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. 

HR prices for CSI, the company’s sheet subsidiary in California, also rose. Nucor aims to collect $760/st for HR from CSI, also up $5/st from last week. Note that sheet prices on the West Coast are typically higher than those east of the Rocky Mountains.

Lead times of 3-5 weeks will continue to be offered, but Nucor noted for customers to contact their district sales manager for availability.

SMU’s Aug. 13 check of the market put current HR coil spot prices in the range of $630-700/st, with an average of $665/st. That marked the third straight week of HR prices ticking higher.

Steel Summit 101

If you’re new to the event – which will be held Aug. 26-28 – you might not know that this is not only one of the biggest steel conferences in North America but also one of the easiest to attend too.

The GICC is connected to Hartsfield-Jackson airport by a tram. You can grab your bags, hop on the tram, and be at Summit in a matter of minutes – no rideshare, taxi, or subway required.

We typically start with a bang. This year will be no different. We’ll also seek the wisdom of the opening-day crowd with a few live poll questions. Over the course of the conference, we’ll talk about everything from steel price forecasts and demand trends to trade policy and the state of the economy.

And of course it’s an election year. That means we’re going to be talking about who might win in November and what the outcome could mean for steel. As the negative ads ramp up (especially in “battleground” states), feelings can run high.

Be nice, please

Here’s my ask: We might not agree on everything. But let’s keep it civil. Summit is about the industry we love, that supports us and our families, and about bringing people together.

To that end, I think you’ll really enjoy the opening keynote from Sirius XM radio host and CNN contributor Michael Smerconish. He’ll be talking about his latest creation – “The Mingle Project”.

Smerconish is a great speaker, as those of you who have attended past Summits already know. And I hope his words will set the tone for the rest of the conference. We want you to learn a lot, network a lot, and maybe make a few new friends along the way – even better if they’re ones from outside your usual social bubble.

Survey says

My colleague David Schollaert has a good summary of of SMU’s latest steel market survey here. Those results were released to our premium subscribers on Friday. (If you’re interested in upgrading to a premium account, please contact my colleague Luis Corona at Luis Corona Luis.Corona@crugroup.com.)

Below are a few survey findings that caught my attention too. For starters, most people think sheet prices will continue rising into the autumn months (75%):

That’s what you’d expect following mill price-increase announcements in late July and early August.

But a solid minority (25%) think prices have already peaked or will by the end of this month. I didn’t expect that result. After all, the conventional wisdom (whether that still holds is another question) is that prices tend to rebound after the “summer doldrums”. It’s not often that they fall into the fall.

Here is a sampling of what survey respondents had to say about where and when prices might peak. I’ve divided the responses up into bulls, bears, and centrists.

Bulls:

“Demand is picking up in heavy steel coil, and interest rates are starting to move down.”

“Demand will start to pick in late Q3 – similar to pre-Covid years. And mills will take advantage of the opportunity to push pricing as high as possible.”

“Customers seem to have overreacted in reducing inventory. As the market begins to turn, the domestic mills will push hard and create more upward movement than would have been the case based on fundamentals. Contract season will start soon, and the total focus will be on getting prices up.”

“We won’t see a true peak until late Q1/early Q2 of 2025.”

Bears:

“I do not agree that they are trending up. It’s a glitch to stop the decline.”

“We have definitely set a floor. But we are thinking it’ll be a mostly temporary one and that pricing will level and dip back a bit. Demand is still too slow.”

“This rally seems pretty weak.”

“Dead-cat bounce.”

Centrists:

“This next cycle will be more moderate than previous cycles. There is not enough economic activity to support a big ramp up. The market will be one where moderate returns will be the norm – neither good nor bad.”

“It will remain flat for a while. Then import positions/options change, and mill outages in back half of 2024 play a role.”

“The market will stay flat until elections are over.”

While not everyone agrees on when prices will peak, there is broad consensus that recent mill price increases have at least stopped the bleeding downstream.

Take a look at the chart below:

Among service center respondents, 64% said they were holding prices, 16% said they were increasing them, and only 20% said they continued to lower prices.

That’s a huge change from a month ago. Back then, 84% reported lowering prices, none said they were increasing them, and only 16% said they were holding the line.

If there is a fly in the ointment, it might be the data in this chart:

About two-thirds of service centers tell us that they’re releasing less steel now than they were a year ago. That’s a little better than 75-80% readings we saw earlier this summer – but not by much.

And that result might explain why 30% of respondents to our survey report that they’re not meeting forecast while only 5% say they’re exceeding it.

The good news is that most (65%) continue to meet forecast.

Here is what respondents had to say about their forecasts and what’s impacting them:

“Customers are down across the board. Ag layoffs, parts/productions moving to Mexico, high interest rates hurting automotive and home buying/upgrades is having a major impact.”

“As an OEM, we’re OK. But a lot of our peers certainly seem slow with demand off and internal layoffs are pretty abundant.”

“We will barely meet forecast. But expectations are for a strong September.”

“Yes. But after adjusting down.”

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Your feedback helps us make sense of the steel market. And we’ll be asking you a few questions to kick off Summit – just as we have in past years. What will hot-rolled (HR) coil prices be a year from now? How is demand? Who will win the election?

Is there anything else that you’d like us to ask 1,400 or so folks in the steel business? Let us know at info@steelmarketupdate.com. We might include any good suggestions in our live polls at Summit.

Fwiw, you’ll need to the Steel Summit 2024 app to participate in those polls. If you haven’t already, go to either the Apple or Android app stores and download it today.

PS – Thanks again for you continued support. And we can’t wait to see you on Aug. 26 in Atlanta!

Port Talbot closes BFs, shifts to EAFs

Last week, Tata Steel, the UK’s largest steel producer, announced plans to close a major production plant in Wales. That will make nearly 3,000 workers redundant. The union representing those workers, of course, is crying foul. But is it really foul?

The Port Talbot, Wales, plant employs about 5,000 workers. Tata plans to shutter two blast furnaces there, replacing them by 2027 with an EAF plant. The net job loss: about 2,800 workers, or more than 50%.

The changes threaten the town of Port Talbot with the loss of critical (and well-paying) employment. Politicians are understandably worried. The union complains that the transition is too quick. The union and the company also argue about whether certain steel products can even be made with EAF steel.

Both sides have a point about that. But the trend clearly favors EAF steelmaking. In the US and elsewhere, “minimills” have expanded their product offering. No longer can it be said that only long products can be made in scrap-based minimills, while truly high-purity steels for automotive, pipelines, shipbuilding, and appliances must be made in blast furnaces.

How long will the integrated business model work?

The business model for traditional blast furnace companies is changing as a result. Giant steel mills can no longer rely on an indefinite “baseline” demand for products that can only be made in blast furnaces. There are some products where blast furnace steel still predominates, such as automotive steels, plate for ships, and pipelines. But EAFs are making inroads in these product lines as well.

The inconvenient truth: Multimillion-ton blast furnace plants (in Britain and the US) can no longer produce as much steel because the buyers aren’t there anymore. There are, of course, domestic buyers and foreign buyers. In both the US and Britain, foreign suppliers have captured large market shares in both countries. Trade remedy actions have proliferated, especially in the US. But new products that can only be made abroad are an increasing feature of both markets.

To survive over the long term, blast furnace producers must adapt to new market conditions. Serving global markets requires competition with China, which has largely been shut out of the US market. Britain has not been able to do that as effectively. Indeed, the British steel industry is principally owned now by Indian (a delicious irony) and Chinese parents.

Change requires more than trade protections and handouts

Competing in export markets will require US companies to become much more efficient and cost-competitive than they are now. The current protective regime is not going to help the industry get where it needs to be.

Of course, environmental concerns also are increasingly important. The summer of 2024 increased attention to global warming, with heat indexes setting records across the northern hemisphere. While steel is still an important product for modern life, substitutes that are more climate-friendly will continue and increase. And while all steel producers are under pressure to make progress on clean steel, the blast furnace companies must make more progress on that than the minimills.

British companies have chosen to transition away from blast furnace production to EAF production. That hard of a turn may not be right for the US for a variety of reasons. The defense sector, for example, needs armor plate for ships, that still needs to be made from “virgin” steel. It’s a similar story for certain applications in transportation and for the energy grid. But demand volumes for these highly specialized products may require scaling back the companies that make blast furnace steel.

The financial resources necessary to manage even a partial transition away from blast furnace production are huge, and the political challenges are too. Companies that need to transition the most may not have enough financial staying power to handle it. That is why, IMHO, the Nippon-US Steel deal makes sense. Government handouts sufficient to guide this transition don’t seem to be in the cards.

Editor’s note: This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.

US CR coil prices averaged $915 per short ton (st) in our check of the market on Tuesday, Aug. 13, up $10/st from the week before. Despite the slight 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, 15.3% more expensive than imports. That’s up marginally from 11.9% 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, $107/st more expensive than offshore product (see Figure 1). That compares to $81/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. 15, the CRU Asian CR price was $535/st, down $18/st week over week (w/w) and down $64/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 $1,005/st. The theoretical price of South Korean CR exports to the US is $625/st.

The latest SMU CR average of $915/st theoretically puts US-produced CR $90/st below CR product imported from Japan. But US tags are still $290/st more expensive than CR imported from South Korea.

Italian CR coil

Italian CR prices were down $12/st to roughly $704/st this week. After adding import costs, the price of Italian CR delivered to the US is, in theory, $794/st.

That means domestic CR is theoretically $121/st more expensive than CR coil imported from Italy. The spread is up $22/st from last week but still $359/st below a recent high of $453/st mid-December.

German CR coil

CRU’s German CR price was largely flat, down just $1/st vs. last week. After adding import costs, the delivered price of German CR is, in theory, $810/st.

The result: Domestic CR is also theoretically $105/st more expensive than CR imported from Germany. The spread is up $11/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.

“This equitable deal with our team at Dearborn is the latest illustration of our strong commitment to a collaborative relationship that benefits our employees and Cliffs as a whole. We are pleased to solidify this partnership with the UAW for another four years,” Cliffs’ Chairman, President, and CEO Lourenco Goncalves said in a statement.

Cliffs’ Dearborn Works in southeast Michigan produces slabs, galvanized steel, and advanced high-strength steels. According to SMU’s Blast Furnace Status Table, the mill’s blast furnace has an annual capacity of approximately 2,190,000 short tons.

Every two weeks, we poll hundreds of steel buyers about their companies’ chances of success in today’s market, as well as business expectations three to six months from now. We use this information to calculate our Current Steel Buyers’ Sentiment Index and our Future Sentiment Index, which we have been tracking since 2008.

SMU’s Current Buyers’ Sentiment Index increased by four points to +38 this week (Figure 1). Recall that Current Sentiment had fallen to +34 in both the first and last weeks of July. Those were the lowest readings recorded since August 2020. Year to date, Current Sentiment has averaged +53. This is significantly lower than the +69 average seen in the same time frame of 2023. This time last year, Current Sentiment was 19 points higher at +57.

SMU’s Future Buyers’ Sentiment Index measures buyers’ feelings about business conditions three to six months down the road. This index fell to +55 this week, its lowest point in over a year (Figure 2). Future Sentiment has averaged +64 since the beginning of the year, down just one point from the same period of 2023. Future Sentiment this week is 16 points lower than the same week last year.

Measured as a three-month moving average, Buyers Sentiment eased further this week, a trend in place for most of the last year. The Current Sentiment 3MMA slipped to +41.60 this week, its lowest reading since August 2020. The Future Sentiment 3MMA declined slightly to a five-month low of +63.72 (Figure 3).

What SMU survey respondents had to say:

“Working through higher-priced inventory … and trying to push price – not much luck yet.”

“We seem to buy well and turn our inventory well.”

“Low raw material prices are below financial forecast.”

“I believe our market will begin to increase, and steel will increase and provide better margins.”

“Spot price increases should help future business.”

About the SMU Steel Buyers’ Sentiment Indices

The SMU Steel Buyers’ Sentiment Indices measure the attitude of buyers and sellers of flat-rolled steel products in North America. They are proprietary products developed by Steel Market Update for the North American steel industry. Tracking steel buyers’ sentiment can be helpful in predicting their future behavior. A link to our methodology is here. If you would like to participate in our survey, please contact us at info@steelmarketupdate.com.

TAB Bank, an online bank focused on serving small businesses, recently announced a $27.8-million credit facility for an aluminum extrusion manufacturer based in Southern California. This financial package, which includes a $20-million revolving line of credit and a $7.8-million term loan, is designed to support the manufacturer through challenging times, particularly after facing difficulties with its previous lender.

Brett Horwitz, TAB Bank’s managing director and head of originations for the Western Region, expressed the bank’s enthusiasm, stating, “TAB Bank is excited about the potential of this partnership, as the leading aluminum manufacturer plays a crucial role in the overall economy and infrastructure of our country.”

He added, “This new credit structure not only provides opportunities for growth but also supports more efficient operations. We look forward to supporting the company’s management team as they continue to scale the business.”

Gulf Extrusions wins Gaia Award


Gulf Extrusions (Gulfex) has been recognized as a winner of this year’s esteemed Gaia Awards. These awards are among the construction and building materials industry’s most prestigious honors, celebrating innovative products and equipment that contribute to a more sustainably built environment. Gulfex received the award for its X-ECO aluminum alloy line.

Alba reports its financial results for Q2 & H1

Alba announced its results for Q2’24 and H1’24. The producer reported an EBITDA of $289 million in Q2, up 42% y/y. For H1’24, EBITDA of $469 million was reported, up 8% y/y amid sales of $1.9 bn, down 2% y/y. This led to a profit of $182 million in Q2’24 and a profit of $247 million for H1’24, up 129% y/y and 20% y/y, respectively.

Commenting on the results, Alba’s CEO Ali Al Baqali said: “The aluminum industry continues to face economic headwinds. However, focusing on the aspects within our control has enabled us to navigate these challenges while positioning ourselves for sustained growth when market conditions improve.”

In terms of operational performance, Alba produced 403,737 metric tons of primary in Q2’24, down 0.5% y/y, with a VAP sales share representing 73% of the mix versus 70% in Q2’23. The company’s top and bottom lines were driven by higher LME prices in Q2’24 and H1’24, which were 11% and 1% higher y/y, respectively. However, lower premiums (down 21% in Q2’24 and 32% in H1’24 compared to the previous year) partially offset these gains.

Alba’s Chairman of the Board of Directors Khalid Al Rumaihi said: “Building on our Q1 performance and despite navigating a challenging market landscape marked by depressed premiums, we are pleased to report another quarter of solid results thanks to our dedication to operational excellence. This performance has enabled us to return value to shareholders through an interim cash dividend of US$70 million. We are confident that if premiums had held steady at Q2’23 levels, our performance would have been even more robust. We remain optimistic about our prospects for the remainder of 2024.”

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

Key points and takeaways

We go over the big highlights of the survey in Final thoughts. Here are some other key points that we think are worth your time. (And, again, our premium subscribers can follow along with the latest results here.)

• Steel Buyers’ Current Sentiment edged back up but is now only four points above a four-year low (slide 9). Future Sentiment (slide 11) moved lower by nine points vs. the prior market check.
• Lead times for HR coil are still largely stable though moving marginally higher. Lead times for tandems products have improved modestly, as have those for plate (slide 13).
• On pricing, buyers said that most mills remain willing to negotiate. But there was still a steady decline in the number willing to cut deals after both Nucor and Cliffs held HR prices around $700/st (slide 16). We’ll keep tabs on whether negotiation rates continue to slide in the weeks ahead.
• On the raw materials front, about two-thirds of respondents expect scrap prices to be sideways again in September (slide 19). Another 31% expect prices to move up next month, while just 6% anticipate a decline.
• What might keep sheet prices from a sharp rally? Some 65% of respondents said they expect to meet forecast in August, while another 30% said they will miss their business forecast this month (slide 20). Only ~5% think they will exceed forecasts in August. Also, more than two-thirds of service centers said they are releasing less steel (slide 28) than a year ago.
• What might support higher prices? Only 20% of service centers reported lowering prices – likely a continued reaction to mills trying to hold the line. (See slide 38, one of our favorites.) That’s a significant shift from the nearly 85% who were cutting prices just two about a month ago. But it might be too soon to predict any surge in prices. Just about 16% of service centers reported increasing prices.

There’s a lot more to unpack in the survey. Be sure to check out this week’s Final thoughts for some of the comments and key reactions directly from our sources.

US rigs

Through Aug. 16, the number of active drilling rigs in the US declined by two week over week to a total of 586 rigs. Oil rigs fell by two to 483, gas rigs rose by one to 98, and miscellaneous rigs eased by one to five.

There were 56 fewer active rigs in the US this week compared to one year ago. The number of active oil rigs is down by 37, gas rigs are down by 19, and miscellaneous rigs are unchanged.

Canadian rigs

The number of rigs operating in Canada held steady at 217 in the week ended Aug. 16. Oil rigs rose by four to 151, gas rigs fell by three to 66, and miscellaneous rigs declined by one to zero.

Currently, 28 more drilling rigs are operating in Canada than there were at this time last year. Oil rigs are up by 32, gas rigs are down by four, and miscellaneous rigs are unchanged.

International rig count

The international rig count is updated monthly. The total number of active rigs for the month of July fell to 934. That’s 23 less than the June count and down by 27 from July 2023.

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.

The Chinese National Bureau of Statistics (NBS) announced that July automobile production and sales both fell m/m and y/y, reflecting generally sluggish local demand. As a result, HR coil spot prices hit a seven-year low in the week. In China’s domestic market, for the first time, all major Chinese mills surveyed by CRU reported lower local sales this week.

The local market’s poor performance prompted Chinese exporters to cut HR coil offers by up to $30 from last week. However, this only scared away most overseas buyers, who bid at extremely low levels or simply remained on the sidelines this week.

In the face of bleeding bottom lines, some mills started production cuts this week, but the effect has not been observed yet as the oversupply in China’s steel market is likely to persist and depress steel prices in the near term.

Turkey HR coil prices downtrend persists

HR coil export prices remained unchanged for the fifth consecutive week at $555 per metric ton (mt) FOB. This is because Indian suppliers continued to halt export offers in response to the recent sharp decline in Asian prices. Market sources suggest that some traders tested the market by reducing price offers for Indian-origin HR coil by $30/mt w/w, but there was no acceptance as these prices were still much higher than the latest offers from China. CRU contacts on the supply side expect export activity to resume in late August when European buyers return after the summer holidays.

The downtrend in the Turkish sheet market persisted, resulting in a $5/mt w/w fall in HR coil export quotes. Turkish sellers have come under pressure from the overall price weakness observed in export markets. In Asia, markets have been impacted as Chinese mills continued to drop prices amid a lack of domestic demand. HR coil offers from China were heard at $510-520/mt CFR in Turkey.

The discount of Turkish HR coils in Southern Europe fell to $30/mt, duties included. Buying interest in Europe remained weak due to the holiday season, while local prices trended downwards.

Turkish longs prices remained stable w/w, with rebar and wire rod being at $575/mt and $585/mt, respectively. Buying activity from Central and Western Europe remained seasonally weak. Meanwhile, heavily discounted long products from China have limited interest from the Middle East.

This article was first published by CRU. To learn more about CRU’s services, visit www.crugroup.com.

But lead times aren’t galloping away like some of the more bullish corners of the market might have hoped. And those for cold-rolled and coated products are largely unchanged.

Lingering summer doldrums?

Also, while some mills are less willing to negotiate lower prices, steel buyers tell us that most remain willing to cut a deal to bring in an order.

That’s an improvement from a few weeks ago – when it seemed like everyone was willing to slash prices. But it’s not the sharp decline in the negotiation rate that we’ve seen in the past when price hikes have gained traction in the market.

Basically, the price hikes we saw in late July have succeeded mostly in stabilizing the market. And the modest drop in the negotiation rate looks more like a round of price hikes in the summer of 2023. That one “stopped the bleeding” or “slowed the slide.” What we’re not seeing is the negotiation rate plunge like it did last fall, for example, when multiple rounds of price hikes stuck and sent tags soaring higher.

Meanwhile, as Estelle Tran notes here, service center sheet inventories remained high in July – slightly above May-June levels and well above July of last year. What does that say about demand?

We’ll have more granular data available on that when we compile the results from our full steel market survey for our premium members on Friday. (Btw, if you’re not a premium member, that survey is a good reason to consider upgrading.) My best guess in the meantime is that demand is not great, but not terrible either. (I realize that blanket statement might not fit everyone.) So there is no obvious catalyst for prices to move sharply higher or sharply lower.

I mean, it’s great that retail sales are up, for example. That probably means talk of a US recession is overblown. But it’s not exactly comforting to see China’s largest steelmaker saying that “winter is coming” for steel demand.

And on the raw materials side, as SMU’s sister publication Recycled Metals Update (RMU) notes, Turkey is contending with low-priced Chinese billet. Turkey is a large destination for US scrap exports. And weakness in the Turkish market is not a great sign if you’re hoping domestic scrap markets will settle higher in September.

And what about those Sept/Oct outages at US sheet mills? Some had hoped the primary result would be sharply higher sheet prices and longer lead times. Could it instead be pressure on scrap prices next month?

By the way

By the way, I want to give a shoutout to CRU, our parent company, for some news headlines that SMU might not otherwise have had, given our focus on North American flat-rolled steel markets.

Case in point: The US Defense Department is investing significantly in steel for artillery at Metallus (previously known as TimkenSteel). When was the last time you saw a headline like that? And what does that tell you about the state of global affairs?

Also, when was the last time you saw a headline about someone easing import restrictions in our more protectionist/regionalist times? That’s just what the UK is doing as it shuts down blast furnaces a few years before starting up new EAFs to replace them.

It brings up an interesting question, one I’ll probably be asking at Steel Summit. The US and Europe disagree sharply over the specifics of decarbonization. But both intend to limit imports of steel from countries with more pollution. Could that create at least a temporary opportunity for US mills, which sport low carbon footprints, to export not just scrap but also finished steel across the Atlantic?

SMU Steel Summit

So, what’s the good news – what numbers are still going up and to the right? Attendance at the 2024 Steel Summit! We’re at nearly 1,400 and closing in on another all-time record.

You can see the latest agenda and register here. We’re looking forward to seeing all of you Aug. 26-28 in Atlanta. We don’t care whether you get there by gas guzzler, EV, plane, or a midnight train to Georgia.

HR falters

The futures contango structure continues to roll forward, with an approximately $90/st spread between August and December contracts. Limited positive data and bearish headlines have weighed on the futures complex.

The seasonal doldrums seem to be in effect in paper markets during the late summer, as daily contract volumes struggled to break past 30,000 st on any given day. And several days in the first part of August saw less than 16,000 st traded. Open interest has declined from levels seen in July, with 436,000 st open as of Wednesday’s close, down from 520,000 st at the end of July.

A sideways CRU print at $658/st for the pricing period has failed to inspire broader confidence in futures values. The global macro picture also remains precarious, as industrial indicators such copper and iron ore prices have moved down well off their Q2 highs. And various reports this week of Chinese mill Baowu warning of faltering demand in China and overseas further dampened sentiment.

US commercial participants in futures have described a mixed bag. Some say they are seeing an increase in demand inquires for physical tons. Others have said demand remains soft and hardly enough to justify a sustainable bounce in values. Commercial players with exposure to the auto sector have noted the effects from a decline in motor vehicle production.

BUS open interest dries up

The CME busheling scrap contract (BUS) is steady to softer. The lead September BUS contract is essentially flat on the month at $410 per gross ton (gt). The December contract is down intramonth approximately $10/gt at $425/gt.

Nonetheless, open interest in the BUS contract continues to decline and now sits at only 40,000 gt across all contract months. That comes amid ongoing industry debate about the accuracy of the underlying assessment, which has kept fresh interest sidelined.

Disclaimer: The content of this article is for informational purposes only. The views in this article do not represent financial services or advice. Any opinion expressed should not be treated as a specific inducement to make a particular investment or follow a particular strategy. Views and forecasts expressed are as of date indicated. They are subject to change without notice, may not come to be, and do not represent a recommendation or offer of any particular security, strategy or investment. Strategies mentioned may not be suitable for you. You must make an independent decision regarding investments or strategies mentioned in this article. It is recommended you consider your own particular circumstances and seek the advice from a financial professional before taking action in financial markets.

Negotiation rates by product

The negotiation rate for hot-rolled coil declined two percentage points from two weeks ago and is now at 75% and in territory not seen since April (Figure 2). Cold rolled buyers reported a negotiation rate of 63%, a considerable drop from late July (79%) and also down to levels last seen in April. Mills’ willingness to negotiate on galvanized products ticked three percentage points higher over the last two weeks to 80%, while Galvalume’s rate eased from 89% to 78%. Plate remains the most negotiable product, with 89% of buyers reporting mills are willing to talk price. This is the second-highest rate recorded since November, just behind the late-July rate of 90%.

Here’s what some survey respondents had to say about mills’ willingness to negotiate:

“If you have tons, they will move on price.”

“Mills will only flex on pricing with higher-than-normal tons.”

“Yes, on big orders.”

“Negotiable, but slowing.”

“Seems to be more room for negotiation on this product [galvanized].”

“[Negotiable on plate] – with tons.”

“Quietly negotiable.”

“The mills are holding pricing now and not very negotiable.”

Note: SMU surveys active steel buyers every other week to gauge their steel suppliers’ willingness to negotiate new order prices. The results reflect current steel demand and changing spot pricing trends. Visit our website to see an interactive history of our steel mill negotiations data.

The upper and lower limits of our lead time ranges have extended for all products compared to our late July data. The longest lead time in our HR range has increased from six weeks to seven weeks. The upper range for all tandem product lead times has extended from eight weeks to nine weeks. And the bottom end of our plate lead time range has risen from two weeks to three weeks.

Survey results

Just over half of the companies we surveyed this week remarked that current mill production times were shorter than usual. The remainder responded that lead times were within normal levels, while 3% commented they were slightly longer.

We also asked buyers where they think lead times would be two months from now. The majority of our respondents (66%) believe lead times will be flat through October (vs. 62% in our prior survey). Only 29% forecast production times will extend in that time (down from 33% previously), while 5% expect them to shrink further (unchanged from late-July).

Here’s what respondents are saying:

“Flat, unless mills reduce capacity to match poor demand…”

“Lead times will remain short. Some outages at Nucor pushed out lead times but demand has not improved. Still decent demand but the lead-time adjustment had more to do with supply.”

“Lead times are leveling off.”

“Contracting, all based on lighter demand in Q4.”

“There remains too much available capacity out there with more coming online. No reason to see things extended from here.”

“I don’t think Q4 will have long lead times, mills will want to fill tonnage.”

Figure 1 below tracks lead times for each product over the past two years.

3MMA lead times

To better highlight trends, we can view lead time data on a three-month moving average (3MMA) basis and smooth out the variability seen in our biweekly readings. Through this week, 3MMA lead times ticked lower for all products, now at low levels not seen since September and October 2023. This downward trend has been evident for the last six months.  

The HR 3MMA lead time is now down to 4.77 weeks, cold rolled is at 6.70 weeks, galvanized at 6.92 weeks, Galvalume at 6.90 weeks, and plate at 4.80 weeks.

Figure 2 highlights lead time movements across the past four years.

Note: These lead times are based on the average from manufacturers and steel service centers participating in this week’s SMU market trends analysis survey. SMU measures lead times as the time it takes from when an order is placed with the mill to when it 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.

Oil and gas spot prices

The weekly West Texas Intermediate oil spot market price has remained rangebound across the last two years, hovering between $70-90 per barrel (b) since September 2022. The spot price has decreased over the previous five weeks, falling to a two-month low of $76.33/b last week (Figure 1). The EIA expects oil spot prices to recover soon and average between $85-90/b by the end of the year, which is in line with their prior estimates. Their 2025 forecast has been revised downwards to $88/b, attributed to reduced consumption.

Following historical lows seen earlier this year, natural gas spot prices ticked up in May and June but have trended downward since July. Recall that in March, prices fell to a 25-year low of $1.40 per metric million British thermal units (mmBtu). The EIA attributed these low prices to historically high inventory levels due to reduced winter consumption. Natural gas prices fell to a three-month low of $1.88/mmBtu last week. The July STEO forecasts natural gas to remain below $2.50/mmBtu for the next three months. EIA forecasts natural gas prices from November through March to average $3.10/MMBtu, following regular seasonal patterns. This increase is supported by increased seasonal heating demand and higher gas exports from new Texas and Louisiana facilities. 

Rig counts

The number of active US oil and gas drill rigs has stabilized over the last six weeks, remaining near a two-and-a-half-year low (Figure 2). According to Baker Hughes, the latest US count was 588 active drill rigs as of August 9. Active US rig counts are 10% lower than last year.

Canadian rig activity continues to improve after bottoming out in May, nearing a five-month high of 217 rigs just last week. As seen in Figure 3, Canadian counts experience seasonal swings each spring as warmer weather sets in and thawing ground conditions limit access to roads and sites. Canadian rig activity is up 14% compared to levels recorded one year prior.

Stock levels

US crude oil stocks have eased over the last two months following the 14-month high in June. Earlier this month, US stock levels declined to a nearly six-month low of 805 million barrels. The August 9 rate is up slightly to 807 million barrels. While down, July stocks are 3% higher than levels at the start of the year and up by 2% vs levels one year ago (Figure 4).

Despite this summer’s “challenging near-term pricing and uncertain macroeconomic conditions,” Algoma Steel CEO Michael Garcia said the company is focusing on what it can control: operating safely, providing exceptional customer service, and successfully executing its capital programs.

On Wednesday, the Sault Ste. Marie, Ontario-based steelmaker reported earnings for its fiscal 2025 first quarter ended June 30. All told, Algoma’s net income of CA$6.1 million tumbled 95% from last year, on sales that fell 21% to CA$650.5 million.

Garcia pointed out that the company’s quarterly results mirrored the current challenging conditions of the steel market, with slower shipments and softer prices. Shipments declined 12% y/y to 503,152 short tons (st), and revenue per ton fell 11% to $1,453.

He highlighted Algoma’s capital expenditure projects, including its modernized plate mill and its transition to EAF steelmaking.

“We are on the cusp of a new chapter for Algoma and believe that we are on track to deliver strong shareholder value as we transition to becoming one of North America’s greenest steel producers,” he noted.

Plate mill modernization

Algoma’s plate mill was offline for three weeks during the quarter to complete all remaining upgrades. The company had planned for another multi-week outage later this year, but it now expects “any remaining items to be addressed with other planned maintenance activities over the coming year.”

Product quality has been enhanced and plate shipments are ramping up, Garcia commented on an earnings call with analysts on Wednesday. Plate shipments totaled 61,000 tons in the quarter and are expected to be ~90,000 tons in the current quarter. A steady ramp up is expected through the 2025 fiscal year, with the goal of reaching the expected annual run rate capacity of more than 650,000 st.

For reference, about 30% of Algoma’s annual plate volumes are shipped to the US market.

“With the maintenance outages on the blast furnace and the plate mill upgrade complete, our operations are running normally, and we continue to expect solid production levels in the second half of calendar 2024,” Garcia noted.

“I think the main challenge right now, frankly, is the market,” he said on the call. “We’re in a soft market … demand is not necessarily robust right now.”

“I don’t see any near-term catalyst for increased pricing over the balance of the year, and that’s probably going to be the same around demand,” he commented.

EAF transition

Garcia said Algoma is “in the home stretch” of its CA$875-million EAF project. Commissioning activities are expected to begin by the end of 2024 and steel production by the end of Q1’25.

He said all equipment is on site, the building’s exterior and tie-in to the adjacent operations are largely complete, the EAF transformers are in place, and many cranes are already being commissioned.

“We have been on this journey to bring electric-arc furnace steelmaking to Sault Ste. Marie for close to five years. Our entire company is energized as we approach this major milestone,” Garcia said.

Algoma’s start-up plan is for normal production at its existing steelmaking facility while simultaneously ramping up EAF output in 2025, and then for a complete switch to EAF steelmaking. “Sometime in 2026,” the plans are to reach 2.4 million tons of EAF production, Garcia revealed.

He mentioned on the call that Algoma’s headcount will be reduced by ~1,000, with most changes happening after the BF and coke ovens are no longer operating. “The cost of making that headcount reduction is pretty well laid out in the [collective bargaining agreements], and we have good visibility to it,” he noted.

“Near-term pricing weakness can’t dampen our excitement for what’s happening at our company and the huge step forward it represents for Algoma Steel and our community,” he stated.

“We are in a really exciting place right now and we’ll be making EAF steel in over six months,” he added.