Harsh steel industry winters originating in China are no longer a question of “if,” but of “when.” Their periodic emergence is not the unexpected result of sudden market downturns. It is the inevitable consequence of decades of failed industrial policy and generous government financial support driving overcapacity that China’s planners are unwilling or unable to confront.   

China’s official statements of concern regarding “blind investment” and overcapacity in the steel industry go back to at least 2003. Repeated attempts since then to address overcapacity have harbored illusions that the solution lies with government-directed consolidation and government-funded facility upgrades. In practice, these policies are counterproductive vectors for ongoing subsidization that sustains and even expands all but the most decrepit, non-operational facilities through financial bailouts and other government support.     

Wiley has closely tracked these policies and the market distortions they have created.  In a series of previous reports dating back more than 15 years, we have documented the ways in which China’s pursuit of subsidized self-sufficiency and market dominance in steel and other sectors has affected US producers.   

Our most recent analysis, Shell Game: Case Studies in Chinese Steel Subsidies, will be issued in the coming days. It examines a selection of oil country tubular goods (OCTG) producers and confirms that the same pattern continues today. If anything, the Chinese government has only expanded the scope of intervention and subsidization.   

First, it continues to rely on state-directed mergers and acquisitions in pursuit of industry consolidation and capacity reductions.  Far from reducing capacity, these transactions often operate as massive financial bailout schemes that sustain uncompetitive capacity and create mammoth conglomerates that are insulated from domestic competition so that they can more effectively target global markets.   

Second, policies with stated environmental objectives continue to operate as counterproductive vectors for additional subsidization that do little but move capacity from one place to another. In the process, these state-supported relocations expand capacity and facilitate export orientation by concentrating it logistically optimized regions like coastal ports. 

Third, industrial policy support that has historically favored large state-owned enterprises has been expanded to cover even the smaller, non-state firms that were in theory to spur more market-oriented competition and outcomes in the industry. These policies call on the state to dramatically increase the scope of grants, subsidized financing, and other support throughout the steel industry.

We examined these policies through recent examples from the OCTG sector, but this is just a snapshot of what is happening throughout the steel industry. As long as this continues, China’s overcapacity is here to stay. This will remain the case unless and until policymakers elsewhere accept the hard truth that China’s ability to access demand in their markets only enables the policies that are the root cause of the problem. As long as foreign markets, whether for direct steel imports or imports of major steel-consuming downstream goods, can be flooded by subsidized Chinese steel, harsh winters in China will become an ice age for the rest of the global industry.

It may be difficult and complicated in the short term, but concerted action among like-minded partners to deny the Chinese steel industry any outlets may be the only way to end this pattern. Steel producers around the world are ringing alarm bells, from North America to South America, from Europe to Southeast Asia. Given globalized markets and interconnected supply chains, countries acting individually to respond to immediate crises on an ad hoc basis remains necessary, including by updating and strengthening trade remedies laws, but more will be needed.

China’s steel industry also remains overwhelmingly composed of high-emission blast furnaces and still relies largely on coal-fired electricity. Nearly every ton of steel exported from China into markets with lower-emission industries displaces a ton of steel made by less carbon-intensive processes. Downsizing the Chinese steel industry is therefore also perhaps the most effective and efficient way to dramatically reduce global steel industry CO2 emissions.

For the sake of both the global economy and the global climate, China will need to shut down around 30% of its steel industry, at least according to some of its own companies’ estimates. But as long China’s policymakers have outlets to force those painful decisions onto other countries, we can expect that they will continue to do so, just like they have in the past.

As of Aug. 21, prices for busheling steel scrap, zinc, and aluminum have risen 5-8% month on month (m/m). Pig iron and shredded scrap prices have remained stable. Iron ore and coking coal were the only products to experience significant monthly decreases, dropping 9-10%.  

Prices for all but one raw material (pig iron) are cheaper than they were three months ago, with some products down by 14% or more in that time. Table 1 summarizes the percentage changes from one month, three months, and one year ago for each product.

Iron ore

Following an uptick in April and May, the import price of 62% Fe Chinese iron ore fines has moved lower over the past three months. The latest weekly spot price has fallen to $94 per dry metric ton (dmt) delivered North China (Figure 1). This is now the lowest weekly price recorded since November 2022. Iron ore prices have decreased 9% over the past month and are 14% lower than levels seen this time last year.

Coking coal

Prices for premium hard coking coal had remained relatively stable between May and July but have eased over the past month. The latest weekly price is down to a two-year low of $205/dmt, having fallen 10% in the last month (Figure 2). Coking coal prices have decreased 14% in the past three months and are 20% less than they were one year prior.

Pig iron

Since stabilizing about a year ago, pig iron prices have overall trended higher since November. Prices were flat from July to August at $460/dmt (Figure 3). Pig iron prices are in line with levels seen three months prior and 8% higher than levels one year ago. Recall that pig iron prices had jumped more than 60% in April 2022 following the invasion of Ukraine by Russian forces, reaching a historic high of $975/dmt.

Note that most of the pig iron imported to the US had come from Russia, Ukraine, and Brazil. This report uses Brazilian prices, averaging north and south port prices.

Scrap

Steel scrap prices have generally shifted lower across 2024 following their peak last December. SMU’s busheling and shredded scrap indices picked up steam from July to August; busheling scrap prices rose 5% m/m to $395 per gross ton (gt), shredded scrap ticked up 1% to $383/gt (Figure 4). Scrap tags are down 2-4% from prices recorded three months ago and are 2-12% lower than this time last year.

Changes in the relationship between scrap and iron ore prices offer insights into the competitiveness of integrated mills, whose primary feedstock is iron ore, compared to mini-mills, whose primary feedstock is scrap. Figure 5 shows the prices of mill raw materials over the past three years.

To compare these two feedstock materials, SMU divides the shredded scrap price by the iron ore price to calculate a ratio. A high ratio favors the integrated producers and a lower ratio favors the mini-mill/EAF producers (Figure 6). Integrated producers had mostly held the cost advantage between late 2021 through mid-2023. The advantage then briefly shifted to EAF producers in the second half of 2023. After bouncing around this year through July, the ratio began to favor integrated producers as we entered August, now up to 4.08.

Zinc and aluminum

Zinc is used in galvanized and other coated steel products. Following the multi-year lows seen last year, spot prices rapidly increased earlier this year, reaching a one-year high of $1.40/lb in May. (This surge prompted some mills to increase their galvanized coating extras.) Those gains were short lived, being erased by the end of July. The latest LME cash price for zinc has recovered by 5% m/m to $1.27 per pound. Zinc prices are 7% lower than levels three months prior, but up 23% compared to August 2023 (Figure 7).

Aluminum prices, which factor into the price of Galvalume, also rose earlier this year. Prices climbed to a one-year high of $1.22/lb in May, but receded through July. The latest LME cash price has risen 8% m/m to $1.11/lb. Aluminum prices are 6% lower than tags three months prior, but 17% greater than levels seen this time last year. Note that aluminum spot prices sometimes have large swings and return to typical levels within a few days, as seen in Figure 7.

Zekelman purchased 5,229,988 common shares, the filing from July 31 said.

Recall that Barry Zekelman, executive chairman and CEO, told SMU in a Community Chat leading up to Steel Summit 2023: “If I go to my grave without owning a steel mill, I won’t be happy. It’s been a lifelong dream of mine.”

Requests for comment from Zekelman Industries and Algoma was not returned by time of publication on Friday afternoon.

Through Aug. 23, there are 585 US drilling rigs in operation, one less than the week prior. Oil rigs held steady at 483, gas rigs fell by one to 97, and miscellaneous rigs were unchanged at five.

There were 47 fewer active US rigs last week compared to the same week last year, with 29 less oil rigs and 18 less gas rigs.

Canada rigs

Last week, there were 219 active Canadian rigs, two higher than the week before. Oil rigs rose by two to 153 and gas rigs remained at 66.

There are currently 29 more drilling rigs operating in Canada than one year prior, with 37 more oil rigs and 8 less gas rigs.

International rig count

The international rig count is updated monthly. The total number of active rigs for the month of July fell to 934, 23 less than the June count and down by 27 from levels one year prior.

The Baker Hughes rig count is important to the steel industry because it is a leading indicator of demand for oil country tubular goods (OCTG), a key end market for steel sheet. A rotary rig rotates the drill pipe from the surface to either drill a new well or sidetrack an existing one. For a history of the US and Canadian rig counts, visit the rig count page on our website.

US CR coil prices averaged $915 per short ton (st) in our check of the market on Tuesday, Aug. 20, flat vs. the week before. Despite the recent improvement of late, CR tags are still down roughly $390/st from a year-to-date high of $1,325/st in January.

Domestic CR prices are, theoretically, 18.2% more expensive than imports. That’s up from 15.3% last week. While US CRC prices are still higher than offshore material, the US CR premium is down from a 31.5% premium in early January.

In dollar-per-ton terms, US CR is now, on average, $125/st more expensive than offshore product (see Figure 1). That compares to $107/st costlier on average last week. That’s still down from a recent peak of $311/st in mid-January.

The charts below compare CR coil prices in the US, Germany, Italy, South Korea, and Japan. The left-hand side highlights prices over the last two years. The right-hand side zooms in to show more recent trends.

Methodology

This is how SMU calculates the theoretical spread between domestic CR prices (FOB domestic mills) and foreign CR prices (delivered to US ports): We compare SMU’s US CR weekly index to the CRU CR weekly indices for Germany, Italy, and East Asia (Japan and South Korea). This is only a theoretical calculation. Import costs can vary greatly, influencing the true market spread.

We add $90/st to all foreign prices as a rough means of accounting for freight costs, handling, and trader margin. This gives us an approximate CIF US ports price to compare to the SMU domestic CR price. Buyers should use our $90/st figure as a benchmark and adjust up or down based on their own shipping and handling costs. (Editor’s note: If you import steel and want to share your thoughts on these costs, please get in touch with the author at david@steelmarketupdate.com.)

East Asian CR coil

As of Thursday, Aug. 22, the CRU Asian CR price was $508/st, down $27/st week over week (w/w) and down nearly $75/st over the past month. Adding a 71% anti-dumping duty (Japan, theoretical) and $90/st in estimated import costs, the delivered price to the US is $959/st. The theoretical price of South Korean CR exports to the US is $598/st.

The latest SMU CR average of $915/st theoretically puts US-produced CR $44/st below CR product imported from Japan. But US tags are still $317/st more expensive than CR imported from South Korea.

Italian CR coil

Italian CR prices were up $2/st to roughly $706/st this week. After adding import costs, the price of Italian CR delivered to the US is, in theory, $796/st.

That means domestic CR is theoretically $119/st more expensive than CR coil imported from Italy. The spread is down $2/st from last week but still $334/st below a recent high of $453/st mid-December.

German CR coil

CRU’s German CR price was down just $2/st vs. last week. After adding import costs, the delivered price of German CR is, in theory, $808/st.

The result: Domestic CR is also theoretically $107/st more expensive than CR imported from Germany. The spread is up $2/st w/w but still well below a recent high of $431/st in the first week of 2024.

Notes: We reference domestic prices 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 a port is important to keep in mind when deciding where to source from. It’s also important to factor in lead times. In most market cycles, domestic steel will deliver more quickly than foreign steel. Note also that, effective Jan. 1, 2022, the blanket 25% Section 232 tariff was removed from most imports from the European Union. It was replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25% tariff. A similar TRQ with Japan went into effect on April 1, 2022. South Korea is subject to a hard quota rather than a tariff.

The two rail companies had locked out more than 9,000 workers who are part of the Teamsters union after they were unsuccessful in reaching an agreement over issues related to scheduling, labor availability, and work-life balance.

The Canadian government on Aug. 22 said it would ask the Canada Industrial Relations Board (CIRB) to issue a back-to-work order.

CN said the same day it had ended its lockout and initiated a recovery plan.

CPKC said that the resumption of its services would be delayed pending the result of the CIRB back-to-work order. The board is independent and must first consult workers represented by the Teamsters union, which is planning to challenge the constitutionality of the Canadian government’s order.

The CIRB was set to meet with the union and CPKC officials later on Friday.

Miners Rio Tinto and Teck Resources are taking a series of measures to mitigate the impact of Canada’s two largest railway companies shutting down their networks during a labor dispute.

Rio Tinto said it will truck some materials and products, and increase the use of its own rail network, primarily 400 km serving its iron ore operations in Quebec, as well as Newfoundland and Labrador, and around 100 km for its aluminum business. The labor dispute between Canada’s two largest railway companies and their workers is expected to disrupt operations, prompting miners to implement measures to minimize the impact.

Teck stated it is looking to use alternative transportation, with a spokesperson for the Vancouver-based base metal miner adding that interruption of rail services is negative for its partners and customers in the critical minerals supply chain.

Normal rail services in the vast country were suspended on Aug. 22 after operators Canadian National Railway and Canadian Pacific Kansas City locked out more than 9,000 unionized workers. The Mining Association of Canada said it is seriously concerned about the damage the development may cause.

“As the single largest industrial customer group of Canada’s railways, the mining sector has seen first-hand how detrimental unpredictable work stoppages are to Canada’s reputation as a reliable trading partner,” said association president and CEO Pierre Gratton, before adding: “The urgent need for Canadian minerals and metals presents a generational opportunity, and we are in a race with our competitors to meet global demand. A first-ever, simultaneous halt in … rail service could not come at a worse time.”

The association said rail freight volume in 2022 was 283.6 million metric tons (mt), 132 million mt of which was crude minerals and 28.3 million mt processed mineral products, together accounting for 56% of the total.

EGA to acquire majority stake in US recycling firm Spectro Alloys

EGA announced its intention to acquire a majority stake in American aluminum recycling firm Spectro Alloys Corp. The acquisition, which is subject to obtaining regulatory approvals, will accelerate EGA’s global expansion into aluminum recycling and expand EGA’s business in the US.

Spectro Alloys is a leading secondary foundry alloy producer in the US, founded in 1973, and based in Rosemount, Minn. The company has a production capacity of around 110,000 mt/y of aluminum ingots, with a carbon intensity of less than 1 mt of CO2 equivalent per mt of aluminum produced. Earlier this year, Spectro Alloys broke ground on an expansion project at its Rosemount site that will add approximately 55,000 mt/y of secondary billet production capacity in the first phase, which is expected to be completed in 2025.

EGA intends to acquire 80% of Spectro Alloys. The current owner-managers will retain a 20% interest. EGA and Spectro Alloys have signed an equity purchase agreement, and the transaction is expected to close during the third quarter of 2024.

Hindalco to invest $10 bn in major expansions plans across India and the US

India’s Hindalco Industries is set to undertake a significant expansion with investments totaling $10 billion, said Chairman Kumar Mangalam Birla at the company’s annual general meeting on Aug. 22. Birla outlined plans for ongoing and near-term projects, including expansions in aluminum and copper smelters, the Aditya flat-rolled product plant, a new alumina refinery in Rayagada, and Novelis Bay Minnette, Ala., expansion.

Hindalco is considering a brownfield expansion of approximately 200,000 mt/y at its aluminum smelter in Odisha, with a significant portion of the power requirements to be met through renewable energy sources, Birla said in his speech. In addition to its aluminum initiatives, the company is planning to expand its copper smelting capacity and is exploring the establishment of a brownfield facility in Gujarat to address the rising demand for this metal in India.

Finally, Birla stressed the strategic investment in its subsidiary Novelis and its rolling and recycling project in Bay Minette, Ala., which is well set to become one of the most advanced and automated plants in the industry.

Novelis celebrates major milestone in green investments

Atlanta-based Novelis announced this week the successful completion of its Green Bond financial commitments. In the third Green Bond report, the flat-rolled aluminum producer shares how these investments are driving innovation and helping the company achieve its goals for reducing carbon emissions, energy use, water use, and landfill waste.

In the report, Novelis asserts that an amount equal to the total net proceeds of $588 million from the March 31, 2021, issuance of the €500 million, 3.375% Senior Notes due April 15, 2029, have been used to finance new or existing Renewable Energy and Pollution Prevention & Control projects in the 36 months prior to the issuance through Sept. 30, 2023.

“Although we’ve met the spend commitment of our Green Bond, our commitment to sustainability is never ending,” said Steve Fisher, president and CEO of Novelis. “We are aiming for a carbon-neutral future for aluminum – built on a global, circular economy – and every day we innovate and collaborate with our customers to move us closer to that future.”

To learn more about CRU’s services, visit www.crugroup.com.

On the Brazilian side, the only relevant market for BPI is the US. So, they have to price their product to compete with other exporting countries such as India. But more importantly, they need to keep their delivered price within range of US domestic ferrous scrap. This is setting up a possibly contentious negotiation on the next round of buying for Q4 deliveries.

Since the start of the year, ferrous scrap prices for prime scrap, namely #1 Busheling and #1 Bundles, had dropped $80-100/metric ton (mt). However, imported Brazilian pig iron has traded with a range of $470-485/mt on a CFR US Port basis. So, BPI to date has only dropped $15/mt while prime scrap dropped much more.

With weakness in demand for HRC, BPI has become an expensive addition to the burden of scrap in the EAFs of flat-roll steelmakers in the US. When calculated on a delivered works basis, BPI costs well over $510/mt based on the most recent offers from Brazil of $470/mt CFR. Mills can obtain prime scrap at around $395/mt. They want to narrow this $100/mt-plus spread.

RMU recently reached out to a major BPI buyer based in the US who agreed that pig iron prices were way too expensive compared to a wide variety of ferrous products. He also stated offers as low as $440/mt CFR have been heard from South Asian producers.

RMU also spoke to a Brazilian-based export executive about the expectations of producers there. He said the onset of rainy season next month will increase the price of charcoal, which is the main reductant used in Brazil to produce pig iron. The pig iron trade there was hoping for a rise in the US scrap market in August so they could obtain a price increase for BPI. This has not happened. As a result, they have not attempted to increase their offer price and have kept it at $470/mt CFR. There have not been any reported new sales at this price.

The Brazilians are facing a strengthening in the real vs. US dollar (USD), which negatively affects their production costs. The pig iron trade in Brazil has historically benefited from a strong USD and has made exports to the US profitable.

Brazil domestic consumption

Another factor that could affect future pricing is the amount of Brazilian pig iron bought by the domestic steelmakers. At a recent meeting of the Brazilian Steel Association, there was optimism about the demand in the domestic market. Our source noted, “for the last two to three years, it has been 50/50 [domestic/export], while it used to be 70% sold to the domestic market.” This has not happened yet.

RMU spoke with a US-based pig iron trader and distributor about the situation. He said “pig iron is too tight. US mills wanted to take scrap down in August but couldn’t get it done.” He added, “Brazil is firm at $470/mt CFR for high Phos. BPI and $485/mt for low Phos. material.”

Even though Brazilian producers were expecting a $20/mt increase for Q4 shipments to the US, it doesn’t seem very likely US-based users will agree. US buyers are expecting a decrease in prices.

HBI/DRI?

When asked whether hot-briquetted iron (HBI) could come to the rescue, the trader explained that the main source for HBI has been Venezuela. However, material there is not readily available, and their Fe yield is down to 85%. The other units which produce HBI/DRI (direct-reduced iron) in New Orleans, La., Toledo, Ohio, and Trinidad are owned by steelmakers. The same goes for the HBI plant in Corpus Christi, Texas. Therefore, the material is captive and not sold into the general market. There is also a very weak trade flow of HBI into the US from Africa and Asia.

With eyes back on pig iron, RMU will continue to monitor the progress and keep the community updated as new information unfolds.

Editor’s note: This column appeared first in Recycled Metals Update (RMU), SMU’s new sister publication. Want to meet the author of this article and learn more about RMU? Stop by the SMU/RMU booth at Steel Summit on Aug. 26-28 at the Georgia International Convention Center (GICC) in Atlanta. You can also visit RMU’s website and register for a free 30-day trial.

The Chinese government is also expanding its unfair trade practices beyond its borders by subsidizing its steel producers in building additional export-oriented steelmaking capacity outside of China — particularly in Southeast Asian countries like Indonesia and Vietnam. From 2010 to 2020, crude steel capacity in the Association of Southeast Asian Nations (ASEAN) region doubled, and significant additional capacity expansion is underway, over 80% of which is the result of Chinese cross-border investments.

These cross-border subsidies are helping build new sources of unfair trade that will follow the China model, putting American steel companies, our supply chain, our workers, and the 2 million jobs the steel industry supports at risk.

While China is the largest and best-known perpetrator of these market-distorting practices, it is not the only country pursuing such policies. India is undertaking its own government-driven steel capacity expansion program that is forecast to make that country one of the leading contributors to further increases in excess steel capacity, along with the ASEAN region and the Middle East.

In order to address these growing challenges, we need more effective trade laws. Unfortunately, US antidumping and countervailing duty laws have not been updated since 2015. As a result, they have not kept up with the efforts of many entities to circumvent and evade US trade enforcement measures.

Furthermore, cross-border or “transnational” subsidies like those being used to subsidize offshore Chinese steel production via its “Belt and Road Initiative” are not clearly addressed by our existing trade remedy laws. This means American steel producers do not have a reliable remedy to address the resulting injury from imports benefiting from these subsidies.

AISI, our member companies, and industry partners have been working with Congress on a solution. The “Leveling the Playing Field 2.0 Act” has been introduced in the House by Reps. Terri Sewell (D-Ala.) and Rep. Beth Van Duyne (R-Texas), and in the Senate by Sens. Sherrod Brown (D-Ohio) and Todd Young (R-Ind.). This legislation is critical to addressing the latest efforts by foreign exporters to evade US trade laws through a variety of schemes, including those subsidies that have been enabled by China’s Belt and Road Initiative, and will help US industries fight back with new tools to crack down on repeat offenders and serial trade cheaters.

This legislation is critical to addressing the latest efforts by foreign exporters to evade US trade laws
through a variety of schemes.

Kevin Dempsey
President and CEO of the American Iron and Steel Institute

Specifically, the bill provides the Commerce Department with the authority to use the countervailing duty law to address the growing problem of cross-border subsidies. It would also address the current lack of statutory deadlines for anti-circumvention inquiries, which results in significant delays in industry efforts to obtain relief against dumped and subsidized imports that are routed through third countries for additional minor processing. In addition, the bill makes needed revisions to existing law to ensure the ability of the Commerce Department to make “particular market situation” adjustments in antidumping investigations in all instances where home market costs or prices have been distorted.

The Leveling the Playing Field 2.0 Act has strong bipartisan support in Congress, with 68 House cosponsors, including 37 Republicans and 31 Democrats, and 19 Senate cosponsors, consisting of 10 Republicans and nine Democrats. In addition, last December, the House Select Committee on the Chinese Communist Party released a detailed report that provided several recommendations to address strategic competition between the US and China. Among these recommendations was the enactment of the Leveling the Playing Field 2.0 Act “to update US trade laws by addressing issues such as cross-border subsidies, simplifying investigations into circumvention and repeated product-related inquiries, and strengthening remedies to minimize [People’s Republic of China] predatory economic practices.”

There have been some recent congressional expressions of interest in legislation to address the challenges we face from China, especially during this election season. But to date, one key piece that has been missing is concrete action to update our trade laws to address the latest forms of unfair trade like those mentioned above.

Through our direct advocacy outreach, AISI and the American steel industry continue to work with congressional leadership to request that any legislative package on China addresses the antagonistic trade practices that destroy American jobs and industries. Readers of Steel Market Update should urge their respective members of Congress to support the Leveling the Playing Field 2.0 legislation and send a strong signal that we will not stand by while China and other countries continue to take steps to undermine fair trade and threaten the health of the American steel industry.

Editor’s note

SMU welcomes opinions from across the steel industry. We’re happy to share the thoughts above from Kevin Dempsey, president and CEO of the American Iron and Steel Institute (AISI). If you have an opinion you’d like to express to the broader steel community, please contact us at info@steelmarketupdate.com.

Global steel production averaged 157.6 million mt per month across the first seven months of the year. That’s 1 million mt below the same period of 2023.

On a three-month moving average (3MMA) basis, global production declined 1% from June’s 11-month high to 159.5 million mt through July.

On a 12-month moving average (12MMA) basis, monthly production over the last 12 months averaged 153.3 million st. This rate is identical to the 12MMA in July 2023; it’s remained in this ballpark for the last two years.

On a daily basis, July production averaged 4.93 million mt, 8% below June’s 14-month high and 5% lower than last year.

Regional breakdown

China, the world’s top steel producer, produced 82.9 million mt last month, 9.5% less than June and 9% less than July 2023. Recall that in May, Chinese production reached a 14-month high of 92.9 million mt. China’s year-to-date production averaged 87.1 million mt per month in the first seven months of the year, down from 88.9 million mt in the same period last year.

Chinese production accounted for 54% of the world’s total steel output in July, down from a 57% rate one month and one year prior.

Meanwhile, steel output in the RoW increased 1% from June to July. Production in these regions totaled 69.9 million mt for the month, up less than 1% y/y. RoW production averaged 70.5 million mt per month through July, up from 69.7 million mt in the same period of 2023.

Looking at steel production levels by country, India retained the number two spot last month, producing 12.3 million mt in July. Next up was Japan at 7.1 million mt, followed by the US at 6.9 million mt, Russia at an estimated 6.3 million mt, and South Korea at 5.5 million mt.

SMU’s check of the market on Tuesday, Aug. 20, put domestic HR tags at $675 per short ton (st) on average, up $10/st from last week. (Note that stateside hot band, while up $40/st from a 20-month low, remains $170/st below a recent high of $845/st in early April.)

Domestic HR prices are now theoretically just 0.3% cheaper than imports. They were 2.3% cheaper last week and nearly 12% cheaper just last month.

In dollar-per-ton terms, US HR is now, on average, $2/st cheaper than offshore product (see Figure 1). That compares to $15/st cheaper on average last week. That’s a massive change from late last year, when US HR was often hundreds of dollars per ton more expensive than offshore material.

The charts below compare HR prices in the US, Germany, Italy, and Asia. The left-hand side highlights prices over the last two years. The right-hand side zooms in to show more recent trends.

Methodology

This is how SMU calculates the theoretical spread between domestic HR coil prices (FOB domestic mills) and foreign HR coil prices (delivered to US ports): We compare SMU’s US HR coil weekly index to the CRU HR coil 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/st to all foreign prices as a rough means of accounting for freight costs, handling, and trader margin. This gives us an approximate CIF US ports price to compare to the SMU domestic HR coil price. Buyers should use our $90/st figure as a benchmark and adjust up or down based on their own shipping and handling costs. If you import steel and want to share your thoughts on these costs, please get in touch with the author at david@steelmarketupdate.com.

Asian HRC (East and Southeast Asian ports)

As of Thursday, Aug. 22, the CRU Asian HRC price was $429/st, down $20/st vs. the week prior. Adding a 25% tariff and $90/st in estimated import costs, the delivered price of Asian HRC to the US is approximately $626/st. As noted above, the latest SMU HR price is $675/st on average.

The result: US-produced HRC is theoretically $49/st more expensive than steel imported from Asia. That’s up $35/st vs. last week as stateside prices inch up and Asian tags slump. But it’s still a far cry from late December, when US HR was $281/st more expensive than Asian product.

Italian HRC

Italian HR coil prices were flat at $601/st this week. After adding import costs, the delivered price of Italian HR coil is, in theory, $691/st.

That means domestic HR coil is theoretically $16/st cheaper than HR coil imported from Italy. That is down $10/st from last week. Just five months ago, US HR was $297/st more expensive than Italian hot band.

German HRC

CRU’s German HR price moved to $624/st, which is $16/st higher than last week. After adding import costs, the delivered price of German HR coil is, in theory, $714/st.

The result: Domestic HR is theoretically $39/st cheaper than coil imported from Germany, down from a $6/st discount last week. At points in 2023, in contrast, US HR was as much as $265/st more expensive than German hot band.

Notes: Freight is important when 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, Section 232 tariffs no longer apply 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 prices from other countries. We do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.

Lastly, please remember to download the Steel Summit 2024 app! If you haven’t already, go to either the Apple or Android app stores and download it today.

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HARDI’s Sheet Metal/Air Handling Council met virtually for its monthly meeting on Tuesday, Aug. 20. Council members are service centers, distributors, and manufacturers active in the Heating, Air-Conditioning & Refrigeration Distributors International (HARDI) association.

Wait-and-see market

The call’s moderator said the steel market in the US seems to be in a wait-and-see mode after the steady, drawn-out deflationary period that characterized most of 2024.

Another member said this week’s SMU steel buyers’ survey data, shared by SMU Managing Editor Michael Cowden on the call, “pretty much supports everything I’m about to say.” He then said there is plenty of supply in the market, mill lead times are still relatively short, demand is stable, and inventories are slightly above average.

He said he felt the market was nearing a bottom after last month’s council call, so he began building inventory levels. So, “We have a little bit higher-than-average inventory currently,” he revealed.

Another buyer remarked that their inventories are right where they want them to be after one of their best Julys.

The moderator called attention to the fact that “there is more momentum for higher prices” now than there has been all year.

Call it a floor or an inflection point, “however you want to characterize it: prices have leveled off,” he stated.

In SMU’s check of the market on Tuesday, buyers reported an average price of $905 per short ton (st) for galvanized sheet. Galv prices have steadily crept higher over the past month, but are still only $35/st higher than a month ago.

Another HARDI member noted that pricing is “firm” but is not shooting up.

He said his company saw higher volumes in July and August. This could be “related to the steel market potentially bottoming. Or at least it’s getting to a price point where contractors are more comfortable taking a position,” he surmised.

“Is this a dead cat bounce? Is this just a pause? Or is this truly an inflection point?” the moderator questioned.

We’ll have to wait and see…

Strap on your muck boots if you haven’t already

If you’ve never eaten alligator before, “you’re about to, because we’re going to be in a swamp for the next 60 days or so, and it’s going to be murky and sticky,” according to one member on the call.

Demand is far from normal, he said, and folks are waiting – for interest rates to fall, for November’s election results, for any stability.

Once the dust settles after November, we “might get some surge in demand. But for now, it’s going to be pretty, pretty swampy,” the member said.

Another HARDI member agreed that people are sitting on the sidelines and waiting to see what happens with the election.

“I’m just getting a little tired of being in this mush market,” he lamented.

Predictions on galvanized prices

The survey results from this month’s HARDI call were little changed from July’s predictions.

Over half (58%) of HARDI members predicted this month that galvanized prices will be basically flat (+/- $40/st) a month from now. Still, another third (35%) think prices will be $40-80/st higher.

Looking six months out, 64% of members think galv prices will be up by $40-120/st, while 24% think they’ll be flat. Another 12% predict a rise of more than $120/st.

The majority of members (68%) on the call foresee galvanized prices being $1,000-1,199/st a year from now. Still, 16% predict $800-999/st, and 12% say $1,200-1,399/st.

SMU participates in a monthly steel conference call hosted by HARDI and dedicated to better understanding the galvanized steel market. The participants are HARDI member companies, wholesalers who supply products to the construction markets. Also on the call are service centers and manufacturing companies that either buy or sell galvanized sheet and coil products used in the HVAC industry and are suppliers to the HARDI member companies.

“Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout,” CN said in a statement on Aug. 22.

At the same time, CPKC cited “binding arbitration” as the way to move forward. So far, the Teamsters have refused this option.

“At this time, the responsible path forward for the union, the company, our customers, the Canadian economy and North American supply chains and the public interest is for TCRC and CPKC to engage in binding arbitration to resolve all outstanding disputes,” CPKC said in a separate statement on Thursday.

CPKC said its actions are “to protect Canada’s supply chains, and all stakeholders, from further uncertainty and the more widespread disruption that would be created should this dispute drag out further, resulting in a potential work stoppage occurring during the fall peak shipping period.”

CN claims that the the Teamsters have not shown any “urgency or desire to reach a deal that is good for employees, the company, and the economy.”

“We urge the Teamsters to engage in these negotiations with the urgency and importance that this situation requires,” CN added.

Teamsters clap back

The union, which represents close to 10,000 workers at both CN and CPKC, sees the situation through a different lens.

“Despite months of good faith negotiations on the part of the Teamsters Canada Rail Conference, parties remain far apart, and both CN and CPKC have begun their lockout as of 00:01 today,” the Teamsters said in a statement on Thursday.

The union noted that, over the past several days, they have put forward “multiple offers, none of which were seriously considered by either company.”  

“The main obstacles to reaching an agreement remain the companies’ demands, not union proposals,” the union added.  

Additionally, the Teamsters said they remain at the bargaining table with both companies. 

Canadian government responds

Canadian Prime Minister Justin Trudeau said the government will soon announce how it plans to solve the nationwide freight rail interruption, according to a Reuters article.

Speaking to reporters in Quebec, Trudeau on Thursday emphasized the need for a quick solution, the article said.

The merger is expected to close by the end of Q1’25. It is subject to approval by both companies’ stockholders, regulatory approvals, and the satisfaction of other customary closing conditions.

The transaction is anticipated to be “accretive to free cash flow” for both companies in the first full year following the close of the deal.

In 2023, Arch and CONSOL sold an aggregate of ~101 million short tons of coal to steelmaking, industrial, and power-generation customers.

Executives cheer deal

“Our assets are highly complementary, resulting in increased diversification across coal types, end uses, and geographies,” said Jimmy Brock, chairman and CEO of CONSOL.

Likewise, Arch CEO Paul Lang lauded the move.

“This merger will join two proven leadership teams and best-in-sector operating platforms to establish a premier North American coal producer with worldwide reach and world-class mining and logistics capabilities,” he said.

Lang will serve as CEO and as a board member of Core Natural Resources. Brock will serve as executive chairman of Core’s board of directors.

Core Natural Resources details

Core will have mining operations and terminal facilities across six states, and will own 11 mines. The diversified coal producer will serve customers with ~12 million st of met coal and more than 25 million st of thermal coal annually.

The combined company will have access to world markets via ownership interests in two East Coast export terminals. Additionally, it will have “strategic connectivity” to ports on the West Coast and the Gulf of Mexico.

The headquarters of the combined company will be in Canonsburg, Pa., where CONSOL is based. Arch is currently based in St. Louis.

The companies said stockholders from Arch will own ~45% of Core, while CONSOL stockholders will own ~55% on a fully diluted basis. When the transaction closes, Core will trade under a new ticker.

Lifting North Star’s HR capacity – again

The North Star BlueScope (NSBS) mini mill in Delta, Ohio, operates three electric-arc furnaces, the third of which has been ramping up production since its 2021 commissioning. That EAF and a second caster added 850,000 metric tons (mt) of annual hot-rolled (HR) sheet making capacity, increasing the mill’s annual steelmaking capacity to 3 million mt (3.3 million short tons).

The North Star mill is “really settling in nicely at that 3-million-metric-tons run rate,” said BlueScope CEO Mark Vassella on an earnings call with analysts on Monday.

After completing a feasibility study earlier this year, BlueScope’s board approved a $130-million-Australian-dollar (US$87.7-million) debottlenecking expansion plan for the mill.

BlueScope plans to lift the mill’s capacity by another 10% to more than 3.3 million mt (3.6 million st). To achieve this, it has already begun various debottlenecking projects, including upgrades to the hot strip mill (see image below).

“Once at full run rate in financial year ’28, the North Star mini mill will be producing nearly 60% more steel than it did in FY’22, materially increasing our exposure to the consolidated and rationalized US steel industry and the robust steel spreads and returns it offers,” Vassella said in his remarks.

NSBS reported stronger fiscal 2024 results than in the prior year, “predominantly on higher volumes due to the expansion ramp-up, which produced 660,000 metric tons in the year.”

The North Star mill operated at full capacity during the 2024 fiscal year, as demand from end users remained robust, the company said.

Slight change in plans for greenfield coating facility

BlueScope is also advancing its plans to build a greenfield cold rolling and coating facility in the Midwestern US.

“We progressed our feasibility study into the further integration of our US value chain, which presents a compelling medium- to long-term opportunity for BlueScope,” Vassella commented.

The planned midstream coating facility would connect the NSBS mill in Ohio with three BlueScope Coated Products (BCP) paint facilities. Locations are being considered in Ohio, Kentucky, Indiana, Michigan, and Tennessee.

He said the company foresees needing 550,000 mt of cold rolling, pickling, and metal coating capacity in the medium to long term to support its growth plans in the North American pre-paint market.

Plans are for that additional capacity to be phased in over the next five to seven years, Vassella explained. The first phase will install half of that capacity (~275,000 mt), with commissioning slated for 2028. Then the rest will be “added as required.”

He said the updated plan calls for one coating line instead of two, as previously planned. Initially building one line “gives us optionality if other opportunities emerge that don’t require a second metal coating line,” he noted.

BlueScope projects outlays of $800 million in upfront capital for the project will be spread across FY’26 to FY’28.

BlueScope Coated Products

BlueScope established BCP in 2022 after its $500-million acquisition of Coil Coatings, the second-largest metal painter in the US at the time.

That acquisition added 900,000 mt, more than tripling BlueScope’s US coating and painting capacity to 1.3 million mt per year.

BCP is one of the largest toll-processing coil coaters in the US. It has locations in Cambridge and Middletown, Ohio; Rancho Cucamonga, Calif.; Jackson, Miss.; Marietta, Ga.; Memphis, Tenn.; and Houston.

Now two years since the acquisition, Vassella said BCP has “absolutely not” been performing to expectations.

BCP “underperformed on continued operational challenges, compounded by lower foundation customer demand,” said a BlueScope investor presentation. Its contribution to BlueScope’s results were “negligible,” according to Vassella.

“So there’s an enormous amount of effort going into BCP to get it back to our business case,” he disclosed on the call.

And while “conditions aren’t fabulous” for the segment at present, he reiterated that it’s always been a medium- to long-term play.

“We still fundamentally believe there’s going to be a spot for Colorbond in North America. … That’s a very big market,” he noted.

Colorbond is BlueScope’s proprietary pre-painted steel. It’s been refined as a building material in some of Australia’s harshest environments for more than 50 years, according to the company.

Vassella said it doesn’t need to capture a huge amount of market share. The planned initial addition of ~275,000 mt is in an East Coast painted market of ~5 million mt, he pointed out.

“I’m looking through where we are right now, and looking out into the medium and longer term, and still fundamentally believe in the outlook for that economy,” he said.

July marks the 18th consecutive month the ABI has indicated contracting business conditions. This time last year the index was 49.5, whereas two years prior it was 50.6.

“Architecture firms continue to face a billings slowdown,” AIA chief economist Kermit Baker said. “However, the emerging prospects of lower interest rates coupled with a modest uptick in project inquiries suggest that some dormant projects may be revived in the coming months.”

The project inquiries index rose to 52.4 in July, recovering from an eight-month low one month prior. The design contracts index remained weak for the third consecutive month, inching up to 46.5 following June’s four-year low.

Three of the four regional indices continued to show declining billings through July (Figure 2, left). The Northeastern region was the only regional index to indicate improving business conditions, the second consecutive month. The Southern, Midwestern and Western indices all remained dismal in July, though each recovered slightly from June.

Sector indices also indicated less-than-stellar business conditions across the board in July (Figure 2, right).  All four sector indices saw some degrees of growth compared to the month prior but all indicated declines in billings in July.

He will oversee Mill Steel’s financial operations, driving strategic initiatives, and supporting the company’s long-term growth objectives.

“We are thrilled to welcome Scott to the Mill Steel family,” Pam Heglund, CEO of Mill Steel, said in a statement. “His impressive track record, coupled with his deep understanding of strategic growth initiatives, aligns perfectly with our vision for the future.”

Mill Steel is a provider of flat-rolled steel and aluminum products with six stocking locations in Michigan, Ohio, Indiana, Alabama, and Texas.

He will oversee all the Cleveland-based steelmaker’s commercial operations in his new role, including sales, marketing, and customer service.

“His extensive experience, primarily with Cliffs and its legacy companies, ArcelorMittal USA, ISG, and LTV, will play a critical role in driving Cliffs’ strategy forward,” the company said in a statement on Wednesday.

Succeeding Hrosik in his previous role will be Michael Cooney. He was appointed enterprise director of flat-rolled steel sales and was most recently hired from Reliance Inc.

Cliffs said Cooney will oversee the company’s commercial relationships with service centers and non-automotive end users.

Want to share your thoughts? Contact david@steelmarketupdate.com to be included in our market questionnaires.

Steel prices have been inflecting upwards. How do you expect prices to trend over the next three months?

“We are expecting this to be another much ballyhooed ‘dead-cat bounce.’ In other words, it’ll peak here soon and then drift lower. We aren’t putting a ton of credence behind these upcoming outages.”

“Flat with some bounce up and down. Economy and elections are too volatile.”

“I don’t expect much movement up or down – demand average at best and no one is rushing to stock up.”

“Relatively flat…”

“Could go either way. Logic says they should go up, but I am not optimistic as demand is just not there and autumn is near.”

“I think prices bounce along current levels for a while, near term the outages may lead to a bit more price increases, but I would expect buyers to push back quickly.”

“I do expect them to rise but I don’t think it will rise quickly.  Nothing pushing the market right now.”

“Sideways to soft up for coil, sideways to down for plate.”

“Very slight upward movement.”

“I see small steady increases through early October.”

“Yes, because the bottom has been found.”

“Down, slowing economy.”

Is demand improving, declining or stable?

“Demand is OK on contract and is trending down on spot as buyers are still very cautious to not build inventory.”

“Stable at best.  Economy sucks, interest rates are high, and it is an unstable presidential election year.”

“Stable but lower then last year.”

“Stable soft, with a soft lean.”

“Stable, but down from what we expected for the year.”

“Declining, slowing economy, auto inventories growing, and plant shutdowns.”

“Demand seems very soft…”

Is inventory moving faster or slower than this time last year?

“Slower… soft demand and declining prices.”

“Slower based off of prices starting to rebound and no one wanting to invest.”

“Slower with less demand.”

“A bit slower.”

“Slower.”

“Inventory is moving about the same for us, but we’ve kept our levels lower on purpose.”

“About the same.”

“Slightly faster.”

Are imports more attractive than domestic material?

“No, too long to wait to hedge.”

“Not attractive, our customers require domestic.”

“Not really, a mix of lead time, spread, and unstable domestic demand.”

“Imports not attractive.”

“Domestic supply and pricing is preferred.”

“They are not more attractive based on current domestic prices and the uncertainty on what the future holds.”

“Less attractive, market is too unstable.”

“I think import pricing would be comparable, especially with domestics trying to raise things a bit, but the lead times are certainly risky.”

“Not yet for HRC but it could come soon as Europe continues to decline. Euro a bit too strong, though.”

“Yes, imports are lower on galv, roughly 10% below domestic supply chain.”

“Imports are always less expensive.”

What’s something that’s going on in the market that nobody is talking about?

“In normal seasonality trends, the market tends to bottom in October or November. There is no reason August should be projected as the bottom of the market for this year.”

“We’re all talking about the outages and AHMSA is back in the headlines. But from an M&A standpoint, I’m still curious on Evraz NA as well as on the service center side (which has been oddly quiet as of late).”

“Demonstrations that will plague this country over the next five months…”

“Do the outages actually mean anything?”

“Been quiet on US Steel/Nippon deal.”

“Cleveland-Cliffs Steel will continue monitoring several key market drivers and reserves the right to modify pricing prior to opening the spot October booking availability,” the company added.

SMU has updated its mill price announcement calendar to reflect the announcement.

Note that Cliffs’ new price is also $35/st higher than Nucor’s published HR price of $695/st.

Recall that Nucor updates its published price every Monday. Cliffs price is officially a monthly one. But the steelmaker has said it reserves the right to update its price more frequently if it sees fit.

SMU’s HR price stands at $675/st on average, up $10/st from last week and up $40/st from late July. We will next update prices on Tuesday.

Our average HRC price was $675 per short ton (st) as of Aug. 20, up $10 from the prior week.

At the same time, busheling tags increased $20 month over month to an average of $395 per gross ton (gt) in August. Figure 1 shows price histories for each product.

After converting scrap prices to dollars per short ton for an equal comparison, the differential between HRC and busheling scrap prices was $322/st as of Aug. 21, up $17 from a month earlier (Figure 2). Even with the slight bump, the spread remains in low territory not seen since November 2022.

The chart on the right-hand side below explores this relationship differently: We have graphed HRC’s premium over busheling scrap as a percentage. HRC prices carry a 71% premium over prime scrap, flat from a month ago. As with July, that is still the lowest premium since January 2023, when it was 67%.

Here’s what some of our SMU survey participants are saying about the prime scrap situation and September outlook:

“Sideways to slightly up.”

“Could be down slightly to match iron ore market.”

“I have not heard anyone really willing to go out on a limb and predict September pricing yet.”

“With upcoming outages, they could be down.”

Note: By the way, did you know SMU’s Interactive Pricing Tool can show steel and scrap prices in dollars per short ton, dollars per metric ton, and dollars per gross ton?

Well, maybe I’m getting my dates wrong here. Still, there’s a grain of truth in that last one. At last year’s Summit, one of the biggest questions was whether or not the United Autoworkers (UAW) would go on strike against the Detroit-Three automakers. (Spoiler alert: It did.) And less than a week out from Steel Summit 2024, we can quote that old Yogi Berra adage: “It’s déjà vu all over again.”

That is, history is not exactly repeating but rhyming. New UAW President Shawn Fain really turned up the rhetoric last year. The “Stand-Up Strike” against the Detroit Big Three that started last September had no shortage of colorful language against the corporations and the “billionaires.”

Just this week, though, we’ve seen the UAW threatening another nationwide strike, this time targeting only Stellantis. Find more info on that in today’s newsletter here.

Plus, in a video last week, Fain said, “It’s time to put an end to corporate greed at Stellantis.” And, in order to lower the temperature in a contentious presidential election season, Fain wore a “Trump is a scab” t-shirt Monday at the Democratic National Convention in Chicago.

So we’ll be keeping tabs on that.

Trains and ports

Two more large work actions could be coming down the pike soon, potentially affecting shipping and logistics across North America.

One possible work stoppage to watch out for is the International Longshoremen’s Association (ILA), which could go out on strike on Oct. 1 if an agreement is not reached with the US Maritime Alliance (USMX).

The ILA has 85,000 members.

“We will stand strong to win a new contract that adequately compensates our hard-working and dedicated ILA longshore workforce, and simultaneously are preparing to strike at all ports from Maine to Texas come Oct. 1, 2024, if a new agreement is not reached,” International President Harold J. Daggett said in a statement on Aug. 10.

For Canada, work action was looming on Thursday for two of the country’s rail providers.

CN and Canadian Pacific Kansas City (CPKC) have said they will lock out Teamsters Canada Rail Conference workers on Aug. 22 at 12:01 a.m. ET, in the event a negotiated settlement cannot be agreed upon.

Whither USS?

Finally, at Steel Summit 2023, the sale of U.S. Steel was the subject that dared not speak its name. Mainly because nothing was clear, except that USS had rebuffed an initial offer from Cliffs.

A year later, and we know that Nippon Steel became the accepted suitor in a deal valued at more than $14 billion. That deal, although approved by shareholders and the USS board, still needs to pass through some regulatory hurdles.

Ripped from the headlines, former President Trump reiterated his opposition to the deal on Monday, according to a Bloomberg article. (President Biden has also said he opposed the deal.)

Likewise, Pennsylvania Gov. Josh Shapiro, in the same article, repeated that he is against any deal that is not backed by the USW. We’ll see, in Atlanta, if any further clarity has come to the situation or if we will likely have to wait until after the election.

The final countdown

With less than a week until the festivities, over 1,400 people have already said yes to the premier flat-rolled steel event in the country. If you are one of those folks, thank you, and we look forward to seeing you next week! If you’re not already registered, it’s not too late to join us! You can register here. Just a few more registrations and this will be another SMU Steel Summit for the record books. We will see you soon!

The gains, however, appeared to result less from mill increases than from more limited discounting vs. last month. That’s when certain larger buyers, anticipating a bottom, stepped back in at low numbers.

Galvanized base prices also inched higher. They rose $5/st to $905/st on average. But cold-rolled prices were unchanged at $915/st on average while Galvalume was flat at $925/st on average.

Market participants were mixed on the future direction of prices. Some said upcoming and widespread fall maintenance outages should result in prices moving higher and lead times extending in the weeks ahead.

But others said that increased supply, steady/lackluster demand, and a well-inventoried supply chain could offset the outages and keep prices in a holding pattern. They also noted that a potentially soft scrap market next month might blunt any effort to significantly raise tags.

SMU’s sheet price momentum indicator remains pointed upward on predictions that mills will continue to try to push prices higher incrementally – or at least to enforce previously announced increases. But we also note that few expect prices to surge higher as they have in past cycles.

On the plate side, prices fell $25/st to $980/st on average on weak demand. Market participants said deep discounting below some mill list prices was widespread. Because of such feedback, our plate momentum indicator continues to point lower.

Hot-rolled coil

SMU’s price range for HR coil is $650-700/st, with an average of $675/st FOB mill, east of the Rockies. The lower end of our range is up by $30/st week over week (w/w), while the top end is unchanged. The overall average is up $10/st w/w. Our price momentum indicator for HR remains at higher, meaning we expect prices to increase over the next 30 days.

Hot rolled lead times range from 3-6 weeks, averaging 4.9 weeks as of our Aug. 14 market survey.

Cold-rolled coil

The SMU price range is $880–950/st, averaging $915/st FOB mill, east of the Rockies. The lower and top ends of our range were unchanged from last week. Our overall average is also flat w/w. Our price momentum indicator for CR remains at higher, meaning we expect prices to increase over the next 30 days.

Cold rolled lead times range from 5-8 weeks, averaging 6.6 weeks through our last survey.

Galvanized coil

The SMU price range is $860–950/st, with an average of $905/st FOB mill, east of the Rockies. The lower end of our range is up $10/st w/w, while the top end is unchanged. Our overall average is up $5/st w/w. Our price momentum indicator for galvanized sheet remains pointing higher, meaning we expect prices to increase over the next 30 days.

Galvanized .060” G90 benchmark: SMU price range is $947–1,047/st, averaging $997/st FOB mill, east of the Rockies.

Galvanized lead times range from 6-8 weeks, averaging 7.2 weeks through our last survey.

Galvalume coil

The SMU price range is $870–980/st, averaging $925/st FOB mill, east of the Rockies. The lower and top ends of our range were flat vs. last week. Our overall average is sideways w/w. Our price momentum indicator for Galvalume remains at higher, meaning we expect prices to increase over the next 30 days.

Galvalume .0142” AZ50, grade 80 benchmark: SMU price range is $1,164–1,274/st, averaging $1,219/st FOB mill, east of the Rockies.

Galvalume lead times range from 6-8 weeks, averaging 7.0 weeks through our latest survey.

Plate

The SMU price range is $920–1,040/st, with an average of $980/st FOB mill. The lower end of our range is down $20/st w/w, while the top end is $30/st lower. Our overall average is down $25/st w/w. Our price momentum indicator for plate remains at lower, meaning we expect prices to decline over the next 30 days.

Plate lead times range from 2-6 weeks, averaging 4.2 weeks through our last survey.

SMU note: Above is a graphic showing our hot rolled, cold rolled, galvanized, Galvalume, and plate price history. This data is also available here on our website with our interactive pricing tool. If you need help navigating the website or need to know your login information, contact us at info@steelmarketupdate.com.

SMU has received multiple reports from various sources of outages slated for the rest of the year at flat-rolled steel mills across North America. SMU contacted all the mills for confirmation but received just one reply: U.S. Steel said they were “looking into this” for us, but still had not responded by our publication deadline. Therefore, note that the outages listed below are all unconfirmed.

While this is not a comprehensive list, it provides some sense that the outages coming through year’s end are not insignificant.

If you know of any other upcoming outages or changes to the list below, please contact laura@steelmarketupdate.com.

Editor’s note: The chart above has been updated with a revised production loss estimate for USS’ Gary Works.

• Busheling at $390-400/gross ton (gt), averaging $395, up $20 from July.
• Shredded at $380-385/gt, averaging $382.50, up $5 from July.
• HMS at $320-340/gt, averaging $330, up $15 from July.

For HMS, one source commented that there are “some lower numbers and some higher ones.”

“That grade was in relatively shorter supply in the Midwest,” he said.

A second source noted that HMS in the Midwest was bought as high as $360/gt.

Exports, outlook

The first source said export pricing has been at a premium to domestic until the last two weeks or so. At that point, it started to come down due to less of an appetite in Turkey

He remarked that Turkish mills still need scrap, but less than they did in Q2 and July.

“Lots of cheap Chinese billets have made and will make their way to Turkey, which reduces Turkish scrap demand, especially in an environment where they have trouble lifting rebar prices,” the source added.

He thinks that, in the medium term, governments will crack down on “cheap” Chinese steel exports.

The source noted this could lead to those mills trying to find other ways to export steel, “but also more scrap demand to feed mills ex-China.”

He said there could be some downside potentially for US scrap in September and October as a result of that, and “continued weak demand here, which will manifest in lots of outages coming up.”

A third source said the “sentiment in the market is pessimistic as mills don’t seem to be needing much scrap due to cutbacks and planned outages.” 

He added that the “export numbers have sharply declined also.”

Looking at the near-term pricing outlook, the first source remarked that scrap prices have been lackluster all year.

“I don’t see much downside but either side of $20 is reasonable over the next 60-70 days in my opinion,” he added.

SMU survey outlook for prime in September

Participants in SMU’s survey last week were asked their outlook for September busheling prices. A majority thought prices would be sideways in September.

Little progress

“Despite negotiations over the weekend, no meaningful progress has occurred, and the parties remain very far apart,” CN said in a statement on Sunday.

Separately, CPKC said the decision to issue a lockout notice came after the Canada Industrial Relations Board (CIRB) issued a decision. The board determined that “no services need to be maintained during a railway strike or lockout in order to protect Canadian public health and safety,” the company said in a statement on Aug. 9. 

Teamsters respond

Acknowledging the CN notice, the Teamsters issued a statement on Sunday saying, “As this situation at the bargaining table develops, we will keep you all as informed as possible in the coming days.”

Earlier on Sunday, the Teamsters had said they would go out on strike at CPKC on Aug. 22.

A Reuters article on Sunday lists the companies as the country’s two largest rail operators.

The union has so far refused to commit to binding arbitration to resolve the labor disputes, according to the CN and CPKC statements.

Raw steel production is in addition up 0.7% from the same week one year ago, when output totaled 1,742,000 st.

The mill capability utilization rate for last week was 79%. That’s higher than the week prior (78.1%) and better than this time last year (76.6%). It the best utilization rate since Feb. 18, 2023, according to AISI data.

Year-to-date production stands at 55,910,000 st at a capability utilization rate of 76.6%. This is down 2% vs. the same year-ago period, when 57,076,000 st were produced at a capability utilization rate of 77.2%.

Weekly production by region is detailed below, with the weekly changes noted in parentheses:

• Northeast – 124,000 st (down 3,000 st)
• Great Lakes – 588,000 st (up 8,000 st)
• Midwest – 218,000 st (up 11,000 st)
• South – 763,000 st (up 11,000 st)
• West – 68,000 st (down 8,000 st)

Editor’s note: The raw steel production tonnage provided in this report is estimated and should be used primarily to assess production trends. The monthly AISI “AIS 7” report is available by subscription and provides a more detailed summary of domestic steel production.

The union said that in the 2023 UAW Stellantis labor agreement, “the union won the right to strike over product and investment commitments.”

The UAW noted that among these was a commitment to the reopen Belvidere Assembly plant in Illinois, which was indefinitely idled in early 2023.

“Since ratification, the company has gone back on its product commitments at Belvidere, and has been unreceptive in talks with the union to stay on track,” the union said.

The UAW clarified that under the current contract, “once an issue has been taken through the grievance procedure, the union may authorize a strike over the grievance.”

Further, the union said that aside from the impact on Belvidere, “this glaring violation of the contract imperils all of the other investment commitments the company has made.”

The UAW listed locals in Ohio, Michigan, and Indiana that could file grievances.

A request for comment from UAW on a possible timeline for the grievance process was not immediately returned.

Recall that workers at all three Detroit-area automakers ratified new labor contracts last November with UAW after a “Stand-Up Strike” that started on Sept. 15.

Stellantis responds

A Stellantis spokesperson disputed the UAW’s remarks in a company statement sent to SMU.

“The company has not violated the commitments made in the Investment Letter included in the 2023 UAW Collective Bargaining Agreement and strongly objects to the union’s accusations,” Stellantis said.

The company noted “it is critical that the business case for all investments is aligned with market conditions and our ability to accommodate a wide range of consumer demands.”

“Therefore, the company confirms it has notified the UAW that plans for Belvidere will be delayed, but firmly stands by its commitment,” Stellantis added.

Regarding the union’s remarks themselves, the company specified that “the UAW agreed to language that expressly allows the company to modify product investments and employment levels.”

The statement continued: “Therefore, the union cannot legally strike over a violation of this letter at this time.”

However, Stellantis said it “is committed to engaging with the union on a productive, respectful, and forward-looking dialogue.” 

Trenton Engine idling

Separately, the spokesperson for Stellantis told SMU the company’s Trenton Engine plant in New Jersey will be down the week of Aug. 19. The reason cited was “to balance engine inventories with production.” 

The plant produces the V-6 Pentastar Classic engine for Rams, Chryslers, and Jeeps, according to its website. It has 672 workers, including 564 hourly and 108 salaried.

However, the worldwide response isn’t uniform, and some countries are taking a more aggressive stance than others. For instance, President Joe Biden proposed raising import tariffs on steel products imported from China. Yet this may be too little too late for most of the industry, and the next few years are set to be fraught with challenges.

Let’s dive into how organizations can tackle these global challenges and future trends to look out for in the industry. 

What’s on the horizon for the global market? 

One crucial emerging trend is the increasing demand for “green steel.” According to Fortune Business Insights, the green steel market will showcase exponential growth over the next decade, with industry value expected to hit $129.08 billion by 2032.

This is no surprise, as decarbonization is a universal priority across most industries around the world. Sustainability will continue to be a crucial defining factor in organizations’ strategies for the short and long term, particularly as regulations become more stringent on carbon reduction. Notably, increased demand for green steel could shift the location of new outputs to places with lower energy costs, such as the MENA region.

Another key trend to keep in mind is weathering supply chain disruptions with technological approaches. A recent report from McKinsey highlights that economies worldwide will continue to undergo supply chain disruptions due to ongoing conflicts, such as those in the Middle East and other crises. 

That same report also underlines the likely risk of continued imbalance and overcapacity for the steel industry across multiple markets and sectors. More specifically, manufacturers and vendors can expect a slowdown in construction demand, but this may be alleviated by increased demand in the energy and transportation industries. 

Combating challenges through collaboration

Primarily, steel is a regional business, with prices differing across markets. For example, hot-rolled coil (HRC) is roughly below $500 per short ton (st) in Asia, $600 in the European Union, and $700 in the US. However, these price gaps are narrowing due to China’s oversupply of cheap steel. 

Rather than operating in isolation between markets and regions, there’s business promise in nurturing cross-collaboration between steel companies. One interesting proposition is joint ventures with other steel companies to expand portfolios without taking on huge additional costs.

Within the steel space, this collaboration could be in the form of cross-licensing contracts between suppliers and sellers across multiple regions. In fact, this approach has been adopted in Japan and some European countries. One example is India’s JSW Steel’s recent joint venture with Japan-based JFE Steel Corp. 

Mitigating the impact with technology

Although policies and regulations such as tariffs and anti-dumping may alleviate the situation in the short term, relying on state action alone is not enough to overcome this massive challenge. Fortunately, there are long-lasting strategies steel companies can adopt to become more resilient. 

According to a recent report from Boston Consulting Group (BCG), one promising solution is for organizations to shift their focus toward driving efficiency in supplying existing inventory. This means organizations should aim for operational excellence and continuous improvement. 

Technological innovation is at the crux of this approach. Investing in and adopting technologies that bolster resilience, efficiency, and productivity on the factory floor and across the supply chain is the way to go.

For instance, minimizing machine downtime is crucial for optimal operational output. The Internet of Things, which provides enhanced visibility into manufacturing processes, is continuously transforming how factory operators improve efficiency. These interconnected technologies create a streamlined operational ecosystem where disruptions are swiftly mitigated while maximally allocating cost resources.

An example of this in action is integrating solutions such as computer vision alongside machine learning (ML) algorithms. This is becoming increasingly popular among manufacturers. That’s because computer vision yields actionable data to inform automated machine interventions when there’s a risk of failure or disruption. 

These automated solutions and this approach take the heat off organizations so they can boost their efficiency and operational quality without breaking the bank—all by leveraging data collection and analysis. This technology is also crucial for allocating human resources intelligently. This includes assessing functions and roles to identify where automations can be implemented to heighten efficiency. 

Based on the current situation and expected trends, the bottom line is that organizations should prepare for continued volatility in the upcoming decade across the global steel market. Honing a future-proof strategy that can weather the instability, disruption, and fierce competition across the industry is non-negotiable. This will require leaders to carefully innovate existing processes in their supply chains through emerging technologies and align business strategies according to shifting demands as green steel becomes more popular.