuring an accurate verification of the internal structure and uniformity of heat treatments. Also, by using ultrasonic control to check the internal structure and perform electrical conductivity measurements on both surfaces, an additional guarantee is ensured regarding the quality of manufactured aluminum alloy plates.
“These investments represent another important step in implementing Alro’s strategy to increase the output of complex products with high profitability by implementing best practices and high-performance, energy-efficient, and environmentally friendly technologies,” said Gheorghe Dobra, CEO of Alro.
North American aluminum associations, including the Aluminum Association, Instituto Mexicano del Aluminio, and the Aluminum Association of Canada, have jointly advocated for enhanced import monitoring while reaffirming their commitment to tariff-free trade within North America. In a letter to trade officials, the associations emphasized the longstanding collaboration that has facilitated cross-border trade, with Canada and Mexico being significant aluminum trading partners with the US. The groups are urging continued tariff exemptions under Section 232 of the US-Mexico-Canada Agreement (USMCA) and express concern about a 15-country trade case that includes Mexico. They also call for Mexico to implement an aluminum import monitoring program. The letter highlights past challenges, including trans-shipment schemes with Chinese aluminum, emphasizing the need for ongoing vigilance and enforcement of global trade laws. Additionally, the associations stress their support for sustainability initiatives and call on governments to aid industry decarbonization and the broader aluminum sustainability agenda.
This article was first published by CRU. Learn more about CRU’s services at www.crugroup.com.