The Kentucky Transportation Cabinet will receive $1.385 billion to rehabilitate and reconfigure the existing Brent Spence Bridge, which connects Covington, Ky., and Cincinnati.

In northern California, the Golden Gate Bridge, Highway and Transportation District in California will get $400 million to replace, retrofit, and install critical structural elements on the Golden Gate Bridge to increase resiliency against earthquakes.

On the East Coast, the Connecticut Department of Transportation will receive $158 million to rehabilitate the northbound structure of the Gold Star Memorial Bridge, part of the Interstate 95 corridor over the Thames River between New London and Groton, Ct.

Finally, the City of Chicago will be awarded $144 million to rehabilitate four bridges over the Calumet River on the South Side of the city.

Large Bridge Project Grants follow $5.3 billion in FY2023 Bridge Formula Funding, the administration said in a release. Approximately $40 billion is planned over five years to help repair or rebuild 10 of the most economically significant bridges, along with thousands of other bridges across the country.

“Safe, modern bridges ensure that first responders can get to calls more quickly, shipments reach businesses on time, and drivers can get to where they need to go,” US Transportation Secretary Pete Buttigieg said.

Bridges require heavy use of steel, often involving plate products, with even concrete bridges requiring the intensive use of rebar. 

Steel trade associations praised the move by the Biden administration.

“The SMA is glad to see money flowing from the bipartisan Infrastructure Investment and Jobs Act (IIJA),” Philip Bell, president of the Steel Manufacturers of America (SMA), told SMU. He lauded the decision “because it focuses on traditional, steel-intensive infrastructure projects such as bridges and roads.”

Bell added that this only the beginning, noting: “The National Steel Bridge Alliance (NSBA) has identified at least 10 critical bridge projects that should be funded now.” 

Likewise, Kevin Dempsey, president and CEO of the American Iron and Steel Institute (AISI), heaped praise on the decision. 

“President Biden’s announcement this week of grants to upgrade four of the nation’s most economically significant bridges will positively impact the American steel industry and continue to enhance our national infrastructure,” he told SMU. “It will create demand for key steel products, boost the economy and enhance America’s competitiveness.”

He noted that the structural steel in a bridge can weigh from less than a hundred tons to nearly 100,000 tons, depending on its size.

“American steel mills and fabricators have the capacity to meet the current demand for steel and future demand expected from funding allocated through the Bipartisan Infrastructure Law,” he continued. 

By Ethan Bernard, Ethan@SteelMarketUpdate.com

The total rig count in the US dropped to 772 total rigs in operation. The number of active oil rigs dropped to 618, down three from the week prior, and the number of gas rigs declined to 152. Miscellaneous rigs remain unchanged at two. Compared to this time last year, the US count is up 184 rigs, with oil rigs up 137, gas rigs up 45, and miscellaneous rigs up two, respectively.

As expected, the Canadian rig count bounced back up to 189, with oil rigs at 113, gas rigs at 76, and miscellaneous rigs unchanged. This week’s Canadian count is up 48 rigs compared to levels one year ago, with oil rigs up 35 and gas rigs up 13, respectively.

The international rig count decreased by 10 to 900 rigs for the month of December, and is up 66 rigs from the same month one year ago.

For more in-depth information on the energy market, Steel Market Update publishes an “Energy Update” report each month covering oil and natural gas prices, detailed rig count data, and oil stock levels. Our November report is available here for Premium members.

For a history of both the US and Canadian rig count, visit the Rig Count page on the Steel Market Update website here.

About the Rotary Rig Count

A rotary rig is one that rotates the drill pipe from the surface to either drill a new well or to side track an existing one. Wells are drilled to explore for, develop and produce oil or natural gas. The Baker Hughes Rotary Rig count includes only those rigs that are significant consumers of oilfield services and supplies.

The Baker Hughes North American Rotary Rig Count is a weekly census of the number of drilling rigs actively exploring for or developing oil or natural gas in the US and Canada. Rigs considered active must be on location and drilling. They are considered active from the time they break ground until the time they reach their target depth.

The Baker Hughes International Rotary Rig Count is a monthly census of active drilling rigs exploring for or developing oil or natural gas outside of the US and Canada. International rigs considered active must be drilling for at least 15 days of the month. The Baker Hughes International Rotary Rig Count does not include rigs drilling in Russia or onshore in China.

By Becca Moczygemba, Becca@SteelMarketUpdate.com

Steel buyers reported mill lead times ranging from 4 to 7 weeks for hot rolled and plate, and 5 to 9 weeks for cold rolled, galvanized, and Galvalume.

SMU’s hot-rolled lead time extended by 0.3 weeks to 5 weeks, the highest level since May. Six weeks ago, our hot-rolled lead time reached a low of 3.9 weeks. The shortest hot-rolled lead time recorded this year was 3.8 weeks in January/February. Recall the record low in our ~11-year data history was 2.8 weeks in October 2016.

Cold-rolled lead times also stretched by 0.5 weeks to 6.7 weeks, and are now at the highest level since early September. Cold-rolled lead times fell to 5.2 weeks in late November, the lowest reading since May 2020.

Following the same trend, galvanized lead times increased 0.4 weeks to 6.7 weeks and are now at an 18-week high. Galvanized lead times are up one full week compared to one month ago. Like other products, our galvanized lead time in late November was the shortest seen since April 2020. The record low was 4.8 weeks in February 2015.

Galvalume lead times rose one full week to 7.5 weeks. This is also up one full week compared to levels one month ago. Note that Galvalume figures can be volatile due to the limited size of that market and our smaller sample size.

Plate lead times rose 0.7 weeks to 5.7 weeks, their highest reading since mid-August. In early November, plate lead times were 4.2 weeks—the lowest lead time recorded since February (4.1 weeks). In our four-year history for plate, the shortest plate lead time we have on record is 3.2 weeks in May 2020.

When asked about the future direction of lead times, 65% of executives responding to this week’s questionnaire expect lead times to be relatively flat into February. This is down from 66% in our previous survey. On the other hand, 26% of buyers think lead times will extend, down from 28% two weeks ago. Nearly 9% expect lead times to contract, in line with results from as far back as late October. Premium members can view a longer history of this data series and others by exploring the market trends report.

Looking at lead times on a three-month moving average (3MMA) basis can smooth out the variability in the biweekly readings. As a 3MMA, lead times for all products were flat to down compared with late November. The latest 3MMA lead time for hot rolled inched up to 4.3 weeks. It has remained in this territory since August. Cold-rolled lead times also moved up to 5.8 weeks. Galvanized lead times moved to 6 weeks, while Galvalume lead times increased by 0.2 weeks to 6.1 weeks. Plate lead times moved 0.4 weeks to 4.8, rebounding from the lowest 3MMA measure recorded since September 2020.

Note: These lead times are based on the average from manufacturers and steel service centers who participated in this week’s SMU market trends analysis. SMU measures lead times as the time it takes from when an order is placed with the mill to when the order is processed and ready for shipping, not including delivery time to the buyer. Our lead times do not predict what any individual may get from any specific mill supplier. Look to your mill rep for actual lead times. To see an interactive history of our Steel Mill Lead Times data, visit our website here.

By Becca Moczygemba, Becca@SteelMarketUpdate.com

 

Preliminary results from our latest market survey – we’ll release full results tomorrow – indicate that the reality is somewhere in the middle.

Take a look at the chart below:

Most people, approximately 59%, think that prices will peak in February or March. A few bulls (~17%) think prices won’t peak until April or later. But they’re offset by a sizeable minority of bears (~24%) who think that prices have already peaked or will later this month.

What did people have to say when we asked when and why steel prices would peak? Below are a few responses I found interesting. (We get a lot of replies, so apologies if I didn’t include yours.)

 “If domestic mills have production discipline the market is there’s. Imports cannot affect 1st quarter as arrivals are late 1st quarter at the soonest. And imports are not attractive due to future uncertainty and no significant price advantages over domestic supply.”

“Restocking and strong automotive will help prop up prices, but otherwise weak demand in construction and excess capacity will not allow prices to run up for too long.”

“There will be some more movement upwards with scrap heading higher and seasonal restocking, but it’ll be limited.”

“Mills don’t typically lower prices a month after the first increase. I don’t think demand will be strong, so I think the peak may come early in Feb.”

We also asked people where they thought hot-rolled coil prices would be two months from now. Here are the results:

About 45% think HRC prices in early March will be $700-740 per ton ($35-37.45 per cwt), roughly 26% forecast $750-799 per ton. A notable number of bears (24%) think prices will remain in the $600s per ton. (SMU’s HRC price stands at $695 per ton this week.) Only a very bullish minority (5%) think we’ll see HRC above $800 per ton two months hence.

Here are some notable comments from survey respondents on their HRC price predictions:

“January demand and scrap prices will keep prices above $700.”

“I expect $50/ton per month of increases, so it could go up $100/ton within two months.”

“I think there are enough macro concerns to really limit the upside here. I don’t expect much movement above $750/ton.”

“Not much higher than $800/ton. But slightly above.”

Tampa Steel Conference

Our survey asks you about steel prices two months from now. I hope to see you sooner than that.

Namely, a month from now at our Tampa Steel Conference.

Nearly 300 people have registered from companies across the metals supply chain. We’re anticipating another 100-200 will register between now and when the conference opens on February 5.

We have a great line of speakers, including senior executives from mills from across North America. Don’t miss out! Learn more about the event and register here.

By Michael Cowden, Michael@SteelMarketUpdate.com

Revenue was $599 million in the first quarter, down 33% quarter-on-quarter (QoQ) and down nearly 25% year-on-year (YoY), according to earnings data released on Thursday, Jan. 5.

The company said it was impacted by softening demand throughout the quarter driven by macro concerns, including slower growth, inflationary pressures, and steel inventory destocking. Declining prices tightened supply flows and squeezed metal spreads.

Schnitzer began the commissioning of two primary nonferrous recovery systems in Massachusetts and California, while also acquiring the operating assets of ScrapSource LLC. The Dallas-based business provides metals recycling services and solutions across North America.

The acquisition should significantly expand Schnitzer’s recycled services volumes and extend its business into additional regional markets across the US, the release said.

“Although the past several months have been challenging as we faced weakening market conditions and short-term operational disruptions that are now resolved, we are continuing to progress our strategic initiatives centered on advanced metal recovery technologies, volume growth, and productivity improvements,” Schnitzer chair and CEO Tamara Lundgren said.

Lundgren noted that the company has seen a “strengthening in selling prices and demand for recycled metals in both the export and domestic markets” since the end of the quarter, adding that Schnitzer is expecting major sequential improvements in its Q2 results.

Ferrous sales volumes of 851,000 tons in Q1 of fiscal 2023 were down 25.9% YoY and down 32.9% QoQ. Nonferrous sales volumes of 81,500 tons were up 6.5% but down 12.4%, respectively, over the same period.

Average ferrous net selling prices were down 12.1% sequentially and down 23.8% YoY, respectively, while nonferrous net selling prices were down 14.3%, respectively, over the same period. Finished steel sales volumes, though down 5.6% QoQ, were up 19.2% YoY.

Average net selling prices for finished steel products were up 3.7% compared with the year-ago quarter, but down 9.2% sequentially.

Schnitzer is one of the largest manufacturers and exporters of recycled metal products in North America with operating facilities located in 25 states, Puerto Rico, and western Canada. Its steel manufacturing operations produce finished steel products, including rebar, wire rod, and other specialty products. Schnitzer has seven deep-water export facilities located on both the East and West Coasts as well as in Hawaii and Puerto Rico.

By David Schollaert, David@SteelMarketUpdate.com

Every two weeks, SMU asks hundreds of steel buyers: Are you finding domestic mills willing to negotiate spot pricing on new orders? On average, 56% of steel buyers polled this week reported mills were willing to talk price on new orders, down from an average rate of 67% two weeks ago, and a fall from 73% one month ago. As shown in Figure 1, negotiation rates continue their downward trend from the beginning of November.

Figure 2 below shows negotiation rates by various products. This week, hot-rolled remained relatively flat, with 57% of hot-rolled buyers reporting mills are willing to negotiate lower prices on new orders vs. 58% two weeks ago. 

Buyers in the cold-rolled market reported 50% of mills willing to negotiate prices this week, a drop of 18% vs. Dec. 2, and a steep fall from the 94% willing to negotiate recorded for the week of Nov. 10. 

In galvanized steel, 56% of buyers said mill prices were negotiable this week, compared to 70% two weeks ago, off highs above the 90th percentile through late November.

Galvalume negotiation rates were the outlier, staying completely flat over the two-week period, with all respondents saying prices were negotiable. Only a month ago that rate stood at 67%.

Note: SMU surveys active steel buyers every other week to gauge the willingness of their steel suppliers to negotiate pricing. The results reflect current steel demand and changing spot pricing trends. SMU provides our members with a number of ways to interact with current and historical data. To see an interactive history of our Steel Mill Negotiations data, visit our website here.

By Ethan Bernard, Ethan@SteelMarketUpdate.com

Hot-rolled futures have pushed higher in year-end thin trading. December daily futures trading volumes hovered around 19,000 short tons (ST) per day. Latest HR indexes have spot up roughly $30/ST but still below $700/ST. 

Over the last month of the year, HR curves for Cal’23 futures have risen about $25/ST on a settlement basis. Open interest over the month of December rose from roughly 22,500 contracts to 25,500 contracts, and with the December contract rolling off has dropped back to 22,500 contracts. 

Continued uncertainty and reduced forecast time horizons, along with a number of other demand headwinds, have contributed to a decline in new open positions. As folks get back into the swing of the new year, we expect a pick-up in activity as folks position for the upcoming two quarters.

Below is a graph showing the history of the CME Group HR futures forward curve. You will need to view the graph on our website to use its interactive features. You can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact us at info@SteelMarketUpdate.com.

Scrap

BUS, which rose $30/GT in December to just short of $390/GT, is indicatively expected to rise from $40/GT to $50/GT for January, as new quarter demand and anticipation of winter supply disruptions give scrap the usual season lift. Over the last month, BUS futures settlements have risen close to $30/GT on average for the Cal’23 months, aided by a pick-up in export scrap demand and price. 

Open interest is hovering just above 8,000 contracts as we start January 2023.  BUS volumes continue to grow, with December trading just shy of 4,000 GT on average per day.

Metal margins have are close to unchanged over the last month.

Below is another graph showing the history of the CME Group busheling scrap futures forward curve. You will need to view the graph on our website to use its interactive features. You can do so by clicking here.

By Jack Marshall of Crunch Risk LLC

We’ll talk about how steelmakers globally are working to reduce carbon emissions. We’ll also talk about the growing recognition that carbon needs to be accounted for when steel crosses international borders – whether that be a carbon border adjustment mechanism (CBAM) or another tool.

Our discussion will go into the nitty-gritty of whether the US and the European Union can come to a common agreement on how to handle carbon emissions by 2024, the target date set when the two sides agreed to scale back Section 232 on the EU. The big picture: Could a carbon border mechanism one day replace or come on top of existing duties and tariffs?

We know there are a vexing number of policies and platforms aimed at addressing decarbonization. But recall, too, the panic over pig iron last year. The EAF steel industry rose to that challenge, initially seen as an existential threat, within a matter of weeks. Could CO2 emissions be cut with that same combination of resourcefulness, improved processes, and sense of urgency?

Finally, we’ll talk about the current steel market. The steel industry has seen its best years since World War II in 2021-22. Can that success continue into 2023, or will steel have to learn to survive again in the face of stiffer economic headwinds?

We’ll take your questions, too! As always, we’ll keep it to about 45 minutes. You can (virtually) drop in, learn something — and then get on with your day.

PS – If you’d like to see past Community Chat webinars, you can find those here.

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By Michael Cowden, Michael@SteelMarketUpdate.com

“Construction will continue with a new general contractor in place to ensure the overall safety, quality, and timeliness of the project,” Evraz NA SVP David Ferryman said in a statement.

“The work is not going away, and no EVRAZ NA employees are being let go as a result of this change,” he continued. “We look forward to retaining many of the project’s current subcontractors as we work to complete the project.”

According to a report from local radio station KRDO 13, approximately 660 contract workers have lost their jobs, effective immediately. Evraz NA has parted ways with Wanzek Construction Inc., the company hired to build the state-of-the-art solar-powered steel mill expansion, the report said.

“We’re confident that these changes will help us to successfully complete the rail mill project, allowing us to best serve our workforce, our customers, and the Pueblo, Colo., community for many years to come,” Ferryman said.  

Evraz NA in July 2021 broke ground on the $500-million rail mill, which is slated to be finished in 2023.

The company, part of Evraz Group SA, put its North American operations up for sale in August of last year.

By Ethan Bernard, Ethan@SteelMarketUpdate.com

The ISM’s report notes that of the six largest manufacturing industries, petroleum and coal products experienced moderate growth in December. However, the ISM continues to highlight the continued softening of new order rates. As new order rates slow, lead times shorten, and inventories are growing.

December’s manufacturing PMI fell to 48.4%, down from 49% in November, to the lowest reading since May 2020 when the pandemic recovery began. A Manufacturing PMI above 48.7% typically denotes an expansion of the overall economy.

“Manufacturing contracted again in December after expanding for 29 straight months,” said Timothy Fiore, chairman of ISM’s Manufacturing Business Survey Committee, continuing that companies are carefully managing headcounts.

Fiore added that companies will be paying close attention to demand in the first quarter, as they seek to shore up order books for the next six to 12 months. However, the forward-looking new orders sub-index fell again to 45.2%, two percentage points lower than the 47.2% recorded in November.

Pricing dropped 3.6 percentage points to 39.4 in December, the lowest level since April 2020, indicating that pricing on raw materials has now dropped for three straight months following a 28-month increase period.

With only two manufacturing industries reporting growth, 13 reported a contraction, including: wood products, fabricated metal products, chemical products, paper products, plastics and rubber products, electrical equipment, appliances and components, furniture and related products, apparel, leather and allied products, computer and electronic products, machinery, food, beverage and tobacco products, transportation equipment, and miscellaneous manufacturing.

An interactive history of the ISM Manufacturing Report on Business PMI index is available on our website. If you need assistance logging into or navigating the website, please contact us at info@SteelMarketUpdate.com.

By Becca Moczygemba, Becca@SteelMarketUpdate.com

Keep in mind that this is the high season for tourism in Florida, and rooms are going fast. You can learn more about the agenda, explore networking opportunities, and register here.

There will be an outdoor networking reception on Sunday evening as well as a golf tournament and a harbor tour of Port Tampa Bay on Monday morning. The conference program begins Monday afternoon.

SMU has intentionally made this event a North American one, with executives attending from around the continent, sharing their inside perspectives on what’s happening in steel.

Speaking of attendees, here is a list of companies who have registered so far. Those with an asterisk next to their name are sending more than one person to the event:

ACM, ADM Investor Services, AFC Transport, Inc., Air Products and Chemicals*, Alabama Port Authority*, Algoma Steel Inc.*, All Weather Insulated Panels, Alliance Steel LLC, AlphaUSA, American Construction Metals, American Heavy Plates, AMS Specialty Steel, ArcelorMittal Dofasco*, Area Transportation, ASSA ABLOY Door Group, Associated Terminals, Atez Logistics, LLC, Atlantic Logisitcs*, Bank of America*, BBC Chartering USA, LLC, Beemac Logistics*, Blackhawk Steel, BMO*, BNSF Railway*, Borroughs LLC, Briccetti & Associates, Celtic Marine and Logistics, Central Oceans USA, Central States Manufacturing Inc., Century Metals & Supplies, Inc.*, Chapel Steel, CIH*, Cleveland Steel Container*, Clipper Americas Inc*, Coastal Cargo*, Coilplus, Inc.*, Colakoglu Metalurji A.S., Colonial Terminals, Comanhia Siderurgica Nacional, LLC (CSN)*, Cooper Consolidated, LLC*, Cooper/Ports America*, C-River Logistics, Crowe LLP*, Diehl Tool Steel, Duferco Steel Inc*, Duluth Seaway Port Authority, E-Crane International USA, Inc.*, Elementus Minerals, LLC, Elgen Manufacturing, Empire Stevedoring (LA) Inc. A Company of QSL, Esmark Inc.*, Essien Welding Enterprise, Fathom Consulting*, Ferogen Inc., Fitch Ratings, Friedman Industries*, Galvasid S.A. de C.V.*, General Kinematics Corporation*, Gibraltar – SEMCO, Greystones Maritime International, GridBeyond, Grupo Collado, Gulf Stream Marine, Harbor Freight Transport Corp., Holt Logistics*, Huntington Bank, Hyundai Corporation, Hyundai Steel Company, Illinois Tool Works (ITW)*, ITW Drawform, JFE Shoji America, LLC*, JIT Warehousing, JLG, Kanematsu USA Inc., Kelly Pipe*, Klauer Manufacturing Company, Kloeckner Metals*, Kpler*, Lafayette Steel and Aluminum*, Lapham Hickey Steel*, Leeco Steel LLC, Logistec USA Inc.*, Macsteel International USA Corp, Magswitch Technology Inc*, Mainline Metals, Inc., Matandy Steel & Metal Products*, McNichols Co., Medtrade, Inc.*, Mercury Resources LLC, Metal Master*, Misteelco Inc., Mitsui & Co. (USA), Inc., Modern Metals, Monti Inc., National Material Electrical, New Process Steel, Nippon Steel North America, Inc., Nippon Steel Trading Americas, Inc.*, North Star BlueScope Steel, Nucor, Ohio Coatings Company*, Ohio Pickling & Processing, Olympic Steel, Inc., OmniSource, Optima Steel International, LLC*, Optimus Steel, LLC, Owen Industries Inc., Owen Metals Group, P&S Transportation Inc., Pacific Metals Trading Inc.*, PADNOS Recycling*, Peak Metals Inc., Phillips Manufacturing*, Phillips Tube Group, Port Contractors, Port KC, Port Manatee, Port of New Orleans, Portland Cement Association, Ports America*, Premier Bulk Stevedoring, Priefert Manufacturing, Priefert Steel*, QSL – Americas, Quality Metal Stamping, Raleigh St Metal Recycling, Red Bud Industries*, Reibus International Inc.*, Revax Addis, Reynolds Services, Inc., Rukert Terminals Corporation, Ryerson, Ryerson & Central Steel And Wire, Samuel, Second City Metals, SecuraSOFT*, South Jersey Port Corporation*, Southland Advisors, Southwark Metal, SSA Atlantic LLC*, Steel Company, Steel Dynamics, Inc., Steel Manufacturers Association (SMA)*, Steel Warehouse*, SteelSummit-Tennessee, Summit Global Trading*, TA Services, Tampa Steel & Supply, Tempel Steel Company, Ternium Mexico*, The Bradbury Group*, The Jordan International Co., The Kinetic Company, The Mercury Group, thyssenkrupp Steel North America, Inc*, Tri County Metals, U.S. Department of Commerce, International Trade Administration, UBS Securities LLC*, Vicwest Building Products, voestalpine USA LLC, Watco Logistics, Webco Industries, Weissenrieder & Co, Wheeling-Nippon Steel, Inc., Wiley Rein LLP, Wiley’s International Trade practice, Wolfe Research*, XSteel USA.

We’d like to see your company’s name on that list, too. And we look forward to seeing you in Tampa next month!

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By Ethan Bernard, Ethan@SteelMarketUpdate.com

Perhaps the best place to start for our expectations and potential outliers for 2023 is by reviewing our “top calls” for 2022. Last year, we covered 10 expectations, which are listed below.

Seven of these 10 were realized. Perhaps the most important was the expectation that prices would fall towards cost. The industry, as a whole, at the end of last year found this to be the most contrarian view. A few of the other expectations did not get fully realized – i.e., La Niña did not fully disrupt the steel supply chain. This weather phenomenon is now in a rare third year, and it is possible to still be a factor in early 2023. While no significant disruption was recorded in 2022, one might argue that floods in Australia – which have limited coal production and exports in late 2022 – may qualify here as coming to fruition.  

Realized

• Steel prices will fall towards cost
• Chinese steel demand to keep falling in 2022
• Auto output will support sheet demand more as the year goes on
• Balance will return to supply chains
• New import orders have peaked for North America and Europe
• Iron ore and metallurgical coal will return to earth
• The decarbonization trend will continue… and accelerate

Not Fully Realized

• Demand for steel will be at a record level outside China
• Scrap demand will hit a new record high
• Steel supply chain will be hit by La Niña

Here are CRU’s expectations for 2023:

Metallics Demand Is in a Bull Market

Global metallic markets will rebound from late-2022 lows due to a multitude of factors. One such factor is the new electric-arc furnace (EAF)-based steelmaking capacity coming online – particularly the ramp-up of newly built capacity in the United States. Globally, metallics supply will tighten as new EAFs come online, while at the same time, blast-furnace (BF)-based producers use more scrap in their basic-oxygen-furnace (BOF) mix to lower emissions.  

Due to this demand increase, some regions may enact export controls for steel scrap or other metallics. Traditional pig iron supply will remain limited due to the war in Ukraine as well as sanctions or tariffs on Russian supply. However, India – with the elimination of the temporary export duties – will gain significant share in the merchant pig iron market.

Metallics Consumption to Rebound from 2022 Q4 Low

Easing of Pandemic Restrictions in China Will Lead to Stronger Year-On-Year Demand for Steel and Steelmaking Raw Materials

Near the end of 2022, China already eased pandemic restrictions at a faster pace than anticipated. We expect this easing will continue to lead to increased economic activity and renew demand for steel and steelmaking raw materials. Although construction activity in China will remain under pressure and limit the growth rate of overall steel consumption, there is a possibility the government may provide new backing to this sector if economic performance disappoints. This would further support the steel market.

Continued Online…

The full insight, including our expectations for 2023 is available for free at the following link. You may need to register to gain access.     

https://www.crugroup.com/knowledge-and-insights/insights/2022/2023-steel-expectations-outliers/

The Brandenburg plate mill is slated to have an annual capacity of 1.2 million tons. If all goes as planned, it will probably take Nucor most of this year to ramp to 60% or 70% capacity.

The news also comes as prices are still lacking direction. They have been largely stable over the past three to four weeks. But there are differing accounts from sources on how strong plate mill order books are.

SMU’s most recent check of the market on Tuesday, Jan. 3, placed plate prices between $1,400–1,480 per ton with an average of $1,440 per ton FOB mill east of the Rockies – unchanged week-on-week (WoW), according to our interactive pricing tool.

“We expect little room for negotiations because the mills are telling us that their order books are solid,” said a source.

Another source agreed saying “Nucor shouldn’t be lured into dropping prices just to drop prices because a smaller contributor in the market is taking a shot.

“Nucor Steel will be the price setter and plate quality standard in the marketplace,” the source added.

But the sentiment is not the same across the plate market.

“Nucor still needs demand to pick up in the US, or they are just adding to the problem (pressure) we already have,” said another source. “There aren’t enough orders right now to keep mills full, so they have had to lower pricing at times to try to attract orders. This pressure will only increase when Brandenburg starts to ramp up production if demand is flat.”

“It is possible that what we see in plate this year is what hot-rolled saw in 2022,” a source said. “I am not a doomsday person, but there is still a lot of opportunity margin to give back before the mills get back to normal margins.”

Nucor has been touting this mill for some time, and it’s because it will be able to make plate in several sizes and specs others can’t. The mill will be one of very few mills globally, and the only one in the US, capable of manufacturing at scale the heavy-gauge plate critical for monopile foundations and offshore wind farms.

There’s no doubt it will benefit from some of the major infrastructure spending coming down the pipeline, particularly $300 billion for clean energy development and climate programs included in the Inflation Reduction Act. Nucor estimates that the need alone will add roughly 7.5 million tons of new steel demand to the domestic market.

If any of that gets delayed or held up by red tape in Washington, Nucor clarified that its mill can produce 97% of plate products consumed domestically and is centrally located in the largest steel plate-consuming region in the US.

And although sources aren’t in agreement on where the plate market is headed in the near-term, the fact that there are such widely differing opinions in the market points to the fact that most are waiting to see where Nucor will offer plate when it opens it March order book.

The Tampa Steel Conference

Now that we’ve made it to 2023, it’s another reminder that the Tampa Steel Conference is just around the corner, and it’s time to register and make your travel plans.

The event will be at the Tampa Marriott Water Street hotel again this year. Mark your calendar for Sunday-Tuesday Feb. 5-7. More than 200 of you have registered already. We’re on track to have 400-500 attendees.

You can learn more about the agenda, explore networking opportunities, and register here.

By David Schollaert, David@SteelMarketUpdate.com

All told, SMU’s benchmark hot-rolled coil price stands at $695 per ton, up $10 per ton from before the holidays and up $80 per ton from a 2022 low – recorded before Thanksgiving – of $615 per ton.

Cold-rolled and coated products saw similar gains, with cold rolled recording the biggest (+$20/ton) jump since our prior assessment.

Mills have announced price hikes totaling $110 per ton since Thanksgiving. Recall that domestic mills also announced a round of $60-per-ton price increases after the November holiday.

Our sheet momentum indicators remain pointing upward. We’re holding our plate momentum indicator at neutral following Nucor’s announcement that it would keep plate prices unchanged.

Hot-Rolled Coil: The SMU price range is $650–740 per net ton ($32.50–37.00/cwt), with an average of $695 per ton ($34.75/cwt) FOB mill, east of the Rockies. Both the lower and upper ends of our range increased $10 per ton compared to two weeks ago. Our overall average is up $10 per ton from two weeks ago. Our price momentum indicator on hot-rolled steel points to Higher, meaning we expect prices to increase over the next 30 days.

Hot-Rolled Lead Times: 3–7 weeks* (preliminary ranges from our ongoing market survey, final lead times data will be released on Thursday)

Cold-Rolled Coil: The SMU price range is $860–970 per net ton ($43.00–48.50/cwt) with an average of $915 per ton ($45.75/cwt) FOB mill, east of the Rockies. Both the lower and upper ends of our range increased $20 per ton compared to two weeks ago. Our overall average is up $20 per ton from two weeks ago. Our price momentum indicator on cold-rolled steel points to Higher, meaning we expect prices to increase over the next 30 days.

Cold-Rolled Lead Times: 5–9 weeks*

Galvanized Coil: The SMU price range is $860–940 per net ton ($43.00–47.00/cwt) with an average of $900 per ton ($45.00/cwt) FOB mill, east of the Rockies. The lower end of our range increased $40 per ton compared to two weeks ago, while the upper end decreased $10 per ton. Our overall average is up $15 per ton from two weeks ago. Our price momentum indicator on galvanized steel points to Higher, meaning we expect prices to increase over the next 30 days.

Galvanized .060” G90 Benchmark: SMU price range is $957–1,037 per ton with an average of $997 per ton FOB mill, east of the Rockies.

Galvanized Lead Times: 4–8 weeks*

Galvalume Coil: The SMU price range is $880–930 per net ton ($44.00-46.50/cwt) with an average of $905 per ton ($45.25/cwt) FOB mill, east of the Rockies. The lower end of our range increased $50 per ton compared to two weeks ago, while the upper end decreased $30 per ton. Our overall average is up $10 per ton from two weeks ago. Our price momentum indicator on Galvalume steel points to Higher, meaning we expect prices to increase over the next 30 days.

Galvalume .0142” AZ50, Grade 80 Benchmark: SMU price range is $1,174–1,224 per ton with an average of $1,199 per ton FOB mill, east of the Rockies.

Galvalume Lead Times: 7–8 weeks*

Plate: The SMU price range is $1,400–1,480 per net ton ($70.00–74.00/cwt) with an average of $1,440 per ton ($72.00/cwt) FOB mill. Both the lower and upper ends of our range remained unchanged compared to two weeks ago. Our overall average is unchanged from two weeks ago. Our price momentum indicator on steel plate points to Lower, meaning we expect prices to decrease over the next 30 days.

Plate Lead Times: 3–7 weeks*

SMU Note: Below is a graphic showing our hot rolled, cold rolled, galvanized, Galvalume, and plate price history. This data is 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.

By Michael Cowden, Michael@SteelMarketUpdate.com

SMU’s Current Buyers Sentiment Index was recorded at +70, up from +64 at our previous market check, and three points higher than compared to one month ago (Figure 1). 

SMU’s Future Buyers Sentiment Index measures buyers’ feelings about business conditions three to six months in the future. Future Sentiment jumped four points from our previous survey to +70, and up one point from +69 a month ago. (Figure 2). At the beginning of last year, Future Sentiment was at +65.

Measured as a three-month moving average, the Current Sentiment 3MMA rose over two points to +60.17 from +57.83 two weeks earlier, continuing to rebound since trending downward between May and November. (Figure 3). However, in January 2022 the Current Sentiment 3MMA stood at +74.67.

The Future Sentiment 3MMA ticked up slightly again this week to +66.83 from +66.0 two weeks ago., and up three points from a month ago. (Figure 4). At the beginning of 2022, the Future Sentiment 3MMA stood at +70.33.

What SMU Survey Respondents Had to Say:

“Steady but no or very little growth.”

“Good, dependent on making some price concessions.”

“Economic situation might deteriorate based on central banks’ aggressive rate hikes, and they will get what they are seeking – a slower economy.”

“Demand remains good. Inventory in good position to service our markets.”

“Demand is looking better and inventories do not seem bloated.”

“Order books are strong. Supply chain and labor issues are working themselves out.”

“Optimistic, but only because our business enjoys low-ish steel pricing.”

“Will be a good year, not great, because of Fed actions. Underlying demand will be ok.”

 

About the SMU Steel Buyers Sentiment Index

The SMU Steel Buyers Sentiment Index is a measurement of the current attitude of buyers and sellers of flat-rolled steel products in North America regarding how they feel about their company’s opportunity for success in today’s market. It is a proprietary product developed by Steel Market Update for the North American steel industry. Tracking steel buyers’ sentiment is helpful in predicting their future behavior.

Positive readings run from +10 to +100. A positive reading means the meter on the right-hand side of our home page will fall in the green area indicating optimistic sentiment. Negative readings run from -10 to -100. They result in the meter on our homepage trending into the red, indicating pessimistic sentiment. A reading of “0” (+/- 10) indicates a neutral sentiment (or slightly optimistic or pessimistic), which is most likely an indicator of a shift occurring in the marketplace. Sentiment is measured via SMU surveys that are conducted twice per month.

We send invitations to participate in our survey to more than 700 North American companies. Approximately 45% of respondents are service centers/distributors, 30% are manufacturers, and the remainder are steel mills, trading companies or toll processors involved in the steel business.

Click here to view an interactive graphic of the SMU Steel Buyers Sentiment Index or the SMU Future Steel Buyers Sentiment Index.

By Ethan Bernard, Ethan@SteelMarketUpdate.com

Total December import licenses are currently at 1.97 million tons through Dec. 27 data, potentially the lowest level seen in 22 months.

Although imports have declined for the majority of 2022, the annual rate remains healthy compared to recent years. The average monthly import rate for 2022 is now 2.55 million tons per month through preliminary December data. Compare this to the monthly averages of previous years: 2021 at 2.63 million tons, 2020 at 1.84 million tons, 2019 at 2.32 million tons, 2018 at 2.81 million tons, and 2017 at 3.17 million tons.

Preliminary imports of finished steels declined from 1.98 million tons in October to 1.77 million tons in November. The latest license data shows finished steel imports at 1.70 million tons in December, potentially the lowest level seen since April 2021.

Due to large monthly swings in semifinished imports in recent years, the chart below shows total imports on a three-month moving average (3MMA) basis in an attempt to more accurately display trends. The 3MMA is 2.22 million tons through preliminary November figures, now at a 20-month low. December license data suggests that the 3MMA could decline further to 2.13 million tons, potentially the lowest level since February 2021. Recall that in January of last year the 3MMA had reached a 42-month high of 2.94 million tons, while the lowest 3MMA level in SMU’s recent history was October 2020 at 1.36 million tons.

The table below displays flat-rolled product imports as well as other high-volume products, including rebar, tin plate, wire rod, structural pipe and tube, and other long products. We also provide data on imports divided into semifinished, finished, flat rolled, longs, pipe and tube, and stainless products.

The charts below show monthly imports for two product groups: flat rolled and pipe and tube. Preliminary November flat-rolled imports totaled 819,000 tons, rebounding slightly from September’s 17-month low. December licenses are currently showing 749,000 tons of flat-rolled steel to have entered the country during the month. Pipe and tube imports were 503,000 tons in November, in line with levels seen since March of this year. December pipe and tube licenses are currently at 538,000 tons.

PSA: We have an interactive graphing tool available here on our website, where readers can explore historical import data. If you need assistance logging into or navigating the website, contact us at Info@SteelMarketUpdate.com.

By Brett Linton, Brett@SteelMarketUpdate.com

The total rig count in the US remains at 779 total rigs in operation. The number of active oil rigs dropped to 621, down one from the week prior, while the number of gas rigs increased by one to 156. Miscellaneous rigs are unchanged at two. Compared to this time last year, the US count is up 193 rigs, with oil rigs up 141, gas rigs up 50, and miscellaneous rigs up two, respectively.

 

 

 

 

As we’ve previously seen with this time of year, the Canadian rig count dropped again this week to 84 rigs, with oil rigs down seven, gas rigs down five, and miscellaneous rigs unchanged. This week’s Canadian count is down six rigs compared to levels one year ago, with oil rigs down 14 and gas rigs up 8, respectively.

 

 

The international rig count decreased by one to 910 rigs for the month of November, and is up 93 rigs from the same month one year ago.

For more in-depth information on the energy market, Steel Market Update publishes an “Energy Update” report each month covering oil and natural gas prices, detailed rig count data, and oil stock levels. Our November report is available here for Premium members.

For a history of both the US and Canadian rig count, visit the Rig Count page on the Steel Market Update website here.

About the Rotary Rig Count

A rotary rig is one that rotates the drill pipe from the surface to either drill a new well or to side track an existing one. Wells are drilled to explore for, develop and produce oil or natural gas. The Baker Hughes Rotary Rig count includes only those rigs that are significant consumers of oilfield services and supplies.

The Baker Hughes North American Rotary Rig Count is a weekly census of the number of drilling rigs actively exploring for or developing oil or natural gas in the US and Canada. Rigs considered active must be on location and drilling. They are considered active from the time they break ground until the time they reach their target depth.

The Baker Hughes International Rotary Rig Count is a monthly census of active drilling rigs exploring for or developing oil or natural gas outside of the US and Canada. International rigs considered active must be drilling for at least 15 days of the month. The Baker Hughes International Rotary Rig Count does not include rigs drilling in Russia or onshore in China.

By Becca Moczygemba, Becca@SteelMarketUpdate.com

The shift in import trends has also been a major topic and is ongoing for VAPs down to rolled products and extrusions. Interestingly this was in the face of port disturbances, long freight times and ballooning costs, and other macro variables that plagued supply chains through the early parts of the year. However, most were out of necessity to keep up with the incredible post-pandemic demand boom.

As things start to slow, imports will continue to fall under scrutiny and will test if these new relationships will have lasting effects.

VAPS And Primary Started Off 2022 with Record-High Volumes

When looking at the import trends for primary and VAPs, it was a tale of two halves. Right from the start, January saw a historical high set for total aluminum primary imports. Most of this tonnage can be attributed to an increase in billet coming from UAE and India as overseas producers looked to capitalize on strong demand trends in North America.

The demand boom is most likely responsible for this shift as producers were scrambling to pump out as much as possible. In the second half of the year, imports of VAPs have cooled alongside demand which likely will lead to a more “normal” 2023.

The billet market has shifted in response to demand uncertainty as some are choosing to forego annual contracts for the time being and instead shift their aluminum needs to the spot market. The Midwest premium has finally found support at current levels and inland trucking costs also come off their peak, making spot markets more attractive.

The increased availability of imports likely played a role in this decision as well and will be something to watch unfold in the coming year.

Further Downstream Has Been Affected as Well

Extruders and rollers have also seen shifting trade flows over the course of the year.

Starting with extrusions, imports of extruded products as reported by the Aluminum Association have continued to increase both in volume and in the percentage of total shipments. A second data point in the form of HS code 7604, which is a catchall for extrusion-like shapes, also has continued to increase throughout the year.

The largest increases have come out of Mexico, Turkey, and Vietnam with large one-off orders coming from Indonesia as well. Digging into the bill of landing data, most of this supply is directed towards B&C end use with some heading towards automotive as well.

Construction is expected to slow the most in 2023 as the housing market will continue to be challenged by rising interest rates. Transportation will remain steady but what was once almost double-digit growth expectations have been tempered. As extrusion shipments overall will struggle to see any growth next year, import trends will be a top-of-mind issue for domestic producers.

For rolled products, the biggest shift can be seen by looking at can sheet, the fastest-growing segment of the market in recent years. As the incredibly inefficient import of empty cans in 2021 ceased this year, imports of can sheet into the US increased by over 30%. On top of that, the source of imports also changed dramatically as imports from Saudi Arabia fell off and the tonnage coming from China remained consistent YoY while South Korea and Thailand gained a large percentage of share. Exports from China overall hit their highest yet at over 1 million tons as they gain market share in Europe, Southeast Asia, and Mexico.

Like extrusions, can sheet growth rates are expected to slow off the frenetic post-pandemic pace of recent years however will remain positive. Deficits will remain in both Europe and North America which will present opportunities for exports to continue but at a slower rate. However, come 2025 when the new rolling mills are expected to start coming online, the question again will be if these imports will be positioned to displace any domestic capacity as the deficit closes.

Trade Policies Will Play an Important Role

As we saw with the renewed interest in section 232 and 301, trade policies will be under increased scrutiny going forward. Hot topics include the full economic impact of section 232 and the impacts of the exclusion process on extrusions specifically in which there is a blanketed exclusion in place.

Also, with the war in Ukraine still raging on and other geopolitical uncertainties around the world, the push for onshoring, and friendshoring is gaining traction. With new policies such as the Build Back Better plan, Inflation Reduction Act, CHIPS, and so on, new limits have been set for how much of an end-use product must be made in the US for it to be considered a domestic product.

 With this push affecting both automotive and construction, there will be a trickle-down effect on the origin of aluminum. It is not all domestic policies either, as just this week China announced new increased export tariffs on primary aluminum and aluminum alloy.

LME and Midwest Prices

LME prices have bounced across the recent trading range in December from a high that crested just above $2,500 per ton to a low of $2,385 per ton. The mix of positive and negative sentiment in the global markets affecting the LME will keep the values range bound until a clear signal is identified, in either direction.

Midwest premiums for spot are hovering at $0.20 per pound but are leaning higher as the New Year is expected to see renewed trading as firms re-open and people return from holidays. The Midwest premium should advance as activity returns and recover in 2023. Prices for the second half of 2023 are offered at $0.2350–0.2375 per pound. Replacement cost from overseas remains near $0.25 per pound and the market gap between spot and future delivery costs will close.

Only the clean-up from the Christmas weekend storm that walloped most of the US may slow the return to physical trading.

As demand waned throughout the fourth quarter of 2022, billet negotiations stalled. Some buyers will wait to see what the New Year brings for the 2023 billet supply contracts not yet fully concluded. Spot buying will fill the gap in the near term, now trading at $0.20–0.23 per pound over Midwest P1020.

By Matthew Abrams, Research Analyst, CRU Group

“Congratulations to our more than 400 teammates for achieving this important milestone,” said Leon Topalian, Nucor’s chair, president, and CEO. “We are looking forward to supplying not only the highest quality steel but also the most sustainable plate products in the world for our nation’s military, infrastructure, heavy equipment, offshore wind, and other markets.”

The Brandenburg plate mill — slated to have an annual capacity of 1.2 million tons — is one of very few mills worldwide and the only one in the US capable of manufacturing at scale the heavy-gauge plate critical for monopile foundations and offshore wind farms, the release said.

Nucor looks to capitalize on what it anticipates being roughly 7.5 million tons of new steel demand because of the $300 billion for clean energy development and climate programs included in the recently passed Inflation Reduction Act.

The ultramodern mill can produce 97% of plate products consumed domestically and is centrally located in the country’s largest steel plate-consuming region. Also of note, is Nucor’s pursuit of LEED v4 for Building and Design certification for its new plate mill, a certification even more rigorous than previous LEED rating systems, within categories of sustainable performance, climate change, and third-party transparency and reporting requirements.

“We are proud to bring high-quality manufacturing jobs to the Commonwealth of Kentucky and look forward to being part of the Brandenburg community for many decades,” said Johnny Jacobs, VP, and GM of Nucor Steel Brandenburg.

By David Schollaert, David@SteelMarketUpdate.com

“It provides us with a solid platform for accelerating growth in two target market segments – carbon-coated and stainless steel,” Andrew Greiff, Olympic president and chief operating officer, said in a statement.

The Cleveland-based metals service center also announced it has increased the size of its asset-based revolving credit facility from $475 million to $625 million.

The company said its total debt under the revolving credit facility is approximately $297 million, with availability of approximately $280 million, leaving significant capital to continue its diversification strategy.

By Ethan Bernard, Ethan@SteelMarketUpdate.com

Published adders and extras will continue to be applied, and the company reserves the right to review and requote any unconfirmed offers, the letter said.

Nucor lowered plate prices by $140 per ton ($7 per cwt) in November for its January order book, and by $120 per ton in September for its November order book.

SMU’s latest check of the market on Dec. 20 put discrete plate prices at an average of $1,440 per ton ($72 per cwt), FOB mill. The price is down 7.1% from $1,550 per ton one month ago and down nearly 26% from an all-time high of $1,940 per ton in May of 2022, according to SMU’s interactive pricing tool.

The move was not unexpected, especially with raw material costs, notably for scrap, expected to move higher in January. Though some discounting is still being reported, demand has been largely quiet with buyers on the sidelines over the holidays.

By David Schollaert, David@SteelMarketUpdate.com

Gianni comes to US Steel from Deka Research and Development Corp., where he served as the executive leader for product development and manufacturing.

Before joining US Steel, Gordon spent 2018 to 2022 at Johnson Matthey, a global leader in sustainable technologies, culminating in his position as managing director of the Platinum Group Metals Services division. He was also president of Johnson Matthey (USA).

Both will report directly to David B. Burritt, president and CEO, as members of the company’s executive management team, US Steel said Thursday, Dec. 22.

By Ethan Bernard, Ethan@SteelMarketUpdate.com

Last month’s bookings for durable goods were down 2.1%, or $5.8 billion less, MoM— well below the consensus expected gain of 0.6%, and another potential sign of a slowing economy. Figures are not adjusted for inflation.

Orders for big-ticket, US-made goods weren’t helped by aircraft and autos. Excluding transportation, new orders were up 0.2%.

Transportation equipment, down for the first time in four months, fell $6.1 billion MoM, or 6.3%, to $91.3 billion. The figure drove the decline in overall durable goods orders for the month, the government data showed.

Shipments of manufactured durable goods rose 0.2%, or $600 million, to $275.9 billion. That’s after a 0.4% increase in October. Transportation, up 13 of the last 14 months, led the increase in that category. It was up $700 million, or 0.8%, to $91.8 billion.

Click here for more detail on the November advance report from the US Census Bureau on durable goods manufacturers’ shipments, inventories, and orders. See also Figure 1 below.

Revised and Recently Benchmarked October Data

Revised seasonally adjusted October figures for all manufacturing industries were: new orders, $553.2 billion (revised from $556.6 billion); shipments, $552.1 billion (revised from $554.8 billion); unfilled orders, $1,143.3 billion (revised from $1,144.0 billion) and total inventories, $804.5 billion (revised from $805.3 billion).

By David Schollaert, David@SteelMarketUpdate.com

In addition, we will not update prices on Tuesday, Dec. 27.

We will resume our regular publication schedule, as well as our regular pricing, on Tuesday, Jan. 3.

We appreciate your business, and wish all the best to you and yours.

By Brett Linton, Brett@SteelMarketUpdate.com

Steel buyers reported mill lead times ranging from 4 to 6 weeks for hot rolled and plate, and 5 to 8 weeks for cold rolled, galvanized, and Galvalume.

SMU’s hot-rolled lead time extended by 0.3 weeks to 4.7 weeks, the highest level since May. Four weeks ago, our hot-rolled lead time reached a low of 3.9 weeks. The shortest hot-rolled lead time recorded this year was 3.8 weeks in January/February. Recall the record low in our ~11-year data history was 2.8 weeks in October 2016.

Cold-rolled lead times also lengthened by 0.3 weeks to 6.2 weeks and are now at the highest level since early September. Cold-rolled lead times fell to 5.2 weeks in late November, the lowest reading since May 2020.

Following the same trend, galvanized lead times increased 0.3 weeks to 6.3 weeks and are now at a 16-week high. Galvanized lead times are up almost one full week compared to one month ago. Like other products, our galvanized lead time in late November was the shortest seen since April 2020. The record low was 4.8 weeks in February 2015.

Galvalume lead times rose 0.4 weeks to 6.5 weeks. This is up one full week compared to levels one month ago. Note that Galvalume figures can be volatile due to the limited size of that market and our smaller sample size.

Plate lead times rose 0.2 weeks to 5.0 weeks, their highest reading since mid-August. In early November, plate lead times were 4.2 weeks – the lowest lead time recorded since February (4.1 weeks). In our four-year history for plate, the shortest plate lead time we have on record is 3.2 weeks in May 2020.

When asked about the future direction of lead times, 66% of executives responding to this week’s questionnaire expect lead times to be relatively flat into February. This is up from 57% in our previous survey. Twenty-eight percent of buyers think lead times will extend, down from 36% two weeks ago. Six percent expect lead times to contract, in line results from as far back as late October. Premium members can view a longer history of this data series and others by exploring the market trends report we will publish tomorrow afternoon, Dec. 23.

Here are comments from a few respondents:

“[In two months] I think that is when buyers will start pushing back.”

“Mills will be unsuccessful if they shorten and play spot games.”

“Domestic supply will have little import competition.”

“Leads times appear artificially inflated.”

“Will grow in 60 days, flatten out thereafter.”

“We are expecting to see mill lead times remaining very short – which is a problem for any sort of pricing rally.”

Looking at lead times on a three-month moving average (3MMA) basis can smooth out the variability in the biweekly readings. As a 3MMA, lead times for all products were flat to down compared with late November. The latest 3MMA lead time for hot rolled held steady at 4.1 weeks. It has remained in this territory since August. Cold-rolled lead times were flat at 5.6 weeks, the shortest since July 2020. Galvanized lead times remained at 5.9 weeks for the second consecutive survey, the lowest level seen since August 2020. Galvalume lead times fell 0.2 weeks to 5.8 weeks, the shortest in more than seven years. Plate lead times held steady at 4.4 weeks, the lowest 3MMA measure recorded since September 2020.

Note: These lead times are based on the average from manufacturers and steel service centers who participated in this week’s SMU market trends analysis. SMU measures lead times as the time it takes from when an order is placed with the mill to when the order is processed and ready for shipping, not including delivery time to the buyer. Our lead times do not predict what any individual may get from any specific mill supplier. Look to your mill rep for actual lead times. To see an interactive history of our Steel Mill Lead Times data, visit our website here.

By Brett Linton, Brett@SteelMarketUpdate.com

This week we saw that consumer confidence increased, the USW ratified its agreement with US Steel, and our SMU Spotlight featured Steel Manufacturers Association president Philip Bell. Lots of good things happening as we round out the year.

But it seems like everyone I talk to is focused on pricing. What’s steel pricing going to do in January? Is scrap going to go up or down? Why are partridges in pear trees so darn expensive? I don’t have answers to those questions. And outlooks are mixed.

I was reading the December edition of HARDI’s Data Driven Newsletter by Brian Loftus, and it’s notable that the HVAC sector appears to be cooling off. That’s likely a response to a slower housing market. Loftus pointed out that Lennox, Daikin, and Ferguson had different fiscal years, but their outlooks for the coming year are aligned. “We expect growth rates to continue compressing as we move through the year, driven by increasingly difficult comparables, a reduction in inflation and deterioration in market volumes,” said Bill Brundage, CFO of Ferguson during a recent earnings call.

At the Lennox International Annual Investor Day, on Dec. 14, a presentation noted that the company in 2023 would assume a high single-digit revenue increase when it comes to commercial end markets. But Lennox is also assuming that residential volume won’t be as prosperous.

Commercial HVAC sales are an important data point for steel sales, especially for service centers. But not everyone is bearish.

Associated Builders and Contractors (ABC) puts together the Construction Backlog Indicator, and there is a correlation between construction and HVAC. ABC’s Dec. 13 backlog indicator highlighted that the current construction backlog is “at its highest level since the second quarter of 2019.” (Note: Residential construction is not included in that backlog, only commercial, health care, and institutional are.) “The rise in backlog is remarkable and unexpected,” said ABC Chief Economist Anirban Basu. “A number of contractors have been reporting that their backlog has risen rapidly over the past three months, which is counterintuitive given the pervasive view that the broader economy is headed into recession.”

While we can’t look into our crystal ball and see what the future holds, it appears that building products and the slitting and cut-to-length lines that serve them could have steady business in 2023. I’m cautiously optimistic, but optimistic nonetheless.

My hope for next year is that the word “unprecedented” doesn’t get used much (and ideally not at all). It’s been a hectic two years, and I think we could all use a break from uncommon circumstances. From everyone here at Steel Market Update, we want to express our sincere gratitude for your business and your participation in our webinars, conferences, surveys, and newsletters. We hope you all have a safe, relaxing, and wonderful holiday season, and we’ll see you in 2023!

By Becca Moczygemba, Becca@SteelMarketUpdate.com

The winds of change have blown through the Midwest, with hot-rolled (HR) futures having bottomed on Nov. 9. That day, the January future traded as low as $631, while the December future’s low was $621. The January future has since rallied to an intraday high of $796 on Monday, a $165 jump from low to high. The January future has broken above its downtrend that started in mid-August during the rally off Nucor’s price increase announcement.

At $796, the January future had gained 26% off its low of Nov. 9. The rule of thumb for determining a bear or bull market is 20%, so is Midwest hot-rolled (HRC) in a new bull market? Does this rally have legs, or is this a head fake, a dead cat bounce? 

Before there were Covid lockdowns, 232 tariffs, chip shortages, Russian invasions, and 6% inflation, winter weather rivaled unplanned disruptions as the top catalyst for price spikes. The winds of change have been replaced with Winter Storm Elliott’s bomb cyclone 50 mph winds. We saw some storm hedge buying in busheling yesterday and today, but otherwise the threat of the storm appears to have been mostly ignored. In fact, the HRC curve has been under pressure since peaking earlier this week. 

An aggressive seller or sellers appeared mid-day on Tuesday, flipping the screen from green to red.  When the dust cleared, 55,000 tons traded that day, the most since September and second-highest trading volume of the back half of the year. Since Monday’s settlements, the curve has given back $20-$27 depending on the month. However, this storm is on a path to ravage the Midwest, Northeast, and into Canada. At best it will disrupt scrap flows for a few days, and at worst it could shut down a mill or multiple mills like it did in February 2021.  

For some time we have seen flat rolled and imports in sharp decline. November ‘s HR imports were down 50%, or 163,000 short tons, year on year (YoY), while slab imports fell 246,000 tons, or 62%, YoY.  Year to date, slab imports are down 2.5 million short tons, or 44%, YoY. The service center (distribution) channel is also running low on supply, leaving a dearth of domestic iron units heading into Q1. These two supply channels have been flashing empty for months and have followed their respective trends to their lowest levels yet in November.

The one new development has been a shift in expectations from prices will be lower tomorrow, next week, or next month, to prices will be higher next week, next month, etc. We see this shift in expectations in the rebound in physical indices and rallies in the HRC and busheling futures curves. The HRC curve has shifted from contango (upward sloping) to about flat following its $80-$120 rally since Nov. 9 when using today’s settlements.

I can’t help being reminded of a similar shift in the HRC futures curve 10 months ago when the curve shifted from being steeply backwardated to flat just before that little rally that happened in late February and into March.

Earlier today, a Bloomberg article titled Traders’ $129 Billion Commodities Exodus Marks a Historic Shift stated “clearing houses boosting collateral requirements…higher interest rates raising borrowing costs…the liquidity crunch threatens to disrupt already stressed supply chains, fuel inflation and trigger bankruptcies and bailouts.”

Volume and open interest (open interest is the number of outstanding futures contracts, or tons in this case, across a product’s curve) are areas I watch closely as metrics for liquidity, and ones I have been noting for some time are also flashing yellow. Both have declined since the spring, leaving the futures market vulnerable to a serious bout of volatility if an unexpected event, like a bad storm knocking a steel mill(s) offline, or dramatic shift in sentiment, expectations, demand, etc., creates an extreme imbalance between buyers and sellers.

In the chart above, you will see open interest climbing starting in February 2021, as I believe forward buying by original equipment manufacturers (OEMs) flooded into the market. At the moment, open interest remains just off its lows, but by no means is seeing an influx of orders. That is likely because the spot market remains well below the futures curve trading around $800. However, as we move into January, that spread quickly goes away. If the rally continues, then perhaps the curve shifts into backwardation, and another wave of forward buying arrives lifting HR futures higher.

The December busheling future expired last week at $389.61, up $29.89, or 8.3% month on month (MoM), snapping a very painful seven-month losing streak. The January future settled at $433, implying another $43-MoM increase, while February closed above January at $450. Since Nov. 9, the busheling futures curve has gained $50 – $60, depending on the month.    

Flat-rolled prices are rallying globally, with China’s reopening and flood of stimulus set to hit their economy in 1H 2023. Iron ore bounced off its low of $75 on Halloween to then break above its multi-month downtrend. Iron ore has consolidated around $110/t over the past 15 trading sessions, posting a 45% gain off its low.

The shift in Midwest flat-rolled price expectations could be the catalyst that carries the market higher in Q1. When buyers expect prices to be higher tomorrow, etc., they rush in their orders and increase tonnage, i.e., double or over buy. Also, speculators burst into the market like Kramer into Jerry’s apartment on Festivus on Seinfeld. If these two factors manifest themselves, they will rapidly fill the mills’ order books and push lead times out. This could present a nasty situation for those betting on the status quo and holding lean inventory levels.

Has the general assumption in recent months been that flat rolled will be oversupplied and readily available in 2023? If so, have a majority of buyers refrained from locking in contract tons, instead choosing to buy tons in the spot market? What happens if their assumption proves to be not only incorrect, but also that the opposite occurs: that the spot market abruptly tightens up? What happens if demand comes back faster than supply, or if there is an unplanned disruption due to say a winter storm? A big old crazy HR rally is what will happen, so buckle your chinstrap and wait for the holiday dust to clear.  Kickoff 2023 starts on Jan. 9. 

Happy Holidays!! Happy New Year!!!

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 by Feldstein should not be treated as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Views and forecasts expressed are as of date indicated, 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.

By David Feldstein, Rock Trading Advisors

After reaching an all-time high of 174.4 million metric tons in May 2021, global steel output has varied. The lack of consistency has been heavily determined by Chinese production. After declining for 11 straight months through February, driven primarily by Chinese cutbacks, global output then rose from March through May, led again by China.

Since then, production around the world has fluctuated. November’s total global output fell, and though the decline was widespread, it was still led by China. Global output has now dipped repeatedly over the past two months.

Last month, nine of the top 10 steel-producing nations saw production decline vs. October.

When compared to the same year-ago period, results were similar, only three out of 10 saw production totals increase — China, India, and Iran were the exceptions. When compared to the pre-pandemic period of October 2019, global crude steel production was down 5.7%, or 8.5 million metric tons, last month.

China’s steel production in November totaled an estimated 74.5 million metric tons, down 5.3 million metric tons (-6.6%) MoM, but up 5.2 million metric tons (+7.5%) from the same year-ago period. Worldwide steel production, ex-China, totaled 64.6 million metric tons last month, down 9.4 million metric tons (-12.7%) compared to November 2021. Output was also 4.3% MoM in November, or 2.9 million metric tons fewer.

Chinese steel output accounted for 53.6% of worldwide production in November, down 0.6 percentage points vs. October.

As noted, nine out of the top 10 global steel-producing countries saw production decline from October to November. Iran was the sole nation not to report a MoM decline. Iran’s output was unchanged last month when compared to October at 2.9 million metric tons.

The US saw production decrease by 300,000 metric tons, or -4.5% last month.

By David Schollaert, David@SteelMarketUpdate.com

“Specifically, with higher sales volumes and a similar mix of hot-rolled, cold-rolled and coated products, the company expects from its direct carbon steel automotive customers an average selling price of approximately $1,400 per net ton in 2023, compared to an expected full-year 2022 price of approximately $1,300 per net ton,” Cliffs said in a release.

Cliffs said it made the statement based on a large portion of its fixed-price contractual volumes already renewed in its most recent negotiation cycle.

The Cleveland-based steelmaker noted these improved annual fixed prices were independent of the company’s recently announced price increases on spot steel sales, adding that direct carbon automotive sales represent Cliffs’ largest end market, are performed entirely on a fixed-price basis, and are not influenced by spot prices.

In a leading move, Cliffs said Dec. 13 it was hiking spot market base prices for flat-rolled steel by at least $50 per ton ($2.50 per cwt). 

In a research note responding to Cliff’s announcement, Wolfe Research analyst Timna Tanners said steel mills typically don’t provide full-year pricing guidance.

“Announcing prices before finalizing negotiations seems odd, but consistent with management’s stance that it dominated the market and could price separate from weaker spot (prices),” Tanners said.

Cliffs is a major player in supplying the automotive market. 

Usually, higher contract prices follow higher spot prices. But 2022 spot steel prices were well off the record highs seen in 2021. 

Additionally, Cliffs said it has achieved significantly higher contractual fixed prices for its grain-oriented electrical steels for 2023 vs. 2022, as well as meaningful increases in fixed-base prices for its non-oriented electrical steel and stainless steel products, before surcharge impacts.

Fixed-price contracts are expected to represent 40-45% of the company’s steel volumes sold in 2023, and more than 50% of total steel revenue under the current futures curve for US HRC, Cliffs said.

Separately, as a result of lower input costs and normalized repair and maintenance expenses, Cliffs said it also expects significantly lower steelmaking unit costs in 2023 compared to 2022.

By Ethan Bernard, Ethan@SteelMarketUpdate.com

Figure 2 below shows negotiation rates by various products. This week, 58% of hot rolled buyers responded that mills are willing to negotiate lower prices on new orders. This is down from a rate of 71% two weeks ago. Recall that in early November we saw a rate of 96%, which was one of the highest rates seen since February. The last time hot rolled negotiation rates were this low was in April.

Sixty-eight percent of cold rolled respondents reported that mills were willing to talk price this week. This is up from 61% two weeks ago but down from 88% one month prior.

For galvanized steel buyers, 70% responded that mill prices were negotiable this week, down from 83% two weeks ago. Recall that in late October our galvanized negotiation rate reached 96%, the highest rate recorded in more than eight months. As with hot rolled, the last time we saw galvanized negotiation rates this low was in April.

Galvalume negotiation rates tend to be more volatile due to the smaller market size. All of the buyers we polled this week reported that mills were negotiable on new orders. This is up from a rate of 67% two weeks ago.

Negotiations have been slightly less common in the plate market but ticked up in recent weeks: 75% of buyers reported that mills were willing to negotiate in our latest survey. This is down from 77% recorded two weeks earlier but up from 60% one month ago. Plate negotiation rates were as high as 80% in September. Recall we saw plate negotiation rates between 0–18% in March and April.

SMU’s Price Momentum Indicator was adjusted from Neutral to Higher on Dec. 13 for sheet products, in light of recent mill price hikes and extending lead times. Our plate momentum indicator, in contrast, continues to point Lower.

Note: SMU surveys active steel buyers every other week to gauge the willingness of their steel suppliers to negotiate pricing. The results reflect current steel demand and changing spot pricing trends. SMU provides our members with a number of ways to interact with current and historical data. To see an interactive history of our Steel Mill Negotiations data, visit our website here.

By Brett Linton, Brett@SteelMarketUpdate.com