Looking at the chart below of European natural gas futures, you can see some crazy—and I do mean crazy—volatility. If you approached any major consumer of European natural gas in mid-2020 and asked them what their forecast was for gas in 2021 and 2022, they’d probably have given you some number roughly around €12–14 per megawatt hour or maybe a range of €11–15 per megawatt hour if they were expecting significant volatility.

Fast forward to 2022, and we are seeing price levels that are 10-times those prices and are causing all sorts of worries about industrial plant closures (including steel mills), and even worse, the inability to supply enough heat to homes in the coming winter.

We are at unprecedented levels of volatility and price on this contract due to the unpredictability of Russian supplies. And the Russian Federation continues to play politics with its commodity flows to demonstrate the amount of leverage it has over many European countries. Imagine if you were running a company in Europe and had to deal with this kind of price inflation. The chart below displays the Eurozone Producer Price Index.

Costs are out of control and there is uncertainty as to whether they will be able to secure enough natural gas or other commodities to produce goods. We realize that we are biased towards encouraging companies to hedge their commodity exposures, but we have had many events in the past few years that have demonstrated the unpredictability of markets. Whether it was Section 232 tariffs in 2018, the Covid collapse and then massive reflation just after the worst of the pandemic, and now the Russian aggression that is wreaking havoc in commodity markets. The lesson is that most any forecast is likely to be wrong, and by using futures it does bring SOME certainty into your business in a very uncertain world.

The chart below is of US HRC futures, and there really wasn’t much of a move week-on-week, but that is after a huge drop in the nearby months over the past 30 days, where prices moved down by as much as $140–160/ton in some nearby months. If you are running a service center and holding inventory, this is very painful if you are not hedged! The slight move up is interesting—perhaps some traders are speculating on a potential mill price increase.

Busheling futures (below) also haven’t moved much in the past week, but again, the fireworks really took place last month, when June busheling prices fell by more than in any month since 2008. Busheling prices have been awfully hard to predict. One would think that with auto production still lagging, supply would be impacted, and with new mills starting up, demand would be strong, but we just have not seen that play out so far.

Lastly, a word on China is worth adding. The Covid shutdowns in that country have had a negative impact on the economy and are still causing supply chain woes around the world. The government is trying to kick start the economy by announcing a huge infrastructure package ($220 billion), but to be honest, the commodity prices and inventory levels in China aren’t showing much resurgence. In the case of ore, prices have been under intense pressure:

Property markets are in disarray in China, with many home buyers boycotting their mortgages, as projects go unfinished. These mortgage boycotts have now spread to over 300 projects in 91 cities, according to Bloomberg News. While infrastructure spending will help, the property markets are not healthy, and commodity markets aren’t feeling the love from a new Chinese economic upcycle. So, with that, we will close for this week. The world and markets remain highly volatile and unpredictable, but futures markets continue to offer some help in being able to plan in uncertain times. Putin will continue to play his hand as he sees fit, and China will do what China does. While it may be illogical and unlikely, we hope that at some point, everyone just settles down a bit. Have a good weekend!

Disclaimer: The information in this write-up does not constitute “investment service”, “investment advice”, or “financial product advice” as defined by laws and/or regulations in any jurisdiction. Neither does it constitute nor should be considered as any form of financial opinion or recommendation. The views expressed in the above article by Metal Edge Partners are subject to change based on market and other conditions. The information given above must be independently verified and Metal Edge Partners does not assume responsibility for the accuracy of the information.

SMU’s hot rolled lead times now average 3.9 weeks, the first time they have been below 4 weeks since mid-February. HR lead times declined 0.1 weeks compared to two weeks ago and are down from a peak of 5.8 weeks in April. The lowest hot rolled level this year was 3.8 weeks seen in January and in February. The record low in our ~11-year data history was 2.8 weeks in October 2016.

Cold rolled lead times declined 0.1 weeks to 6.0 weeks, now the lowest level seen since early February. Galvanized lead times remained unchanged from earlier this month at 6.0 weeks. They were as low as 6.1 weeks back in March, and our record low was 4.8 weeks in February 2015. The average Galvalume lead time rose from 6.4 weeks to 6.5 weeks. One month ago Galvalume lead times were 6.7 weeks.

Mill lead times for plate are now at 4.8 weeks, down 0.3 weeks from our previous survey and down 0.5 weeks from one month ago. This is the first time plate lead times have been below 5 weeks since early March, and the lowest plate lead time this year was 4.1 weeks in early February. In our four-year history of plate lead times, the lowest we figure we have recorded was 3.2 weeks in May 2020.

Approximately 55% of the executives responding to this week’s questionnaire told SMU they were seeing stable lead times, up from 39% in our previous survey. 45% said lead times were slipping, in line with responses from the last month. Here is what a few of our respondents had to say:

“They are very short and mills can’t let them get any shorter.”

“Mills need orders.”

“For now they seem stable.”

“Order books are weak to nonexistent.”

“Mills will control lead time moving forward by removing capacity.”

“Below normal, but they cannot go down much more.”

“Lead times at mills are low and have very little room to move lower.”

Looking at lead times on a three-month moving average can smooth out the variability in the biweekly readings. As a 3MMA, all products were down between 0.2–0.5 weeks compared to two weeks prior and down as much as one full week compared to mid-June. The current 3MMA for hot rolled is down 0.2 weeks to 4.3 weeks, cold rolled eased 0.2 weeks to 6.4 weeks, galvanized is down 0.3 weeks to 6.5 weeks, Galvalume declined 0.5 weeks to 7.0 weeks, and plate slipped by 0.3 weeks to 5.2 weeks.

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

Commissioning continues on the hot side and tandem cold mill, but the rest of the mill, which is seeing an average run rate of 75-80% when it is running, is fully operational, said chairman and CEO Mark Millett. Once fully operational, the mill will be capable of producing 3 million tons per year of sheet products including hot-rolled, pickled-and-oiled, cold-rolled, and coated products.

“We are wrestling a little uptime in July,” Millett said on the call, noting that a substation arcing issue should be resolved this week. “We have some unique Texas power supply issues right now. And we are seeing some miscellaneous equipment failures that are typical of commissioning an integrated line,” he said.

Extreme summer heat in Texas this week has resulted in energy companies asking consumers to conserve energy so as not to overheat the state’s electrical grid.

Supply chain issues are also aggravating the equipment failures, causing part delays to sometimes take days instead of just hours.

“So we are wrestling with those alligators, not atypical of a start-up of a new plant, but we expect substantial resolution of these issues over the next few weeks,” he commented.

The issues this month have cost the mill 100,000–150,000 tons of production for the year, Millett estimated.

Millett said the surface quality of the sheet produced on the Sinton hot strip mill, which allows for thermomechanical rolling that produces higher strength grades with lower alloy content, has proven to be superior to that of both its Columbus, Miss., and Butler, Ind., mills.

The Sinton mill added 171,000 tons of shipments to SDI’s total Q2 shipments of 3.1 million tons – a company record.

SDI posted record profits in Q2, with net income of $1.21 billion on revenues of $6.21 billion.

By Laura Miller, Laura@SteelMarketUpdate.com

We’ll talk about big topics like whether the economy is in or might be headed for recession. How do such concerns square with what contractors are experiencing right now?

Another key theme: Interest rates are up as The Fed tries to wrestle inflation under control. What kinds of projects are most vulnerable to higher interest rates and slower economic growth?

Remember the Infrastructure Investment and Jobs Act? It became law eight months ago. Has it had any impact on demand for construction projects and materials? And, if not, when can we expect to see that demand kick in?

And we’ll of course take your questions too.

Simonson is in a good position to address them because AGC is the leading association for the construction industry, with more than 27,000 member firms across a range of markets.

As always, we’ll keep it to about 45 minutes. You can drop in, learn something – and then get on with your day.

Finally, check out our Community Chat page, to see recordings of past webinars, including our last one with Mercury Resources CEO Anton Posner.

By Michael Cowden, Michael@SteelMarketUpdate.com

In consideration of freight costs, handling, trader margin, etc., we add $90 per ton to all foreign prices to provide an approximate “CIF US ports price” that can be compared against the SMU US HRC price. Spot checks show freight for Southeast Asian imports into Houston costing between $100–110 per ton, costs for European products between $80–120 per ton, and costs for Turkish steel around $150 per ton. Buyers should use our $90-per-ton figure as a benchmark and adjust up or down based on their own shipping and handling costs as necessary.

If any of our readers have experience importing foreign steel and want to share your thoughts on these costs, we welcome any comments: Brett@SteelMarketUpdate.com.

Note that effective Jan. 1, 2022, the traditional Section 232 tariff no longer applies to most imports from the European Union. It has been replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25% tariff. SMU still includes the 25% S232 tariff on foreign prices from other countries. We do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.

Far East Asian HRC (East and Southeast Ports)

As of Wednesday, July 20, the CRU Far East Asian HRC price declined $46 to $544 per net ton ($600 per metric ton), down $91 per ton from one month prior. Adding a 25% tariff and $90 per ton in estimated import costs, the delivered price of Far East Asian HRC to the US is $770 per ton. The latest SMU HRC price average is $875 per ton, down $35 compared to one week prior and down $165 per ton from one month ago. Therefore, US-produced HRC is now theoretically $105 per ton more expensive than imported Far East Asian HRC, up from a spread of $83 per ton last week, but down from $156 per ton one month ago. This differential has gradually eased since peaking at $375 per ton in early May. This is the 19th consecutive week foreign steel prices have held this price advantage. The largest price spread between these regions was $847 per ton in September 2021, when Far East Asian prices held a considerable advantage.

Italian HRC

CRU published Italian HRC prices at $704 per net ton ($776 per metric ton), down $5 per ton from last week and down $128 per ton from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $794 per ton. Accordingly, domestic HRC is now theoretically $81 per ton more expensive than imported Italian HRC, down from $111 per ton one week prior and down from $118 per ton four weeks ago. The highest spread this year was $200 per ton in mid-May. This is the 18th consecutive week foreign steel prices have held this price advantage. Prior to removal of the 25% Section 232 tariff, the November 2021 spread of $577 per ton was the largest in SMU’s data history.

German HRC

The latest CRU German HRC price is $771 per net ton ($850 per metric ton), up $1 per ton from last week, but down $82 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $861 per ton. Accordingly, domestic HRC is theoretically $14 per ton more expensive than imported German HRC. This is down from a spread of $50 per ton one week prior, down from $97 per ton four weeks ago, and down from the 2022 high of $164 in mid-May. This is the 14th consecutive week foreign prices have held this competitive advantage. Prior to removal of the 25% tariff, the October 2021 spread of $504 per ton was the largest seen in SMU’s data history.

The graph below compares all four price indices and highlights the effective date of the tariffs. Foreign prices are referred to as “equalized,” meaning they have been adjusted to include importing costs (and tariffs in some cases) for a like-for-like comparison against the US price.

Note: Freight is an important part of the final determination on whether to import foreign steel or buy from a domestic mill supplier. Domestic prices are referenced as FOB the producing mill, while foreign prices are CIF the Port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Inland freight, from either a domestic mill or from the port, can dramatically impact the competitiveness of both domestic and foreign steel. When considering lead times, a buyer must take into consideration the momentum of pricing both domestically and in the world markets. In most circumstances (but not all), domestic steel will deliver faster than foreign steel ordered on the same day.

By Brett Linton, Brett@SteelMarkeUpdate.com

Shotcrete is a significantly shorter and less expensive process than a full reline.

The work was originally scheduled for mid-October.

Mon Valley Works has two blast furnaces: No. 1 and No. 3. The No. 1 furnace has daily ironmaking capacity of approximately 3,200 tons. The No. 3 furnace has daily capacity of approximately 2,900 tons.

The furnaces are located at US Steel’s Edgar Thomson plant in Braddock, Pa. That facility makes slabs and rails them to the company’s Irvin Plant in West Mifflin, Pa., where they are rolled into sheet.

SMU has updated its blast furnace status table, found by clicking here, to reflect the development.

By Michel Cowden, Michael@SteelMarketUpdate.com

Lower sequential shipments and selling prices are expected from its sheet and plate mills in the current quarter, while earnings within the raw materials segment should improve on higher DRI pricing.

Nucor’s earnings totaled $2.56 billion on the quarter, an increase from the $2.1 billion posted in the first quarter and the $1.51 billion seen in Q2 2021. Q2 net sales rose 34% year-on-year to reach $11.79 billion.

Compared to the same quarter last year, shipments of sheet products were 1% higher at more than 2.9 million tons, while most other products saw year-on-year declines. Bar shipments were down 6% to 2.27 million tons, structural shipments were down 8% to 624,000 tons, and plate product shipments fell 21% to 474,000 tons. Shipments of other steel products, meanwhile, rose 21% to 143,000 tons.

Q2 operating rates at the company’s steel mills reached 85%, up from 77% in Q1 but down from 97% in the year-ago quarter.

Earnings per diluted share beat previous estimates, as “Nucor’s second quarter earnings of $9.67 per diluted share and first half earnings of $17.30 per diluted share both represent new records. Nucor’s differentiated business model is yielding exceptional results,” president and CEO Leon Topalian said.

“We believe that 2022 will be the most profitable year in Nucor’s history,” Topalian noted.

By Laura Miller, Laura@SteelMarketUpdate.com

Leaders of the bipartisan Steel Caucus in attendance included Chairman Representative Frank Mrvan, D-Ind., Chairman Representative Conor Lamb, D-Pa., Vice Chairman Representative Mike Bost, R-Ill., and Vice Chairman Representative Rick Crawford, R-Ark. Numerous other members of the Caucus who support the industry in their congressional districts also made appearances.

Witnesses testifying on behalf of the US industry were: Lourenco Goncalves, chairman, president and CEO of Cleveland-Cliffs; Al Behr, executive vice president of Nucor Corp.; Richard Fruehauf, senior vice president of US Steel Corp.; Tracy Porter, executive vice president of Commercial Metals Co.; Anthony Frabotta, executive vice president of Zekelman Industries; and Thomas Conway, international president of the United Steelworkers union.

Representatives of the steel producers touted the incredible investments their companies have been making, noting that the Section 232 tariffs and trade remedy laws have been particularly useful in helping to make this happen. They encouraged the lawmakers to continue supporting laws to ensure fair trade and create a level playing field for the industry.

“Section 232 measures have helped to restore balance to the US market and to create the conditions necessary for the industry to begin recovering and reinvesting,” commented CMC’s Tracy Porter, who noted that CMC has a third micro mill currently under construction in Mesa, Ariz., and is planning a fourth micro mill in the eastern US.

Nucor’s Al Behr lauded the Charlotte, N.C.-based company’s more than $12 billion investments to expand its steelmaking capabilities and to target new growth areas for steel demand. Of note, he said, are its Brandenburg, Ky., plate mill which will begin operating later this year, the groundbreaking of a new sheet mill in Mason County, W.Va., which will soon take place, and a new rebar micro mill in Lexington, N.C. Nucor employes some 31,000 workers, Behr noted.

Behr said that Nucor has reached a 50-year milestone of being listed on the New York Stock Exchange and will celebrate with the ringing of the closing bell on Tuesday, July 26. Nucor’s production capacity during that time has grown from 138,000 tons of bar at one mill to over 25 million tons of bar, sheet, plate, and structural steel at 25 mills.

The investments of note for US Steel, which employs some 24,000 workers, include the $3 billion mill in Osceola, Ark., currently under construction near its Big River Steel operations, a new pig iron caster at the Gary Works in Indiana, and a DR-grade iron ore pellet production system at one of its two Minnesota mines, Fruehauf said.

The leaders noted some of the hard lessons learned during the pandemic and what can be done to address these issues.

“The pandemic taught us that developing strong, resilient domestic supply chains for critical materials like semiconductors is vital. Reshoring semiconductor production presents tremendous potential for unleashing a manufacturing renaissance in the United States,” Nucor’s Behr stated in his testimony.

“The pandemic and economic recovery have emphasized the critical importance of retaining and rebuilding domestic supply chains. We need American-made steel to rebuild and supply American-made manufacturing,” US Steel’s Fruehauf stated.

“As the American vehicle fleet electrifies, we have a unique opportunity to build the entire EV supply chain in the US… for this electrification revolution to succeed, however, we have an urgent need to re-shore production of microchips and many other manufactured components. I implore Congress to pass the CHIPS Act now – that’s a good start,” Cliffs’ Lourenco commented.

“Although both the US and the world’s economy are being stressed in significant ways, the fundamentals of the domestic steel industry are strong because of cooperation between industry, government, and labor,” the USW’s Tom Conway told Congress, noting the incredible possibilities for the industry through increasing domestic iron and steel procurement. He encouraged the Congressional representatives to support stronger procurement rules using Build America, Buy America (BABA).

By Laura Miller, Laura@SteelMarketUpdate.com

“Customer order entry activity continues to be healthy across all of our businesses, conflicting with the more pessimistic emotion in the marketplace,” SDI chairman, president and CEO Mark Millet said in commentary released with second quarter earnings data on Wednesday, July 20.

“Despite softening flat-roll steel pricing, our steel order activity remains solid from the automotive, construction, and industrial sectors, with energy continuing to improve,” he said.

SMU’s hot-rolled coil price stands at $875 per ton ($43.75 per cwt), the lowest level since December 2020 and down 41% from a post-Ukraine war peak of $1,480 per ton in mid/late April.

By the Numbers

All told, SDI recorded net income of $1.21 billion in the second quarter of this year, up 72% from $702.3 million in the same quarter last year on revenue that increased 39% to $6.21 billion over the same period.

Operating income from SDI’s steel division – its largest business unit – was $1.11 billion in Q2’22, up a comparatively modest 9% from $1.02 billion in Q2’21. One reason for that: Average steel selling prices were $1,539 per ton in the second quarter, down $22 per ton from the first quarter. Average ferrous costs, meanwhile, were $538 per ton, up $64 per ton from the prior quarter, the company said.

But SDI made up for any margin pressure with increased shipments. External shipments weighed in at 3.11 million tons in the second quarter of 2022, up nearly 8% from 2.89 million tons in year-ago quarter.

Lower growth rates in steel were also more than offset by a stellar showing from the company’s fabrication segment, which recorded operating income of $599.2 million in the second quarter of this year, up 21-fold from $28.45 million in the year-ago quarter. Strong non-residential construction demand has led to a near-record backlog and higher forward pricing for the fabrication division. And that momentum is expected to continue into 2023, SDI said.

Operations Update

SDI said it reached a run rate of 80% at the hot mill at its electric arc furnace sheet mill in Sinton, Texas in the second quarter.

But Sinton experienced setbacks this month because of unexpected power and equipment problems. Those have resulted in less operating time in July. “The team expects to realize meaningful improvement for the remainder of the year,” Millett said.

He also reiterated his excitement about the company’s $2.2 billion expansion into finished aluminum products with a planned new aluminum rolling mill slated for the southeastern US.

By Michael Cowden, Michael@SteelMarketUpdate.com

Steel Market Update’s (SMU) most recent check of the market on July 19 places plate prices between $1,740-1,860 per net ton ($87-93/cwt) with an average of $1,800 per ton ($90/cwt) FOB mill, according to our interactive pricing tool (Figure 1).

SMU’s average plate price of $1,800 per ton ($90/cwt) has not moved in three weeks and is only down $30 per ton ($1.50/cwt) over the past eight weeks. SMU’s HRC price, in contrast, has declined by roughly $315 per ton ($15.75/cwt) over the same period, falling from an average of $1,190 per ton in early June to $875 per ton, FOB mill, on July 19.

The historical delta between HRC and plate prices has hovered on average around $100-200 per ton. The delta presently stands at $925 per ton – an all-time high for SMU’s price tags and the market overall. A comparison between plate and HRC prices is shown in Figure 2 below. Also shown is the delta spread over the past two years.

  

Though prices have been stable of late, our price momentum indicator on plate steel is pointing lower, because we expect prices to decrease over the next 30 days, given current market sentiment.

SMU sources generally agree that the steel plate market is stable. Demand is likely to tail off slightly while prices should correct and follow a similar move seen across sheet and coated products. The decline is not expected to be as precipitous as we’ve seen for HRC.

The bulk of plate transactions are running at the top of SMU’s range, in line with published and ‘unofficial’ prices from the likes of Nucor, Cleveland-Cliffs, and SSAB. But some deals are being confirmed at the lower end of the range for standard volumes. Import offers are presently between $1,400-1,460 per ton ($70-73/cwt), DDP US port, for late fourth quarter arrival.

Sources have also noted that some mills seem more willing to negotiate, a trend not seen in quite a while for plate products.  

While cut-to-length and discrete plate lead times are running between 4-7 weeks, a number of sources stated that in many cases plate is arriving sooner, between 3-4 week lead times. This is another indicator that fundamental steel plate demand is steady but slowing down.

Current plate premiums are not expected to last. The existing spread is unsustainable, according to several SMU sources. The tightening spread will likely be driven by declining plate prices rather than rebounding HRC tags. But sources stress the decline will be controlled. Most speculate that plate places will fall by approximately $50 per ton ($2.5/cwt) per month between now and the end of the fourth quarter.

By David Schollaert, David@SteelMarketUpdate.com

I used to tell the story to students in our Steel 101 Workshops about having discovered a customer was being taken advantage of by another supplier and how I handled the situation. At the end of the story, I asked the question: How do you tell your customer that he/she is stupid? What I didn’t say in last Sunday’s article is: I would end the session by telling students that if I ever write a book about my sales career the title would be, “The Salesman Is Not Your Friend, the Purchasing Agent Is Not Your Buddy.”

Lesson Learned #2 – Opportunity is Not an Individual Sport

As I look back over the 45 years, there was a fair number of fortuitous events in my life which put me in the right place at the right time. Once in the right place, I made the most of the opportunities presented to me. I found mentors and always tried to learn more about how to improve my limited skills, and to better communicate with my customers and those around me (this was always a work in progress). I got fired at the right time (even if for the wrong reasons), and never burned a bridge behind me.

From my perspective, I was a mediocre sales guy who, for many years, had a good team around him, and I was driven to succeed even when the path to success was full of brambles and pitfalls.

For some odd reason I was able to recognize opportunities and market niches that weren’t clear to others, or that were too complicated for the competition to solve. This is something I have been blessed with throughout much of my active selling career and then transitioned my talent for sensing missing needs into the development and growth of Steel Market Update.

Here is one example: In the mid-1980s, I was working at Pacesetter Steel. Pacesetter was transitioning from being primarily a HVAC-driven company into having a much larger role in the OEM segment of the industry. Through sheer luck (a fortuitous event) I managed to acquire the rights to sell Carrier Corp. across most of the country.

One day I received a call from a Carrier plant in Brazil. The young man on the phone told me they were in immediate need of a few thousand tons of prime galvanized steel. Much of it needed to be AKDQ (now referred to as DDS, or deep drawing quality), extra smooth, non-chemically treated, for a post-paint application. At that point, I was unaware of Pacesetter having ever sold a ton of steel outside of North America.

The next day I received a call from Carrier’s corporate headquarters in Syracuse, New York. The corporate head of purchasing was calling me to inquire why I had not responded to their purchasing agent in Brazil?

Now in the mid-80s there was not much in the way of exports of prime flatrolled from the US to South America. Brazil was especially tough as the government there had restrictions on the importation of steel (as in basically none being allowed). Their steel industry was protected.

However, there was a dispute at one of the main steel mills that resulted in workers being injured by government troops and the plant was damaged by the workers which impacted the ability of that mill to supply prime galvanized to their local customers.

If my memory is correct, Carrier gave me just a few days to solve their problem. I knew we weren’t the only ones working on getting them steel, but for some reason I had confidence we could do it. First, we had some steel on our plant floors that met the specifications. What we didn’t have on the floor, we had orders with domestic steel producers that I thought we might be able to change. I spoke with Steve Leebow (Pacesetter’s owner) about the opportunity and, although he was somewhat skeptical, he felt his relationships with the steel mills were strong enough for him to get the orders changed to what was needed. First, we needed to get the orders.

You see, we not only had to get the steel produced, we had to find a ship to carry it to Brazil, we had to find a way to get the steel packaged for ocean travel, get credit approval, and we had to coordinate the entire order so that it was on the dock at a specific port, with all the correct documentation, in time to make the vessel. Pacesetter had never done anything like this before.

It is here that I must credit one of the best friends I have ever had in the steel industry, and someone I learned to love to travel with – Keith Hanzi. Keith was the head of technical services at Pacesetter. Keith was able to locate a mothballed packaging line in Baltimore, Md. We needed to get the coils wrapped in metal containers for the trip. He was able to convince the company who owned the line to start it up for us and to begin packaging the coils we were to ship to them within a few days’ time. Rather fortuitous, if I don’t say so myself.

Next, we had to find a ship. With a little research we learned of a company called AMTRANS, which was an American flag carrier that brought shoes from Brazil to the US. Most of the containers were going back to Brazil empty, and they were going to the right port in the very southern portion of Brazil close to the Uruguay border. AMTRANS was very happy to have Pacesetter as a customer.

I worked closely with Steve Leebow who was masterfully able to not only get existing purchase orders changed to the new specifications, but to also get the mill to roll the material within literally days, and then move the material to Baltimore where it could be packaged.

As a company Pacesetter worked as one on this project – the logistics were daunting, we were working with international letters of credit, coordinating with mill sales and production, rerouting delivery points to Baltimore for orders that were originally scheduled to ship to other Pacesetter locations, quality assurance because this was not easy steel to make (unlike today), relying on a third-party to package the steel correctly and timely, and working directly with Carrier in both Brazil and New York as we negotiated pricing and the actual purchase orders.

It worked. We shipped on time. We delivered on time. Carrier got the Brazilian government to allow the material into the country. Keith Hanzi and I got the adventure of our lives as we were able to travel to Brazil to see the customer and our steel in their plant. We made many shipments to Brazil over the next couple of years. I smashed all the sales and profit records at Pacesetter.

The process of making this piece of business happen, and then to continue for many months, gave me insights into how to look at a problem and turn it into an opportunity. It also made me realize that I could be a driven salesman with my own end goals, but also how important it was to work as a member of a team with a company goal, and to recognize everyone within the team for their contribution to the success of the company.

2022 Steel Summit Update

There are now 33 days to go before the start of this year’s SMU Steel Summit Conference. You can learn more about our agenda, the attendees, speakers, and how to register by clicking here.

Last year we had slightly over 1,100 executives who attended the SMU Steel Summit. Of those, approximately 200 were virtual. Registrations this year are slightly ahead of the pace of last year, and all of the attendees will be in Atlanta. We currently have 950 executives registered representing 344 companies. 

NexGen Leadership Award nominations are now closed. We had a late burst in nominations, and we are very pleased with both the quality and quantity of the nominees this year.

I hope to see you in Atlanta!

As always, your business is truly appreciated by all of us associated with Steel Market Update.

John Packard, SMU Founder

John@SteelMarketUpdate.com

The ITC found that the domestic industry would be likely to suffer continuing injury should the antidumping duty orders on CR sheet from China, India, Japan, South Korea, and the UK be revoked. Therefore, the duties which were originally imposed in 2016 will remain in place for those countries for at least another five years.

At the same time, the Commission found that removing both antidumping and countervailing duties on CR imports from Brazil would not be likely to lead to the continuation or recurrence of injury to the domestic industry. Thus the duties, which have been in place for just five years, will now be revoked. CR steel flat products may now be imported from Brazil without being subject to antidumping or countervailing duties.

The ITC will release its full public report on these reviews by August 17, 2022.

The Commission also recently determined that import duties on corrosion-resistant steel products should not be allowed to sunset.

By Laura Miller, Laura@SteelMarketUpdate.com

Recently I was asked to reflect on my 45 years in the steel industry and to provide some insights as to what were the most important lessons I learned over my career.

The simple response is to say honesty is the key to success.

Honesty, after all, is a moral choice. I have found one sleeps better at night, and ultimately one does better at business, by being honest and letting the “gray” business go elsewhere.

There are times when you are confronted with problems that define who you are, and ultimately your relationship with your customer. It doesn’t always go the way you think it should.

I think one of the most important lessons I learned is depicted in the following true story.

Early in my career with Pacesetter Steel, I handled several HVAC (heating, ventilation, air conditioning) companies. I had one customer who I had become personally close to. We had a special relationship. The two partners and their wives attended my wedding, and when I was in town to visit them, they went out of their way to make sure we did something special.

As a customer they were the best kind – consistent buyers of as many as 10-15 truckloads of steel monthly. I supplied most of the steel they purchased.

This went on for a couple of years before I noticed their tonnage beginning to wane. What was once 10-15 truckloads had dropped to 5-6 truckloads. Yet their overall business continued to boom.

I asked them why their tonnage had dropped, and they told me a competitor had come in and undercut my prices. In some cases, the prices were as much as 10 percent below our quoted numbers.

This concerned me in a couple of ways. First, I was surprised they did not inform me when they got lower offers so I could adjust my prices or determine what I needed to do to compete. Second, since we were one of the largest sellers of prime galvanized, I realized something fitting in that “gray” area must be in play for our company to be so uncompetitive.

I suspected that the competitor had adjusted the billing method from actual weight to nominal weight. By moving to nominal weight (which is a theoretical calculation), they were able to lower the per hundredweight pricing. The result: when compared against someone quoting actual scale weight, it appeared their prices were lower.

I asked one of the owners (who bought the steel) to give me four or five random coils with the gauge, width, and linear footage. On purpose, I did not ask for the billing weight of the coil.

As I suspected, when I ran the calculations using the nominal density factor for each coil provided, I was able to accurately calculate the billing weight of each coil on his invoice. The competitor had switched the billing method without advising the customer in order to secure the business.

I remember sitting back in my office chair and thinking to myself, what do I do now? If you were in my seat, what would you do?

Sure, it’s easy to say they have been duped by my competitor. But isn’t that just another way of telling your buyer that he is stupid for letting this happen? What happens to our relationship once I inform him of his blunder?

The buyer was a good man. An honest man. He didn’t weigh his steel, and, in the process, he became susceptible to being taken advantage of. Innocence lost.

I provided the tools necessary for the customer to do the calculations on his own. In the process, he discovered there were many truckloads of steel where the steel was billed on a nominal weight basis. The other supplier returned a large sum of money to the customer, but the relationship between us changed. After all, it was I who raised the veil and took away his innocence.

You would think I would have been treated as a hero. For a few months, the customer came back and was buying 10-15 truckloads monthly as before. But it wasn’t too long before the competitor was able to worm their way back as a supplier.

I didn’t understand right away. There are those who want to believe that what they hear is the truth. Those who provide information that differs from their pre-conceived notion become the bad guy in this story.

As I look around the world today, there are many examples of those who believe the competitor’s “spin” – and providers of facts or differing opinions are now the bad guys.

Would I have done anything differently when confronted with a competitor who was misrepresenting steel to a customer? No, taking the moral high road is always the best route. Even so, understand that sometimes facts are not welcomed with open arms.

We are now 35 days before the start of the 2022 SMU Steel Summit Conference. This will be my last Steel Summit Conference, and I am looking forward to seeing as many of our readers, and some of my old steel customers, as possible. You can add your name to the list by clicking here.

As always, your business is truly appreciated by all of us associated with Steel Market Update.

John Packard, Founder

John@SteelMarketUpdate.com

SDI’s steel business already has them connected with automotive and general metal fabrication accounts that cross-over into the aluminium flat-rolled space. New to can making, SDI will need to connect with the North American can sheet customers as domestic demand has outgrown domestic supply. The stopgap import supply measures are expensive for can makers. Import supply chains from Asia and the Middle East are difficult to sustain as transit costs and geopolitical unrest create untenable risk. Yet, today’s import supply sources will not quit the field and cede to these new domestic producers. CRU’s forecast for this new supply volume and our demand forecast for can sheet move from deficit to neutral through 2027 based on the projections provided by Novelis, Manna Capital Partners and Ball Corp. (Manna-Ball), and now SDI. 

SDI’s first production will target general fabrication common alloy customers, service centers, and non-exposed automotive applications. These less technical applications will begin to produce the accretive value in 2025 that SDI is using in their investment rationale. Can sheet and automotive body sheet will develop per the requisite qualification process requirements.

Focusing their secondary metals expertise and operational synergies, SDI is planning to build its mill in the US southeast and support it with recycling and slab casting operations in the US southwest and Mexico, where both Novelis and Manna-Ball have found their rationale for a supply base. SDI’s deep secondary metal position sits at the core of this project’s value creation and recognizes perhaps both its strength, and the exposure other aluminum sheet producers have as energy costs curtail some US primary smelting capacity and raise the stakes on secondary metal processing.

As the SDI project progresses, alongside the Novelis Bay Minette and the Manna-Ball Las Lunas mills, CRU will continue to track their operational readiness and forecast the supply-demand balances in these key end use markets. The Aluminum Beverage Can Market Outlook, September 2022, will continue to feature new investments and their global impact.

By Stephen Williamson, stephen.williamson@crugroup.com

The union said in an update to members that the votes would be held after details of the agreement were presented to members on Thursday, July 21.

The Sault Ste. Marie, Ontario-based steelmaker confirmed those dates in a press release on Wednesday, July 20.

The current labor agreements between Algoma and its two local USW chapters expires on July 31.

Algoma, a Canadian sheet and plate mill, is represented by two unions: Local 2724, which represents salaried workers, and Local 2251, which represents hourly workers.

Talks are still ongoing between Algoma and Local 2251, the company said.

“We are pleased that we have reached a tentative agreement with our salaried union,” Algoma president and CEO Michael Garcia said in a statement. The development “sets out the process to transition the workforce to electric arc steelmaking.”

Local 2251 plans to hold a special membership meeting on July 27 to vote on a tentative agreement if one has been reached by then. If one has not been reached, Local 2251 will then advise its members on what steps to take next. If a strike vote were to be recommended, that vote would take place on July 30 – the day before the current contract expires, according to an update to union members.

Algoma’s transition to EAF steelmaking – necessary to achieve decarbonization goals – has been contentious among Local 2251 because it would obsolete the need for the coke batteries, and associated jobs, used to make steel via the integrated route.

“Theoretically, if they go 100% EAF, you have no more coke ovens and no more iron making. And all the service groups – maintenance, transportation, etc. – that we use to process that,” Local 2251 president Mike DaPrat said in an interview with SMU last summer. He estimated that potential job losses from switching to EAF steelmaking “would probably be in the hundreds.”

Algoma is an important supplier of sheet and plate not only to Canada but also to the Midwest and Great Lakes regions of the US.

By Michael Cowden, Michael@SteelMarketUpdate.com

June sales fell 5.4% from May to a seasonally adjusted annual rate of 5.12 million units. Total registered sales were down by 14.2% from 5.97 million a year ago.

“Falling housing affordability continues to take a toll on potential home buyers,” NAR chief economist Lawrence Yun said. “Both mortgage rates and home prices have risen too sharply in a short span of time.”

The median existing-home price jumped 13.4% from June 2021 to $416,000. All regions posted increased pricing last month, marking the 124th straight month of year-over-year gains, and the longest-running streak on record.

“Finally, there are more homes on the market,” Yun said. “Interestingly, though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”

Total housing inventory at the end of June rose 9.6% from May to 1.26 million units and was up 2.4% from one year ago. Inventory is at a 3.0-month supply at the current sales pace. That’s up from 2.6 months in May and up from 2.5 months YoY. Properties averaged 14 days on the market in June. That’s two days less than May’s total, and down from 17 days versus the same period a year ago.

NAR reports that 88% of homes sold in June were on the market for less than a month. First-time buyers accounted for 30% of sales last month, down from 27% in May and down from 31% a year ago.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.52% in June, up from 5.23% in the month prior. The average commitment rate across all of 2021 was 2.96%.

“If consumer price inflation continues to rise, then mortgage rates will move higher,” Yun added. “Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”

Regionally, existing-home sales in the Northeast were unchanged in June at an annual rate of 670,000, falling 11.8% YoY from June 2021. The median price in the Northeast was $453,300, a 10.1% increase from one year ago.

In the Midwest, sales were down 1.6% MoM to an annual rate of 1,230,000 in June. They were down 9.6% YoY. The median price in the Midwest was $306,900, up 10.2% from one year before.

In the South, sales retreated 6.2% MoM to an annual rate of 2,260,000 and were down 14.1% YoY. The median price was $374,900, a 16.8% jump from one year ago. For the tenth consecutive month, the South recorded the highest pace of price appreciation versus the other three regions.

Existing-home sales in the West shrank 11.1% MoM to an annual rate of 960,000 in June. They were also down 21.3% YoY. The median price in the West was $624,000, an increase of 9.6% YoY.

By David Schollaert, David@SteelMarketUpdate.com

Busheling scrap prices settled earlier this month at $505 per gross ton for July, down $130 per ton from June and down $270 per ton from April’s historic high. Compared to one year prior, July busheling prices are down $165 per ton. (Prior to this year, the previous high for busheling was $670 per ton in July and August 2021). Figure 1 shows price histories for each product.

Converting scrap prices to dollars per net ton for an apples-to-apples comparison, the differential between hot rolled coil and busheling scrap prices is now $424 per net ton, as shown in Figure 2. The spread has averaged $454 per ton over the last four weeks, having peaked at $815 per ton in early May. Recall we saw an 18-month low spread of $375 per ton in early March, and a record-high spread of $1,428 per ton six months prior to that. This time last year, the spread was $1,252 per ton, while in July 2020 it was just $212 per ton. For comparison, the average spread throughout 2021 was $1,080 per ton, with 2020 averaging $310 and 2019 averaging $324.

PSA: Did you know our Interactive Pricing Tool has the capability to show steel and scrap prices in dollars per net ton, dollars per metric ton, and dollars per gross ton?

Figure 3 explores this relationship in a different way – we have graphed the spread between hot rolled coil and busheling scrap prices as a percentage premium over scrap prices. HRC prices now carry a 73% premium over prime scrap, having reached 106% in early May. Back in early March, the premium reached a multi-year low of 43%, having fallen from a record 236% last October. This time last year, HRC held an average premium of 172% premium over scrap, while July 2020 saw an average of 66%. HRC held the lowest premium over busheling scrap back in November 2011, when it reached 29%.

This comparison was inspired by reader suggestions; if you would like to chime in with topics you want us to explore, reach out to our team at News@SteelMarketUpdate.com.

By Brett Linton, Brett@SteelMarketUpdate.com

Adding a high-quality, low-carbon flat-rolled aluminum mill to the Fort Wayne, Ind.-based company’s portfolio is “incredibly exciting” because it broadens SDI’s ability to serve both new and existing customers, he said.

The proposed $1.9 billion aluminum flat-rolled mill will be located in the southeastern US, with an annual production capacity of 650,000 tons of finished products. It will serve the beverage, automotive and common alloy sectors. Commercial production is expected to begin in the first quarter of 2025, the company said.

Aluminum sheet has been on SDI’s radar for many years. A significant and growing North American supply deficit in flat-rolled aluminum makes this an ideal time for SDI to enter the market, Millett said.

“I believe it’s low risk and as high as a margin-enhancing opportunity there is,” he said, noting that that investment would diversify the company’s product portfolio and provides protection against market cycles.

Two-thirds of SDI’s customers are already aluminum consumers, executives said during the call. That means “it’s a no-brainer” for the company to enter into a business that’s “significantly underserved,” Millet said.

“We see it as an adjacent business to our highly successful steel operations with considerable overlap in process, operation know-how, commercial approach, and raw material supply,” he added.

Recall that SDI owns metals recycler OmniSource Corp., which it acquired in 2007. All recycled aluminum requirements will be supplied through its recycling platform – the largest non-ferrous metals recycler in North America, Millett said. The investment in aluminum also capitalizes on SDI’s recent acquisitions and growth in Mexico.

Case in point: SDI in May acquired Mexican ferrous and nonferrous scrap recycler Roca Acero SA de CV. Those operations currently ship approximately 575,000 gross tons of scrap annually and have processing capabilities of roughly 850,000 gross tons per year.

Thus, the construction of two additional satellite recycled aluminum slab centers will be strategically located in the southwestern US and in Mexico.

Analysts on the call asked SDI why it had undertaken a greenfield project instead of acquiring an existing operation. Company executives said legacy costs, expenses, and the inefficiencies of aging mills in the aluminum industry would be counter to the company’s DNA.

“It’s what we do. We build higher-attuned quality assets that melt, cast, and roll – and then we operate them better than anyone else,” said Millett.

For Millett, a greenfield project leverages SDI’s “core strengths” – including design, procurement, and a construction team well-versed in such big projects. “They have constructed three very large mill assets and about 15 coating lines. We have great experience in fast-tracking projects and … mills that start up in short order.”

As was the case with SDI’s electric-arc furnace (EAF) sheet mill in Sinton, Texas, the company will be inviting customers to co-locate on its campus. Doing so will provide significant freight and yield savings as well as something of a closed-loop recycling system. That will dramatically reduce its carbon footprint, company executives said.

The aluminum flat-rolled mill has an expected production mix of 45% canned sheet, 35% auto, and 20% common alloy. SDI expects to first penetrate the common alloy/industrial market followed by the beverage container sector. SDI anticipates that automotive certification and automotive product to be fast-tracked.

“I expect structural aluminum products for automotive to be certified within our first year followed by higher qualities in the second and third years,” said Millett. “We are targeting exposed and unexposed products.”

There is a supply deficit driven primarily by beverage cans but supplemented by the automotive sector, which is constrained by its lack of supply for EV production, he said.

SDI estimates a 2 million metric ton supply deficit even when taking into consideration new capacity from Novelis Inc. as well as from Manna Capital Partners and Ball Corp. Those expansions are expected to come online near or around the same time as SDI’s project. Company executives also think the need for aluminum is growing.

“What excites me is we are probably entering a market that’s under-subscribed,” Millett said. “So to have all our differentiated attributes and to get into this business at a low-cost position is extremely exciting for us.”

Millett was also quick to note that the investment in aluminum rolled products is not due to a lack of opportunities in steel.

“Absolutely not,” Millett said. “We have ongoing growth activities with four coating lines – two galvanizing and two paint lines – currently under construction, and we see continued opportunities in steel.”

“This is not a change in strategy, it’s an alignment with the addition of an adjacent growth platform,” he added. “It’s not one or the other. They will grow in parallel.”

“We can’t overemphasize we have the raw material expertise and the raw-material base, and we have a large component of the customer base,” SDI CFO Theresa Wagler said. “We don’t have can customers today, but we will have them tomorrow. This is really aligned with what we do.”

By David Schollaert, David@SteelMarketUpdate.com

SMU’s hot-rolled coil prices now stand at $875 per ton ($43.75 per cwt), down $35 per ton from last week and down $605 per ton from a post-Ukraine war peak of $1,480 per ton.

HRC prices, in other words, have fallen an average of $46.50 per ton each week over that period.

While some market participants continued to report prices above $900 per ton, others said that prices in the low $800s per ton were widely available from domestic mills – and that it was not necessary to order thousand of tons to attract such prices.

Prices for cold rolled (down $50 per ton this week), galvanized (down $65 per ton) and Galvalume (down $70 per ton) came down even more sharply than those for hot band.

Plate prices remained flat despite continued drops in coil prices, although some market participants said it was only a matter of time before plate follows sheet downward.

SMU prices momentum indicators remain on Lower, meaning we expect prices to decline in the next 30 days.

Hot Rolled Coil: SMU price range is $800-950 per net ton ($40.00-47.50/cwt) with an average of $875 per ton ($43.75/cwt) FOB mill, east of the Rockies. The lower end of our range decreased $40 per ton compared to one week ago, while the upper end decreased $30 per ton. Our overall average is down $35 per ton from last week. Our price momentum indicator on hot rolled steel points to Lower, meaning we expect prices to decrease over the next 30 days.

Hot Rolled Lead Times: 3-6 weeks* (preliminary ranges from our ongoing market survey, final lead times data will be released on Thursday)

Cold Rolled Coil: SMU price range is $1,230-1,410 per net ton ($61.50-70.50/cwt) with an average of $1,320 per ton ($66.00/cwt) FOB mill, east of the Rockies. The lower end of our range decreased $70 per ton compared to last week, while the upper end decreased $30 per ton. Our overall average is down $50 per ton from one week ago. Our price momentum indicator on cold rolled steel points to Lower, meaning we expect prices to decrease over the next 30 days.

Cold Rolled Lead Times: 4-9 weeks*

Galvanized Coil: SMU price range is $1,220-$1,410 per net ton ($61-70.50/cwt) with an average of $1,315 per ton ($65.75/cwt) FOB mill, east of the Rockies. The lower end of our range decreased $110 per ton compared to one week ago, while the upper end decreased $20 per ton. Our overall average is down $65 per ton from last week. Our price momentum indicator on galvanized steel points to Lower, meaning we expect prices to decrease over the next 30 days.

Galvanized .060” G90 Benchmark: SMU price range is $1,317-1,507 per ton with an average of $1,412 per ton FOB mill, east of the Rockies. Effective this week, we have decreased the galvanized extras used in our benchmark prices from $106 to $97 per ton, in response to the revised US Steel galvanized coating extras.

Galvanized Lead Times: 3-8 weeks*

Galvalume Coil: SMU price range is $1,200-1,400 per net ton ($60-70/cwt) with an average of $1,300 per ton ($65.00/cwt) FOB mill, east of the Rockies. The lower end of our range decreased $140 per ton compared to last week, while the upper end remained unchanged. Our overall average is down $70 per ton from one week ago. Our price momentum indicator on Galvalume steel points to Lower, meaning we expect prices to decrease over the next 30 days.

Galvalume .0142” AZ50, Grade 80 Benchmark: SMU price range is $1,494-$1,694 per ton with an average of $1,594 per ton FOB mill, east of the Rockies. Effective this week, we have decreased the Galvalume extras used in our benchmark prices from $319 to $294 per ton, in response to the revised US Steel Galvalume coating extras.

Galvalume Lead Times: 4-8 weeks*

Plate: SMU price range is $1,740-1,860 per net ton ($87-93/cwt) with an average of $1,800 per ton ($90/cwt) FOB mill. Both the lower and upper ends of our range remain the same compared to one week ago. Our overall average is unchanged from last week. Our price momentum indicator on plate steel points to Lower, meaning we expect prices to decrease over the next 30 days.

Plate Lead Times: 4-7 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 Brett Linton, Brett@SteelMarketUpdate.com

I used to tell the story to students in our Steel 101 Workshops about having discovered a customer was being taken advantage of by another supplier and how I handled the situation. At the end of the story, I asked the question: How do you tell your customer that he/she is stupid? What I didn’t say in last Sunday’s article is: I would end the session by telling students that if I ever write a book about my sales career the title would be, “The Salesman Is Not Your Friend, the Purchasing Agent Is Not Your Buddy.”

Lesson Learned #2 – Opportunity is Not an Individual Sport

As I look back over the 45 years, there was a fair number of fortuitous events in my life which put me in the right place at the right time. Once in the right place, I made the most of the opportunities presented to me. I found mentors and always tried to learn more about how to improve my limited skills, and to better communicate with my customers and those around me (this was always a work in progress). I got fired at the right time (even if for the wrong reasons), and never burned a bridge behind me.

From my perspective, I was a mediocre sales guy who, for many years, had a good team around him, and I was driven to succeed even when the path to success was full of brambles and pitfalls.

For some odd reason I was able to recognize opportunities and market niches that weren’t clear to others, or that were too complicated for the competition to solve. This is something I have been blessed with throughout much of my active selling career and then transitioned my talent for sensing missing needs into the development and growth of Steel Market Update.

Here is one example: In the mid-1980s, I was working at Pacesetter Steel. Pacesetter was transitioning from being primarily a HVAC-driven company into having a much larger role in the OEM segment of the industry. Through sheer luck (a fortuitous event) I managed to acquire the rights to sell Carrier Corp. across most of the country.

One day I received a call from a Carrier plant in Brazil. The young man on the phone told me they were in immediate need of a few thousand tons of prime galvanized steel. Much of it needed to be AKDQ (now referred to as DDS, or deep drawing quality), extra smooth, non-chemically treated, for a post-paint application. At that point, I was unaware of Pacesetter having ever sold a ton of steel outside of North America.

The next day I received a call from Carrier’s corporate headquarters in Syracuse, New York. The corporate head of purchasing was calling me to inquire why I had not responded to their purchasing agent in Brazil?

Now in the mid-80s there was not much in the way of exports of prime flatrolled from the US to South America. Brazil was especially tough as the government there had restrictions on the importation of steel (as in basically none being allowed). Their steel industry was protected.

However, there was a dispute at one of the main steel mills that resulted in workers being injured by government troops and the plant was damaged by the workers which impacted the ability of that mill to supply prime galvanized to their local customers.

If my memory is correct, Carrier gave me just a few days to solve their problem. I knew we weren’t the only ones working on getting them steel, but for some reason I had confidence we could do it. First, we had some steel on our plant floors that met the specifications. What we didn’t have on the floor, we had orders with domestic steel producers that I thought we might be able to change. I spoke with Steve Leebow (Pacesetter’s owner) about the opportunity and, although he was somewhat skeptical, he felt his relationships with the steel mills were strong enough for him to get the orders changed to what was needed. First, we needed to get the orders.

You see, we not only had to get the steel produced, we had to find a ship to carry it to Brazil, we had to find a way to get the steel packaged for ocean travel, get credit approval, and we had to coordinate the entire order so that it was on the dock at a specific port, with all the correct documentation, in time to make the vessel. Pacesetter had never done anything like this before.

It is here that I must credit one of the best friends I have ever had in the steel industry, and someone I learned to love to travel with – Keith Hanzi. Keith was the head of technical services at Pacesetter. Keith was able to locate a mothballed packaging line in Baltimore, Md. We needed to get the coils wrapped in metal containers for the trip. He was able to convince the company who owned the line to start it up for us and to begin packaging the coils we were to ship to them within a few days’ time. Rather fortuitous, if I don’t say so myself.

Next, we had to find a ship. With a little research we learned of a company called AMTRANS, which was an American flag carrier that brought shoes from Brazil to the US. Most of the containers were going back to Brazil empty, and they were going to the right port in the very southern portion of Brazil close to the Uruguay border. AMTRANS was very happy to have Pacesetter as a customer.

I worked closely with Steve Leebow who was masterfully able to not only get existing purchase orders changed to the new specifications, but to also get the mill to roll the material within literally days, and then move the material to Baltimore where it could be packaged.

As a company Pacesetter worked as one on this project – the logistics were daunting, we were working with international letters of credit, coordinating with mill sales and production, rerouting delivery points to Baltimore for orders that were originally scheduled to ship to other Pacesetter locations, quality assurance because this was not easy steel to make (unlike today), relying on a third-party to package the steel correctly and timely, and working directly with Carrier in both Brazil and New York as we negotiated pricing and the actual purchase orders.

It worked. We shipped on time. We delivered on time. Carrier got the Brazilian government to allow the material into the country. Keith Hanzi and I got the adventure of our lives as we were able to travel to Brazil to see the customer and our steel in their plant. We made many shipments to Brazil over the next couple of years. I smashed all the sales and profit records at Pacesetter.

The process of making this piece of business happen, and then to continue for many months, gave me insights into how to look at a problem and turn it into an opportunity. It also made me realize that I could be a driven salesman with my own end goals, but also how important it was to work as a member of a team with a company goal, and to recognize everyone within the team for their contribution to the success of the company.

2022 Steel Summit Update

There are now 33 days to go before the start of this year’s SMU Steel Summit Conference. You can learn more about our agenda, the attendees, speakers, and how to register by clicking here.

Last year we had slightly over 1,100 executives who attended the SMU Steel Summit. Of those, approximately 200 were virtual. Registrations this year are slightly ahead of the pace of last year, and all of the attendees will be in Atlanta. We currently have 950 executives registered representing 344 companies. 

NexGen Leadership Award nominations are now closed. We had a late burst in nominations, and we are very pleased with both the quality and quantity of the nominees this year.

I hope to see you in Atlanta!

As always, your business is truly appreciated by all of us associated with Steel Market Update.

John Packard, SMU Founder

John@SteelMarketUpdate.com

SMU has analyzed the old and new galvanized extras below. Select US Steel extras decreased between 7-10%, with an average decrease of 9%. USS extras were previously revised in May 2022.

By Brett Linton, Brett@SteelMarketUpdate.com

Overall housing starts fell 2% to a seasonally adjusted annual rate of 1.56 million units in June from an upwardly revised reading in May. Last month’s reading of 1.56 million starts – indicating the number of housing units builders would begin if development kept this pace for the next 12 months – was driven by a 10.3% drop in the multi-family sector to an annualized 577,000 pace. Single-family starts fell 8.1% to a 982,000 seasonally adjusted annual rate.

“Single-family starts are retreating on higher construction costs and interest rates, and this decline is reflected in our latest builder surveys, which show a steep drop in builder sentiment for the single-family market,” said Jerry Konter, the National Association of Home Builders’ chairman and a home builder and developer in Savannah, Ga. “Builders are reporting weakening traffic as housing affordability declines.”

On a regional year-to-date basis, combined single-family and multi-family starts varied. The Northeast and the West regions were down 4.4% and 0.4%, respectively. The Midwest and South saw growth over the same period, improving by 1.2% and 12.9%, respectively.

“While the multi-family market remains strong on solid rental housing demand, the softening of single-family construction data should send a strong signal to the Federal Reserve that tighter financial conditions are producing a housing downturn,” said Robert Dietz, NAHB’s chief economist. “Price growth will slow significantly this year, but a housing deficit relative to demographic need will persist through this ongoing cyclical downturn.”

Overall permits slipped 0.6% to a 1.69-million-unit annualized rate in June. Single-family permits fell by 8% to a 967,000-unit rate. This is the lowest pace for single-family permits since June 2020. Multi-family permits increased 11.5% to an annualized 718,000 pace.

Compared to the previous year, regional permit data shows that permits are 5.1% lower in the Northeast, while they are 2.5% higher in the Midwest, 2.9% higher in the South, and 3% higher in the West.

There are now 148,900 single-family permits authorized but not yet started, a 3.0% year-over-year gain because of higher construction costs and material delays slowing previously permitted projects.

By David Schollaert, David@SteelMarketUpdate.com

Adjusted year-to-date production through July 16 totaled 49,354,000 net tons, at an average utilization rate of 80.4%. That’s 2.5% below the same period last year when production was 50,623,000 net tons, though the utilization rate was lower at 80.1%, AISI said.

Production rose in just one of five regions last week—a 1.2% (+2,000 net tons) increase in the Northeast. The increase was offset by declines in the Great Lakes, Midwestern, Southern, and Western regions. The Midwest and West both saw the largest tonnage declines at 4,000 net tons week-on-week (WoW), though the West’s decline was of greater overall impact, a 5.5% loss versus a 1.9% loss in the Midwest. Declines were followed by the Great Lakes (-3,000 net tons or -0.5%) and the South (-1,000 net tons or -0.1%).

Production by region for the week ending July 16 was: Northeast, 166,000 tons; Great Lakes, 574,000 tons; Midwest, 205,000 tons; South, 724,000 tons; and West, 69,000 tons – for a total of 1,738,000 net tons, down 10,000 net tons from the prior week.

Note: The raw steel production tonnage provided in this report is estimated. The figures are compiled from weekly production tonnage provided by approximately 50% of the domestic production capacity combined with the most recent monthly production data for the remainder. Therefore, this report should be used primarily to assess production trends. The AISI production report “AIS 7”, published monthly and available by subscription, provides a more detailed summary of steel production based on data supplied by companies representing 75% of US production capacity. Given the large number of changes to steelmaking capability in the current rapidly evolving market environment, AISI is undertaking a comprehensive review of its raw steel production and capability utilization statistics to ensure that they accurately reflect market conditions. Any updates to capability will be phased in over several weeks. Capability for the first quarter 2022 was approximately 28.3 million tons.

By David Schollaert, David@SteelMarketUpdate.com

Commercial production is expected to begin in the first quarter of 2025, the company said.

SDI said it would own more than 94% of the rolling mill facility through a joint venture agreement with Unity Aluminum Inc. The Fort Wayne, Ind.-based steelmaker said it would contribute extensive construction experience and that Unity would provide aluminum operating experience.

Recall that Steel Dynamics has undertaken and completed a major construction project with its $2 billion flat-rolled EAF sheet mill in Sinton, Texas – the newest of its kind in the US.

SDI said an aluminum mill it is a natural fit and complementary extension to its metal recycling platform. The facility will serve SDI’s customer base of notable consumers and processors of aluminum flat-rolled products, which are under-supplied by an estimated 2 million tons annually, the company said.

“We are incredibly excited to announce this meaningful growth opportunity, which is aligned with our existing business and operational expertise,” said Mark Millett, SDI’s chairman, president, and CEO. “Today we are announcing our plans to broaden our ability to serve our existing and new customers by adding high-quality, low-carbon flat-rolled aluminum to our product portfolio. We are also excited to further diversify our end markets with plans to supply the sustainable beverage can industry.”

The rolling mill is expected to have the capacity to supply roughly half of its recycled aluminum slab requirements onsite, with the remaining amount to be provided by the construction of two additional satellite recycled aluminum slab centers, one in the southwestern US and the other in Mexico. Those facilities are expected to cost $350 million.

The US operation is expected to start by the end of 2025 and the Mexican one to begin operations in 2024. SDI will own 100% of those “satellite” facilities.

The aluminum rolling mill will require roughly 900,000 metric tons of aluminum slab supply and 225,000 metric tons of primary aluminum supply annually at full capacity, the company said.

SDI estimates the project will generate between $650 million and $700 million of annual EBITDA (earnings before interest, taxes, depreciation, and amortization) on a through-cycle basis.

Millett added that SDI’s successful history in carbon flat-rolled steel positions them “exceptionally well to execute this strategic opportunity in an adjacent metal space, and to deliver strong long-term value creation.”

By David Schollaert, David@SteelMarketUpdate.com

 

Updated on July 12, you can view the latest EIA Short-Term Energy Outlook here.

Oil and Gas Spot Prices

The weekly West Texas Intermediate oil spot market price was $103.32 per barrel as of July 8 (Figure 1), easing from a 13+ year high of $120.43/b seen in early June. For comparison, the record high in the EIA’s 36-year data history occurred the week of July 4, 2008, at $142.52/b. As of last week, the EIA expects spot prices to average $104/b in the second half of 2022 (down from last month’s estimate of $108/b) and forecasts an average price of $94/b across 2023 (down from $97 in the previous estimate).

Regarding increasing fuel prices for consumers, EIA forecasts the retail price for regular grade gasoline to average $4.05 per gallon in 2022 and $3.57/gal in 2023. Diesel is forecast to average $4.73/gal in 2022 and $4.07/gal in 2023.

Natural gas spot prices have declined from the multi-year records seen in June. The spot price as of July 8 was $5.90 per MMBTU (Metric Million British Thermal Units). In early June spot prices peaked at $8.95/MMBTU, the highest level since Aug. 2008. (We are excluding high spot prices in Feb. 2021 resulting from winter storms and supply scarcity.) The record high in the EIA’s 36-year history was $14.49/MMBTU the week of Dec. 16, 2005. EIA expects natural gas prices to average $5.97/MMBTU in the second half of 2022 (down from June’s estimate of $8.69/MMBTU) and forecasts 2023 to average $4.76/MMBTU.

Rig Counts

The number of active US oil and gas drill rigs continues to recover from mid-2020 lows. The latest US count was 756 active drill rigs as of the end of last week, comprised of 599 oil rigs, 153 gas rigs, and 4 miscellaneous rigs, according to Baker Hughes (Figure 2). Active rig counts are up 56% versus this time last year, and down just 5% compared to pre-Covid shutdowns in March 2020.

The latest Canadian rig count climbed to 191 rigs, comprised of 125 oil rigs and 66 gas rigs. Candian rig counts are up 27% compared to one year prior, but down 22% from pre-Covid levels (Figure 3).

Table 1 below compares the current US, Canadian and international rig counts to historical levels.

US oil and gas production are heavily concentrated in Texas, Oklahoma, North Dakota, and New Mexico. As of July 15, production continues to steadily increase for each state (Figure 4). Texas is the most active state with 365 rigs in operation and New Mexico is the second highest with 110 rigs. Recall that the number of active Texas rigs had plummeted 76% in 2020, falling from 407 in April to 97 rigs in August.

Stock Levels

US total crude oil stocks continue to decline from mid-2020 highs, falling to an 18-year low of 912 million barrels on July 8. For comparison, the record low in the EIA’s 40-year history was 608 million barrels in October 1982. The June stock level is down 14% from 1.059 billion barrels one year ago (Figure 5).

Trends in energy prices and rig counts are an advanced indicator of demand for oil country tubular goods (OCTG), line pipe and other steel products.

By Brett Linton, Brett@SteelMarketUpdate.com

Extreme hot weather is driving record power demand, putting pressure on the state’s electric grid. Recall that in February 2021, snow, ice, and record-low temperatures caused the grid to fail, leaving millions without access to electricity.

In portions of south central Texas, a heat advisory is currently in effect through Tuesday, with expectations of air temperatures of 102-105 degrees Fahrenheit and a heat index up to 107 degrees. The Toyota Motor Manufacturing, Texas (TMMTX) plant in San Antonio is located within this region.

Although the Electric Reliability Council of Texas has issued conservation appeals to Texas residents and businesses, the grid has managed to hold up thus far this summer.

Toyota is now adjusting and reducing production at the TMMTX plant, a company spokeswoman told SMU, both due to supply chain disruptions and in an effort to conserve electricity.

“Toyota’s North American plants continue to face intermittent production delays due to supply chain disruptions,” the spokeswoman said in an email to SMU. “As the state of the supply chain remains fluid, we are adjusting and reducing production at TMMTX while also contributing to efforts to conserve energy in Texas.”

A production pause at 14 of the automaker’s North American plants was scheduled to begin today, July 18, and is expected to last through the end of the week.

As SMU has reported, the company has slashed production across its North American plants this year due to the global microchip and parts shortages.

By Laura Miller, Laura@SteelMarketUpdate.com

 

Flat Rolled

US service center flat rolled inventories edged up in June. At the end of June, service centers carried 55 shipping days of supply on an adjusted basis, according to SMU data. This was up from 54.7 shipping days of supply in May. In terms of months of supply, service centers had 2.5 months of supply on hand, down from 2.6 in May. June had 22 shipping days, one more than the 21 in May.

The daily shipping rate eased back in June, and some service centers observed an early arrival of the summer slowdown. Service center contacts reported steady demand in June but concerns about the pipeline of orders. Manufacturers have been holding back on purchases as prices have declined, and uncertainty about supply chains at the beginning of the war in Ukraine pulled some orders forward. Slowing demand amid fears of a possible recession is pointing to a supply-demand imbalance.

We are also hearing of more inquiries from mills seeking orders. The latest SMU lead time survey published July 7th pegged HRC lead times at 4 weeks, down from 4.28 weeks a month ago.

The amount of material on order fell in June, though remains elevated. This, coupled with slowing demand, could be an indication of a future inventory glut.

While there are some large volume deals taking place, most buyers remain hesitant about placing orders for unsold material with prices falling fast. Plummeting scrap prices and slowing demand in the summer could continue a declining price trend for sheet. We do not view inventories as lean but instead as less bloated. Stronger demand or reduced supply will be needed to change the current downward pricing trend.

Plate

US service center plate inventories decreased in June. Stable shipments contributed to the number of shipping days of plate supply falling to 54.7 days in June. In May, service centers carried 55.2 shipping days of supply. Supplies in June represented 2.49 months on hand, down from 2.63 months in May.

We think there is still intertrade among service centers to manage gaps in inventory, but demand has also been steady. Inventories appear to be balanced with shipments as well.

In June, the amount of material on order fell month-on-month. This is reflected in the mill lead times. The latest SMU survey found plate mill lead times fell to 5.11 weeks from 5.46 weeks a month ago.

We are starting to hear about some deals for heavy plate, and increased concern about the massive spread between plate and HRC. Plate buyers might consider imports given the excessive spread between HRC and plate and the high premium for domestic plate relative to global prices.

Service centers have also expressed worry about projects in the pipeline. That could point to a decline in demand. With the expected seasonal slowdown in outbound shipments and shortening lead times, intake could pick up in July.

By Estelle Tran, Estelle.Tran@CRUGroup.com

Recently I was asked to reflect on my 45 years in the steel industry and to provide some insights as to what were the most important lessons I learned over my career.

The simple response is to say honesty is the key to success.

Honesty, after all, is a moral choice. I have found one sleeps better at night, and ultimately one does better at business, by being honest and letting the “gray” business go elsewhere.

There are times when you are confronted with problems that define who you are, and ultimately your relationship with your customer. It doesn’t always go the way you think it should.

I think one of the most important lessons I learned is depicted in the following true story.

Early in my career with Pacesetter Steel, I handled several HVAC (heating, ventilation, air conditioning) companies. I had one customer who I had become personally close to. We had a special relationship. The two partners and their wives attended my wedding, and when I was in town to visit them, they went out of their way to make sure we did something special.

As a customer they were the best kind – consistent buyers of as many as 10-15 truckloads of steel monthly. I supplied most of the steel they purchased.

This went on for a couple of years before I noticed their tonnage beginning to wane. What was once 10-15 truckloads had dropped to 5-6 truckloads. Yet their overall business continued to boom.

I asked them why their tonnage had dropped, and they told me a competitor had come in and undercut my prices. In some cases, the prices were as much as 10 percent below our quoted numbers.

This concerned me in a couple of ways. First, I was surprised they did not inform me when they got lower offers so I could adjust my prices or determine what I needed to do to compete. Second, since we were one of the largest sellers of prime galvanized, I realized something fitting in that “gray” area must be in play for our company to be so uncompetitive.

I suspected that the competitor had adjusted the billing method from actual weight to nominal weight. By moving to nominal weight (which is a theoretical calculation), they were able to lower the per hundredweight pricing. The result: when compared against someone quoting actual scale weight, it appeared their prices were lower.

I asked one of the owners (who bought the steel) to give me four or five random coils with the gauge, width, and linear footage. On purpose, I did not ask for the billing weight of the coil.

As I suspected, when I ran the calculations using the nominal density factor for each coil provided, I was able to accurately calculate the billing weight of each coil on his invoice. The competitor had switched the billing method without advising the customer in order to secure the business.

I remember sitting back in my office chair and thinking to myself, what do I do now? If you were in my seat, what would you do?

Sure, it’s easy to say they have been duped by my competitor. But isn’t that just another way of telling your buyer that he is stupid for letting this happen? What happens to our relationship once I inform him of his blunder?

The buyer was a good man. An honest man. He didn’t weigh his steel, and, in the process, he became susceptible to being taken advantage of. Innocence lost.

I provided the tools necessary for the customer to do the calculations on his own. In the process, he discovered there were many truckloads of steel where the steel was billed on a nominal weight basis. The other supplier returned a large sum of money to the customer, but the relationship between us changed. After all, it was I who raised the veil and took away his innocence.

You would think I would have been treated as a hero. For a few months, the customer came back and was buying 10-15 truckloads monthly as before. But it wasn’t too long before the competitor was able to worm their way back as a supplier.

I didn’t understand right away. There are those who want to believe that what they hear is the truth. Those who provide information that differs from their pre-conceived notion become the bad guy in this story.

As I look around the world today, there are many examples of those who believe the competitor’s “spin” – and providers of facts or differing opinions are now the bad guys.

Would I have done anything differently when confronted with a competitor who was misrepresenting steel to a customer? No, taking the moral high road is always the best route. Even so, understand that sometimes facts are not welcomed with open arms.

We are now 35 days before the start of the 2022 SMU Steel Summit Conference. This will be my last Steel Summit Conference, and I am looking forward to seeing as many of our readers, and some of my old steel customers, as possible. You can add your name to the list by clicking here.

As always, your business is truly appreciated by all of us associated with Steel Market Update.

John Packard, Founder

John@SteelMarketUpdate.com

But this year, there were a great deal of other things going on. The Saudi leader, Mohammed bin Salman (MBS), is under intense criticism for his hand (which he denies) in the murder of journalist Jamaal Khashoggi and has been called a “pariah” by President Biden. Yet there the President was on Saudi soil.

As I’ve discussed before, the US wants Saudi Arabia to increase oil and gas production to reduce inflation and limit Russian energy revenues. Saudi Arabia and the United Arab Emirates (UAE, another member of the GCC) are two of the largest oil producers in the world. President Biden wants them to increase production immediately. Very few oil producing countries are able to switch on significant oil production. Saudi Arabia and the UAE are two of them.

They appear to be playing hard to get but want to show cooperation. They expressed willingness to increase production in response to an increase in demand, but not unconditionally. An OPEC+ meeting is scheduled for early August, and the United States reportedly is pressing Saudi Arabia and UAE to urge a supply increase at that meeting.

The outcome is far from guaranteed. Russia is not a member of OPEC, but it is one of 10 oil-producing countries that coordinates with the 13 members of OPEC. It will be present at the Aug. 3 OPEC+ meeting.

Meanwhile, progressives in the United States are boiling mad at Senator Joe Manchin III, who has pulled the plug on a scaled-back “Build Back Better” agenda that included policies to address climate change. Those same progressives want to end dependence on fossil fuels. The anti-Russian initiatives this week run counter to their objectives. The President’s agenda is no longer on life support—it’s worse than that.

We are still awaiting a presidential decision on whether to terminate or pare down tariffs on China that were imposed by the Trump administration in 2018. American businesses that rely on imports from China are pressing for elimination of the China tariffs, or at a minimum the expansion and extension of numerous exclusions from these tariffs.

As I noted last week, there are talks ongoing with China that include the tariffs as one agenda item. USTR is always looking for something to get in return for cutting tariffs. But China points out that cutting tariffs is also in the US interest because of their inflationary effects. So far, no discernible progress with China.

The press continues to speculate that steel and aluminum Section 232 tariffs will not be eliminated because they involve “national security.” This is a dubious claim. (Full disclosure, I represent plaintiffs in litigation over the Section 232 tariffs.) The tariffs seem to be more about politics than defense readiness.

Domestic steel production has not been appreciably affected by the Section 232 measures. Since 2010, domestic steel production has been anything but volatile. Other than the outlier pandemic year of 2020 (72.8 million metric tons), domestic production varied from a high of 88 million tons in 2012 to a low of about 78 million tons in 2016. The Section 232 measures have not led to increased domestic steel production, although they have led to increased prices and profits for steel companies.

The Biden administration clearly has little to no interest in removing protection from domestic steel companies and workers in the runup to the 2022 elections. Commerce Secretary Gina Raimondo has telegraphed publicly that the steel and aluminum tariffs are not likely to be touched.

Finally, the US dollar has risen significantly against major foreign currencies. Against the Euro, the dollar has increased from 94.4 Euro cents to 99.1 cents, or about 5% in the last four weeks. That is a major change for such a short time. The British pound has weakened by a similar percentage since June 20. The dollar’s rise has been largely due to the efforts by the Federal Reserve to stem inflation by raising interest rates. It will not go down any time soon.

The effect of these currency changes is to make imports less expensive and US exports more expensive abroad. These effects will likely increase the trade deficit in the future. The importance of global trade to future inflation is likely to increase if the dollar continues to increase. Remember the Plaza Accord in the 1980s, which committed major countries to slow the increase in value of the dollar against other currencies. A rising dollar is not a good thing for the economy. Perhaps a similar meeting will be in the offing soon.

The politics of these issues will continue to get more interesting as the November election approaches. Progressives want action on climate change. They are not willing to compromise on the basis of the immediate international crisis in Ukraine or the inflation we are now experiencing. But Sen. Manchin’s stance against a climate agenda is based on stemming inflation. Immediate climate action is unlikely. Moderates see a more immediate need to hold the international alliance against Russian aggression, which requires increased energy production, including of fossil fuels.

Progressives are outraged at President Biden’s fist bump with Crown Prince Mohammed bin Salman in Saudi Arabia last Friday, preferring the “pariah” designation. But moderates see the need to work with Saudi Arabia to increase energy production and thereby hold the Western alliance together against Russia. Only last week, the Prime Minister of Italy, Mario Draghi, resigned over inflation and the Russian energy situation, which affects Italy greatly.

President Biden has many difficult decisions to make. Where will he come down?

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz
5335 Wisconsin Avenue, N.W., Suite 440
Washington, D.C. 20015
Phone: (202) 617-2675
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E-mail: lewis.leibowitz@lellawoffice.com

Stelco

A prior contract expired on June 30. Local USW chapters have voted to authorize a strike. The USW has also requested conciliators from the Ontario Ministry of Labour to resolve differences between the Hamilton, Ontario-based steelmaker and the union.

Algoma

Local unions representing workers at the Sault Ste. Marie, Ontario-based steelmaker have voted to authorize a strike. The contract between Stelco and the USW runs through July 31. Talks continue in the meantime.

US Steel

Master contract negotiations between US Steel and the USW are underway in Pittsburgh, which is home to both the company and the union. The current labor pact between the USW and US Steel runs through Sept. 1. SunCoke Energy has joined the talks because it is expected to take over the two blast furnaces at US Steel’s Granite City Works near St. Louis to make pig iron. Granite City, like most of US Steel’s mills, is represented by the USW. Not included in the talks is US Steel’s Big River Steel subsidiary in Arkansas. Big River is a non-union mill.

Cleveland-Cliffs

Master contract negotiations between the USW and the steelmaker are underway in Pittsburgh. As with US Steel, the labor agreement between Cliffs and the USW does not expire until Sept. 1.

Recall that a strike authorization vote gives union negotiators the authority to call a strike if they decide to. It is a largely procedural step. It does not mean that the union will go a strike.

By Michael Cowden, Michael@SteelMarketUpdate.com