Nucor announced a $50/ton increase on sheet products Monday. Do you think this increase will have an effect on prices, and how?

“Hopefully it will stop the bleeding and create a floor.”

“Nope.”

“I don’t think it will have a major impact. Nucor may hold strong but other mills may not.”

“I have felt for awhile the mills have been at a floor. I think other mills will follow. It should put a floor on pricing. That said, could be a dead cat bounce.”

“Yes, with the amount of outages coming up and the lack of imports arriving the balance of the year, I believe we have found the floor and should get some bounce back.”

“May stop the slide a week or so.”

“It may start to create a bottom.”

“Yes. I believe tomorrow’s [Tuesday] update will be the low point.”

“Sounds like an attempt to shore up pricing.”

“Yes – establish a bottom/stabilize.”

“The hope is that it’ll continue to ease the declines and maybe even draw the much ballyhooed line in the sand…”

“The mills need to draw a line in the sand and stand on it, every time there is an increase, they always make a secret deal.”

Where do you think steel prices will bottom, and when? Why do you think that?

“HRC will bottom out around $720. On floor inventory has now leveled off. Buyers will get back to business.”

“Now. Just a feeling.”

“Steel prices are close to bottom now. Within Aug./Sept. they could bottom out. Just mills saying more order activity is justifying price inreases. Raw matieral costs will continue to soften but if mills start to collect more orders, demand for raw materials could increse as well, espeically for scrap.”

“If the mills can discipline themselves, today can be the turning point. With prices literally dropping $40/ton a week, why buy steel this week even if I need it? I would rather tell the customer the mills are running two weeks late and grab a better price.”

“Plate has a ways to go. I think we are close to the bottom on HR coil.”

“Looking at actual spot offers (not index values), I would believe we bottom out north of $775 if haven’t already.”

“I think we’re getting there. I wouldn’t be surprised if we see an index dip below $800/ton, but it should go much further. Maybe late August?”

“Q4 around $700.”

“Already did. The big buyers I am sure are buying well below $800 but the small orders will be back north of that number quickly.”

“The bottom will be in August and September.”

“Spot market $70/cwt, offshore $60/cwt, domestic $75/cwt. Cost increases on the bottom line have raised the bar for mills and lines have to be drawn.”

“Q4. I think once contracts are negotiated for 2023 on a futures basis, pricing will then begin to stabilize.”

“4th quarter, lack of demand and increased domestic capacity.”

“Probably around $35.00/cwt – that’s the break even point for the mills.”

Is demand improving, declining or stable, and why?

“Stable to slightly improving. We could definitely ship more product if we had the manpower to support it.”

“Declining. High prices eventually push down demand.”

“Stable – there is still plenty of quoting and construction markets are out at least a year with jobs.”

“Declining, everyone is waiting to see how LOW they can go!”

“Stable.”

“Demand is in a tailspin.”

“Stable to slowing in certain sectors. Others are booked out to early 2023.”

“Slightly down, but we are seeing a lot of outside influence in our primary markets. Either our competitors are spooked, or demand erosion is greater in their primary markets. Wait and see.”

“Demand is only being influenced by buyers playing games with pricing, it is no better or worse than it was.”

“Stable to declining.”

“Declining-to-stable, which I hate to say. A combination of macro concerns and normal “Summer Doldrums” I’m afraid.”

“Leveling off.”

“Demand is soft and orders are declining. Worry of recession is causing reduction of buying.”

“Declining – due to inventory rebalance and lower demand.”

“Improving, service center inventories are low and they have to restock. People aren’t loading up, but they have to buy.”

“Declining, things slowing down and customer buying off contracts due to lower spot prices.”

Are supply chain issues getting better or worse, and why?

“Mixed but overall slighly better.”

“They are not getting any better but are not improving either… No new strategies to improve bottlenecks at ports or trucking.”

“Better – material is readily available. I’m getting an increasing number of excess lists each day, so if it trickles down to my level it warrants quite a bit of excess in the market.”

“Obviously, steel is no longer a concern, remaining categories are stable, but not improved from earlier in the year. It wouldn’t take much to tip the balance again.”

“Staying bad. Ports are terrible and rail is very tough now. Trucking is okay but costs keep increasing.”

“WORSE – numerous reasons.”

“Overall better.”

“Some better, some worse. Because of chips, electronic drives and components are having a severe impact on repairs and new equipment.”

“Some improvement, but not across all industries. West coast port congestion is not improving.”

“Better due to lower demand but still some issues that end customers are experiencing.”

“They remain bleak – they aren’t getting worse and they aren’t getting better.”

“Steel is very easy to get. Customers report continued problems with various components.”

“No supply chain issues at present.”

“Steel supply is better, other products required to run the business is a mixed bag.”

Are you seeing the impact of new North American capacity in the market? If yes, how so?

“We continue to see the new mills/capacity, especially in the southwest acting very aggressive and chasing tons at low numbers.”

“It is going to hold pricing down. Someone will need the order.”

“New capacity has not yet been realized in any major way.”

“It’s not currently front and center but it’s on the horizon.”

“Not at all in the midwest.”

“Additional volumes are starting to hit the market with additional new tons being introduced into the market this fall.”

“In the south we are, up north we are not.”

“There’s plenty of capacity. Lots of spot tons in secondary market too.”

“We see it in the continued decline in steel prices.”

“Not sure if its new capacity in the market, or reduced demand (most likely the later).”

“We all know for now, too much capacity and not enough business.”

“No, they are limiting their production right now.”

“No changes at this time.”

PSA: If you have not looked at our latest SMU Market Survey results, they are available here on our website to all Premium members. We often refer to this as our ‘Steel Market Trends Report,’ and we publish updates every other Friday. We encourage readers to explore the full results, as we simply cannot write about all of the information within. After logging in at SteelMarketUpdate.com, visit the Analysis tab and look under the “Survey Results” section for “Latest Survey Results.” Historical survey results are also available in the Survey Results section under “Survey Results History.” We will conduct our next market survey next week, contact us if you would like to have your company represented.

By Brett Linton, Brett@SteelMarketUpdate.com

We have approximately 50 rooms available at the Atlanta Airport Marriott Hotel. We will be running shuttle buses between this hotel and the convention center on Monday-Wednesday to accommodate those who stay at this hotel, which is about one mile from the Georgia International Convention Center. The room block expires on Aug. 17. Click here to make reservations.

 By Becca Moczygemba, Becca@SteelMarketUpdate.com

Note that AISI’s monthly production estimates are different than the weekly estimates SMU reports each Tuesday. The monthly estimates are based on over 75% of domestic mills reporting versus only 50% reporting weekly estimates.

Figure 1 compares monthly production data on a three-month moving average (3MMA) basis to smooth out month-to-month fluctuations. Raw steel production averaged 7.65 million tons between April and June 2022, down 4% from the same quarter in 2021. The average production rate for Q2 2022 is down 3% versus the previous quarter, down 3% versus Q4 2021, and down 6% from Q3 2021. Recall that Q2 2020 production plunged to the lowest 3MMA level in our 12-year history at 5.39 million tons.

SMU publishes regional steel production data for the four regions responsible for 10% or more of total domestic production. Figure 2 shows 3MMA production history from the combined states of Virginia, West Virginia, Georgia, Florida, North Carolina, South Carolina and Louisiana. The latest 3MMA for June is 885,000 tons, right in the middle of levels seen over the last year, and up 3% compared to the same period in 2021.

Figure 3 shows the combined production in Alabama, Tennessee, Mississippi, Arkansas, and Kentucky. The June 3MMA is 1.98 million tons, up 3% year-over-year. Recall that September 2021 saw the highest 3MMA level in SMU’s recorded history at 2.15 million tons.

Figure 4 displays 3MMA production from Ohio, currently at 872,000 tons through June and down 12% over the same period in 2021. This is the lowest 3MMA since February 2021.

Figure 5 shows the 3MMA production levels from the state of Indiana through June. Production is now at 1.81 million tons, down 14% compared to one year ago. This is the fourth lowest 3MMA seen in the last year and a half.

The average mill capacity utilization rate for June was 79.6%, down from 81.1% in May and down from 83.0% one year ago. The average capacity utilization rate for the year is now 80.3%, up from 79.4% in the first six months of 2021.

On a 3MMA basis, the capacity utilization rate through June reached a five-month high of 80.9%, down 1% compared to the same period one year prior. As shown in Figure 6, the 3MMA utilization rate had increased each month from the June 2020 low through September 2021.

SMU Note: Additional raw steel production graphics are available in the Analysis section of our website here. If you need assistance logging into or navigating the website, contact us at info@SteelMarketUpdate.com.

By Brett Linton, Brett@SteelMarketUpdate.com

Leaders of the United Steelworkers Local 1005 said in the latest bargaining update that many issues remain unresolved with the Canadian steelmaker.

“As the strike deadline rapidly approaches, we have made little progress in the four and a half months that we have spent at the bargaining table. We have been available and ready to bargain every day, but unfortunately Stelco does not have the same sense of urgency and has failed to move forward in good faith,” the update reads.

The Local leaders note Stelco’s incredibly profitable past few quarters and the company’s ability to reward shareholders, sell lands, and buy back $1 billion in shares from shareholders. Additionally, the steelmaker “has boasted about having the lowest labor cost among their competitors.” Taking all these things into consideration, a fair contract remains the USW’s goal.

“…We are not in a position today to tell you if we will be bringing back a contract to vote on or signing members up for picket duty. … The struggle continues,” the Aug. 9 update continues.

Stelco did not respond to SMU’s request for comment as of Wednesday afternoon.

Legal strike dates are also approaching at other USW-represented steelmaking operations in Canada.

The USW Local 8782, which represents Stelco’s Lake Erie Works steelmaking operations in Nanticoke, Ontario, will be in a legal position to strike as of 12:01am on Sunday, Aug. 22.

Earlier this week, USW Local 2251, representing hourly workers at Algoma Steel, rejected the latest offer from the steelmaker. 2251’s extended contract is set to expire on Monday, Aug. 15 at 11:59 pm.

USW Local 2724, representing Algoma’s salaried technical, professional, and front-line supervisors, is the only local that has already ratified a new labor contract.

By Laura Miller, laura@steelmarketupdate.com

If you think prices are still falling, you could point to the lower end of our price range, which slipped. If you think they are rising, you could point to the higher end of our range, which increased.

Some of you might not like that our HRC price range is wider than usual. But that’s not uncommon in the immediate aftermath of a price hike. Past markets have seen mills offering discounts at the last minute, or offering pre-increase prices – right up to the moment a price hike officially goes out.

And make no mistake, while it might have been a surprise to finally see the Nucor increase in writing, it had been rumored for some time.

We see some reasons that might support higher prices, or at least a floor, for HRC. Lead times have increased modestly of late, prices couldn’t keep falling at the $50/ton per week we’d seen without mills entering money-losing territory, and the massive gap between foreign HRC and US HRC prices has narrowed.

Did the increased possibility of labor turmoil in Canada play a role? Maybe.

Let’s not get carried away though. While HRC prices might have bottomed, cold-rolled and coated prices continue to fall. Why? One reason might be that the import spigot has been mostly turned off for HR but that it continues to flow freely for foreign downstream products.

Recall that the spread between domestic HRC and galv base prices, for example, remains far wider than usual. And that probably means that the spread between US and foreign galv prices is wide too. (Our latest full survey results support this. Check out slides 52 and 53.)

What the Charts Say

Check out the correlation between Nucor price hikes and service center resale price trends over time.

You can see in the chart below that Nucor probably successfully used price hikes to change the psychology of the market twice over the last two years. Once as demand snapped back in H2 2020 following the initial outbreak of the pandemic. And again this year following the outbreak of full-fledged war in Ukraine.

The fundamentals supported higher prices in the back half of 2020. And no one needed a reminder of which way prices were going for the first eight months of 2021. But as pricing trends following the war indicate, the jolt provided by price hikes can only be sustained if underlying fundamentals support the upward move. The fundamentals did not support higher prices for long earlier this year, despite a combined $275 per ton in price hikes.

You can see that pattern – of price hikes not sticking for long – repeated throughout much of 2019 too.

(Excuse the differing color schemes. We’ve changed things up a little since 2020.)

Price hikes were not enough, for example, to offset the impact of Section 232 being lifted from Canada and Mexico in 2019, and so their impact was fleeting.

So will mill price hikes change service center psychology this time around, or will they fall on deaf ears?

What Our Members Say

What do our readers say about the Nucor increase? We asked them. Here are some of their thoughts:

“I don’t think Nucor’s move will do much to change the course of steel dropping. They may be tight on spot sales. But out of the eight mills that I deal with, I have heard nothing about filling the books – and lead times are still normal.”

“For once the rumor mill proved to be spot on – we were told late last week to expect a Monday a.m. increase from Nucor and Boooooommmmm! there it came. I’m somewhat torn on whether I think this will actually hold or not though. … I think this might stop the slide, but I don’t actually think it’ll raise numbers. Lead times are still too short, and the newer capacity mills are all still too hungry. But, again, this is better than nothing.”

“The mills need to draw a line in the sand and stand on it. Every time there is an increase, they always make a secret deal.”

“With the amount of outages coming up and the lack of imports arriving the balance of the year, I believe we have found the floor and should get some bounce back.”

“I have felt for a while the mills have been at a floor. I think other mills will follow. It should put a floor on pricing. That said, could be a dead cat bounce.”

“The hope is that it’ll continue to ease the declines and maybe even draw the much ballyhooed line in the sand.”

Steel Summit Update

As of this morning we have 1,155 total registrations for the 2022 SMU Steel Summit Conference. This is a new record, and we still have 13 days before the start of the conference on Aug. 22. You can join these executives by clicking here.

We have approximately 50 rooms available at the Atlanta Airport Marriott Hotel. We will be running shuttle buses between this hotel and the convention center on Monday-Wednesday to accommodate those who stay at this hotel, which is about one mile from the Georgia International Convention Center. The room block expires on Aug. 17. Here is the link to make reservations.

By Michael Cowden, Michael@SteelMarketUpdate.com

Of our six monitored product groups, three increased month-over-month in June and three declined (Table 1).

On a year-to-date (YTD) basis, export levels for the first six months of 2022 now average 781,000 tons per month. This is up from an average of 736,000 tons in the same period of 2021, up from an average of 551,000 tons in 2020 YTD, and up from an average of 649,000 tons in 2019 YTD.

On a rolling 12MMA, June exports are now at a 41-month high of 753,000 tons (Figure 2). Recall the August 2020 mulityear low 12MMA of 577,000 tons. Total exports averaged 731,000 tons per month in 2021, compared to 591,000 tons in 2020, 648,000 tons in 2019, and 775,000 tons in 2018.

Total June exports are 1% below the 3MMA (average of April through June 2022), but 6% above the 12MMA (average of July 2021 through June 2022). Here is a detailed breakdown by product:

Cut-to-length plate exports rose to 103,248 tons in June, up 11% compared to May and up 1% compared to June 2021.

Exports of coiled plate were 39,197 tons in June, down 8% from the prior month and down 17% from June of last year.

June hot rolled steel exports rose 28% from May to 66,700 tons and were up 3% from one year prior.

Exports of cold rolled products were 53,692 tons in June, 6% lower than May but 2% higher than the same month last year.

Galvanized exports were 118,574 tons, down 6% compared to May and down 8% year-over-year.

Exports of all other metallic-coated products increased 4% month-over-month to 29,912 tons. Compared to levels one year ago, June is up 17%.

Figures 3 and 4 show US exports by product, both monthly levels and on a 12MMA basis.

We have an interactive graphing tool available on our website here. Readers can further investigate historical export data in total and by product. If you need assistance logging into or navigating the website, contact us at Info@SteelMarketUpdate.com.

By Brett Linton, Brett@SteelMarketUpdate.com

By the numbers: Our average hot-rolled coil price now stands at $820 per ton ($41 per cwt), up $15 per ton from last week but still down $150 per ton from $995 per ton in early July.

This week’s HR gain resulted primarily from the higher end of our range increasing week-over-week.

There is not widespread agreement on whether the modest uptick in hot band prices marks the bottom for sheet prices and the start of an upward trend.

Sources who predict HRC prices might have found a floor pointed to a potential bottom in scrap prices, limited import competition, and a $50-per-ton price hike announcement by Nucor on Monday.

But others said the Nucor price increase might have been an attempt to stop prices from falling further and cautioned that it was too soon to say whether the move would stick.

SMU has in the meantime adjusted our sheet momentum indicator to Neutral until the market re-establishes a clear direction. Our plate momentum indicator remains at Lower.

Hot Rolled Coil: SMU price range is $740–900 per net ton ($37.00–45.00/cwt) with an average of $820 per ton ($41.00/cwt) FOB mill, east of the Rockies. The lower end of our range decreased $20 per ton compared to one week ago, while the upper end increased $50 per ton. Our overall average is up $15 per ton from last week. Our price momentum indicator on hot rolled steel now points to Neutral until the market establishes a clear direction.

Hot Rolled Lead Times: 3–6 weeks

Cold Rolled Coil: SMU price range is $1,100–1,220 per net ton ($55.00–61.00/cwt) with an average of $1,160 per ton ($58.00/cwt) FOB mill, east of the Rockies. The lower end of our range decreased $50 per ton compared to last week, while the upper end decreased $40 per ton. Our overall average is down $45 per ton from one week ago. Our price momentum indicator on cold rolled steel now points to Neutral until the market establishes a clear direction.

Cold Rolled Lead Times: 4–8 weeks

Galvanized Coil: SMU price range is $1,100–1,220 per net ton ($55.00–61.00/cwt) with an average of $1,160 per ton ($58.00/cwt) FOB mill, east of the Rockies. The lower end of our range decreased $30 per ton compared to one week ago, while the upper end decreased $20 per ton. Our overall average is down $25 per ton from last week. Our price momentum indicator on galvanized steel now points to Neutral until the market establishes a clear direction.

Galvanized .060” G90 Benchmark: SMU price range is $1,197–1,317 per ton with an average of $1,257 per ton FOB mill, east of the Rockies.

Galvanized Lead Times: 4–7 weeks

Galvalume Coil: SMU price range is $1,100–1,200 per net ton ($55.00-60.00/cwt) with an average of $1,150 per ton ($57.50/cwt) FOB mill, east of the Rockies. The lower end of our range decreased $80 per ton compared to last week, while the upper end decreased $40 per ton. Our overall average is down $60 per ton from one week ago. Our price momentum indicator on Galvalume steel now points to Neutral until the market establishes a clear direction.

Galvalume .0142” AZ50, Grade 80 Benchmark: SMU price range is $1,394–1,494 per ton with an average of $1,444 per ton FOB mill, east of the Rockies.

Galvalume Lead Times: 4-7 weeks

Plate: SMU price range is $1,700–1,760 per net ton ($85.00–88.00/cwt) with an average of $1,730 per ton ($86.50/cwt) FOB mill. The lower end of our range decreased $20 per ton compared to one week ago, while the upper end increased $10 per ton. Our overall average is down $5 per ton 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 Michael Cowden, Michael@SteelMarketUpdate.com

“The rising cost of living is the most commonly cited cause of lower sales, as well as the worsening economic outlook,” according to Chris Williamson, chief business economist at S&P Global Market Intelligence.

Factory goods are down for the second straight month, leading to the first drop in production in two years. Foreign client demand also decreased at the start of the third quarter, with new exports falling at the fastest pace since May 2020, the report said.

Buying patterns were more cautious in July, as companies cut back on investments and new orders for business equipment and machinery declined sharply.

Backlogs increased in July as material shortages put more pressure on staff capacity. Firms have the challenge of sourcing raw materials and having enough employees at the correct times, Williamson said.

“Supply chain problems remain a major concern but have eased, taking some pressure off prices for a variety of inputs,” added Williamson. “This has fed through to the smallest rise in the price of goods leaving the factory gate seen for nearly one and a half years, the rate of inflation cooling sharply to add to signs that inflation has peaked.”

By David Schollaert, David@SteelMarketUpdate.com

July’s increase in the headline index, according to the report, pushed the level of planning above the most recent cyclical high reached in May.

During the month of July, commercial planning was led higher by an increase in data center, office, and warehouse projects. Institutional planning was driven down by fewer education and healthcare projects.

Compared to July 2021, the overall Momentum Index was 8% higher last month. The institutional component was down 3%, while the commercial component was 15% higher on a year-over-year basis.

The report noted that a total of 14 projects with a value of $100 million or more entered planning in July. The leading commercial projects were the $300 million Schnitzer Industrial Park in Sacramento, Calif., the $275 million Parteere 42 mixed-use complex in Miami, Fla., and the $180 million Edgecore Data Center in Sterling, Va. The leading institutional projects were the $500 million Vanderbilt University Medical Center in Nashville, Tenn., a $157 million life sciences building in San Francisco, Calif., and the $150 million Cal Poly Humboldt Craftman’s student housing project in Arcata, Calif.

The headline index has yet to show signs of stress despite growing recession fears, the report said. “This shows that developers and owners remain confident that nonresidential building projects will weather the storm of higher interest rates and a slowing economy,” said Richard Branch, Dodge’s chief economist.

Whether the trend can be sustained over the medium term is unclear, ultimately dictating the pattern for construction starts in 2023, added Branch.

An interactive history of the Dodge Momentum Index is available on our website. If you need assistance logging into or navigating the website, please contact us at info@SteelMarketUpdate.com.

By David Schollaert, David@SteelMarketUpdate.com

Demand Outlook

Supply chain issues and inflation remain areas of concern for many customers, but the service centers themselves say they seeing relatively steady backlogs from OEMs and industrial customers. The term “cautious optimism” continues to be used by several of the stockists’ executives—including Reliance’s and Ryerson’s—regarding demand trends.

“The outlook for North American manufacturing for the second half of 2022 remains cautiously optimistic,” said Ryerson COO Michael Burbach. “However, we expect headwinds of rising interest rates, continuation of supply chain issues as well as a slowing in demand. Our discussions with customers led us to believe that supply chain issues such as component shortages and tight labor continue. And while some backlogs remain healthy, there is evidence of customer destocking, moderating quoting activity, and smaller size spot transactional purchases.”

Olympic Steel, meanwhile, was not quite as cautious with its outlook. President and COO Andrew Greiff said his company remains “optimistic about the underlying demand,” noting no “significant pullbacks in any market.” Infrastructure funds should begin to flow more freely late this year and early next, “which could bolster future demand,” he said.

Reliance is cautiously optimistic on non-residential construction demand, including infrastructure, which is the largest end market the company serves. Demand in the sector improved steadily in Q2, and the company thinks activity will remain steady going into Q3.

SMU’s Latest Market Survey

Service center executives surveyed by Steel Market Update are not quite as optimistic as executives on earnings conference calls.

SMU’s market survey last week revealed that 57% of surveyed service center executives reported that manufacturing customers are reducing their orders, and 43% said customers are maintaining their order flows. “For the first time in a long time, our tonnages are noticeably lower. I chalk that to smart buyers sitting on the sidelines and waiting to see a floor,” one executive noted. “Our backlog has not been this low since May 2020,” another said. Inventory reduction and slowing demand was noted by another executive.

When asked “How do you see your customers’ releases (demand) for the products your company provides this year compared to this time last year?” A large majority (72%) said customers are releasing less steel than one year ago. Approximately 24% said customers are releasing approximately the same amount as a year ago, and just 3% said customers are releasing more steel.

M&A Opportunities Abound

2021 and 2022 have been strong years for the steel industry. Service centers have posted record-breaking sales and earnings. Below is a snapshot of the sales and income figures for Reliance, Ryerson, and Olympic, showing the increasing figures for the companies for 2021 and the first half of 2022. Strong results mean strong cash flow, supporting the landscape for mergers and acquisitions moving forward.

“In terms of the M&A environment and consolidation, there’ll be more consolidation in our industry,” Ryerson president and CEO Edward Lehner said on the Q2 earnings call on Aug. 6. He explained that many owners of smaller companies that they speak to would like to do more business development rather than handle the back-office functions that can be handled at scale as part of a bigger organization. Additionally, many owners are just ready to retire.

Reliance Steel’s CEO Jim Hoffman commented on the company’s July 28 earnings call that, “The M&A pipeline remains robust,” with a “high volume of potential opportunities.”

Olympic Steel CEO Rick Marabito said on Aug. 5 that his company is still actively seeking additional acquisitions. Earlier this year on an SMU Community Chat, Marabito said the opportunities out there are the most they’ve seen since at least 2018 and that they are evaluating opportunities in carbon metals, pipe and tube, white metals, aluminum, and downstream operations.

The companies’ comments are in line with what SMU has reported in the past. In April 2021, investment banker Dan Sullivan, founder and managing director of Chicago-based Montrose Advisors LLC, told SMU there was pent-up demand to get businesses sold. And in an October 2021 exclusive interview with SMU, Marabito talked about Olympic’s move to expand beyond its traditional Midwestern carbon flat-rolled business.

Los Angeles-based Reliance has grown itself to be the largest service center chain in North America, having made more than 70 acquisitions since 1994 and now operating a network of more than 300 locations around the world. Its most recent acquisitions include Brooklyn, N.Y.-based Rotax Metals, Inc., Massachusetts-based Admiral Metals and Nu-Tech Precision Metals Inc. late in 2021, and tubular master distributor Merfish United in October 2021.

Ryerson most recently added to its portfolio of companies Ford Tool Steels in June 2022, FreeFORM Technologies in May 2022, Mississauga, Ontario-based Apogee Steel Fabrication Inc. in March 2022, and Stow, Ohio, toll processor Specialty Metals Processing in Sept. 2021. It is nearing the 100-mark on the number of its operating locations.

Olympic now operates more than 30 locations across North America. In October 2021, Olympic acquired the assets of Georgia-based Shaw Stainless & Alloy Inc., and in late 2020, it added Dallas-based Action Stainless & Alloys Inc. to its portfolio. In September 2021, it sold its Detroit-based flat-rolled metal operations to Venture steel Inc.

By Laura Miller, Laura@SteelMarketUpdate.com

SMU’s scrap price ranges for August are as follows: Busheling at $410–460 per ton, averaging $435. Shred at $415–435 per ton, averaging $425. HMS at $300–340 per ton, averaging $320.

Sources report that slowing shredder feed flows propped up secondary prices, resulting in a lesser decline in obsolete grades compared to prime scrap.

One Northeast scrap executive commented, “The cheaper prime grade situation basically reflects dealers’ desire to keep moving material on fixed spreads based on the index price and not disrupt transportation arrangements that were hard to put into place. But mills should be valuing busheling more than shred because of its yield in their furnaces.”

Busheling scrap is expected to regain its price premium over shredded in the coming months. But one scrap exec said this probably won’t happen until shredded scrap flows improve. “Busheling will always sell at higher prices than shredded, except in a market where there is a declining flow of obsolescent scrap,” he said.  Another commented, “It’s inevitable that they [bush and shred prices] will separate. Prime is too undervalued when it’s discounted to shred like this.”

“Many believe this is the bottom as dealers will start stockpiling for the fall over the next month,” said another source.

Regarding conditions outside of the US, sources report that scrap export pricing has firmed after bouncing around for the last few weeks. Turkish shredded prices are reported at $400 per ton delivered, a lower spread to domestic prices than in previous months. One broker commented: “The main weakness we continue to see is in Asia, as Chinese real estate and Covid lockdowns are holding things there back.”

We will report on preliminary September scrap figures around the last week of this month.

PSA: You can chart out scrap prices as far back as 2007 using SMU’s interactive pricing tool.

By Brett Linton, Brett@SteelMarketUpdate.com

According to GrafTech’s report, the net sales increase was a result of “improved pricing on volume derived from short-term agreements and spot sales (non-LTA). This was partially offset by a shift in the mix of our business to non-LTA volume from volume derived from our take-or-pay agreements that had initial terms of three-to-five years(LTA). “

Despite the currently volatile environment of the steel industry, GrafTech’s outlook remains optimistic. Though it recognizes the near future presents many challenges, the company is committed to strengthening commercial capabilities, carefully managing operating expenses and reducing long-term debt.

GrafTech International Ltd. is a manufacturer of graphite electrode products that are utilized in electric arc furnaces for the production of steel, ferrous, and non-ferrous metals. The company manufactures products in Europe and the Americas, and supplies customers in over 50 countries. 

Have some news or just want to chat? Email me!

By Becca Moczygemba, Becca@SteelMarketUpdate.com

While month-on-month (MoM) growth disappointed in June, construction spending increased 8.3% on a year-on-year (YoY) basis. Spending on private construction projects decreased 1.3% after increasing 0.2% in May.

The Census Bureau’s report on construction shows investment in residential construction dropped 1.6%, with spending on single-family projects plunging 3.1%. Outlays on multi-family housing projects increased 0.4%.

Total construction expenditures and their major categories are shown in Table 1 below. Figure 1 shows total construction and infrastructure expenditures. It details the YoY growth rate versus a rolling 12-month average.

Private Construction

The breakdown of the $1.416 trillion private expenditures into residential and nonresidential, and their subsectors, is highlighted in Table 2 and Figure 2 below. Construction put in place in the private sector in June was down 1.3% from May’s upwardly revised estimate of $1.434 trillion.

Within that category, residential construction was at a seasonally adjusted annual rate of $923.7 billion in June, 1.6% below the revised May estimate of $939.2 billion.

Residential spending contracted at its steepest pace in two years in the second quarter. That contributed to gross domestic product declining at an annualized rate of 0.9% last quarter after shrinking at a 1.6% pace in the January–March quarter.

Nonresidential construction was at a seasonally adjusted annual rate of $492.7 billion in June, 0.5% below the revised May estimate of $495.3 billion. Outlays on non-residential structures have declined for five straight quarters.

June’s homebuilding totals disappointed as growth stalled among residential segments. Builders are hitting the brakes as building costs rise and prospective buyers get priced out of the market with rising interest rates. Total housing starts in four regions—the Midwest, Northeast, South, and West—are displayed below (Figure 3). It also displays the growth of single- and multi-family construction starts. Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1.559 million, down 2.0% from the revised May estimate of 1.591 million, and falling for the second straight month.

Regional results were mixed. The South and Midwest were both down in June, while the Northeast and West rebounded. The South saw the largest decline in total starts in last month, 42,000 less starts MoM (-4.8%) to a total of 825,000 starts, while the Midwest saw the largest percentage decline during the same period, down 7.7% or 18,000 less starts MoM, totaling 215,000 starts in June.

The Northeast saw the greatest growth over the same period, up 10.6% or 15,000 more starts MoM to a total of 156,000. The West was up 3.7% with 13,000 more starts in June versus May at a sum of 363,000.

The National Association of Homebuilders (NAHB) said that prices for construction materials have increased by more than 20% in the past year, during a period of intense demand and insufficient supply. That dynamic led to building material production bottlenecks, coupled with rising inflation, which are driving construction costs higher and further delaying projects. NAHB’s Optimism Index registered 67 in May, down from 69 in May, slipping for the sixth straight month. Advance reports indicate that the index fell further in July with a reading of 55—the second largest drop on record. (Figure 4).

State and Local Construction

Publicly funded construction spending in June was $345.9 billion, at a seasonally adjusted rate, falling for the fifth straight month. June’s outlays dropped 0.5% after falling 0.7% in May. Investment in state and local government construction projects slipped 0.6%, while federal government spending increased 1.2% (see Table 3 and Figure 5 below).

Educational construction was at a seasonally adjusted annual rate of $77.5 billion, 0.7% below the revised May estimate of $78.1 billion. Highway construction was at a seasonally adjusted annual rate of $97.4 billion, 2.7% below the revised May estimate of $100.1 billion.

Year-to-date expenditures for construction of the various building sectors for 2021 and 2022 are compared in Figure 6. Single-family residential construction was dominant in 2021, with expenditures totaling $409.9 billion.

The trend has continued into 2022: single-family residential totaled $225.1 billion through June, 20.3% above $187.1 billion a year ago. Manufacturing (+27%) saw the strongest subsector growth versus last year followed by commercial (+21.9%). Multifamily residential grew by 2.6% and totaled $53.1 billion when compared to the same year-ago period. Lodging is behind by double digits at -22.7% YoY, followed by religious and transportation, down by 10% and 4.2% respectively.

Explanation: Each month, the Commerce Department issues its Construction Put in Place (CPIP) data, usually on the first working day covering activity one month and one day earlier. There are three major categories based on funding source: private, state and local, and federal. Within these three groups are about 120 subcategories of construction projects. SMU analyzes the expenditures from the three funding categories to provide a concise summary of the steel-consuming sectors.

By David Schollaert, David@SteelMarketUpdate.com

The reason: “to support our customers impacted by a longer-than-anticipated outage due to automation issues during the first phase,” she said.

Algoma had scheduled a one-month outage in its fiscal first quarter, which ended in June, to complete the first phase of upgrades. It took the steelmaker approximately six to eight weeks longer than expected to start up the mill following the outage, company executives said on an earnings conference call with analysts last week.

The protracted start-up resulted from problems with automation equipment installed as part of the upgrades. The result: Production and shipment volumes in both the first and second quarters of Algoma’s fiscal year are expected to be lower than in the same quarters last year, they said.

Algoma makes hot-rolled coil, cold-rolled coil, and plate. Company executives noted that the outage and delayed start-up of the plate mill would impact not only discrete plate volumes but also those of strip mill plate too.

SMU’s plate price averaged $1,735 per ton ($86.75 per cwt) when this article was filed, down 3.6% from $1,800 per ton a month earlier on the heels of a price decrease announced by Charlotte, N.C.-based Nucor Corp.

By Michael Cowden, Michael@SteelMarketUpdate.com

The employment growth was widespread across industries, with healthcare and leisure and hospitality seeing some of the biggest gains.

In July, leisure and hospitality led the job gains with 96,000, however, employment in that key service sector is still more than 1 million jobs below its pre-pandemic level, the report said.

Professional and business services followed close behind, adding 89,000. Health care added 70,000 to payrolls, while construction saw a 32,000 boost despite rising mortgage rates and falling housing and permitting declines. Manufacturing added 30,00 jobs; transportation and warehousing, 21,000.

Participation in the labor force fell in July. High demand has done little to expand the ranks of available workers, with many still on the sidelines of the labor market. The overall labor force participation rate fell slightly to 62.1%, 1.3 percentage points below its level in February 2020.

Shown below in Figure 1 is the total number of people employed in the nonfarm economy as well as the month-on-month net change in total jobs in May.

Designed on rolling time periods of one month, three months, one year, and two years, the table below breaks total employment into service industries and goods-producing industries, and then into private and government employees. Most of the goods-producing employees work in manufacturing and construction. Comparing service and goods-producing industries in July shows both increased marginally. The steady and repeated gains have pushed both above pre-pandemic levels, where they’ve been for the past four straight months. Note that the subcomponents of both manufacturing and construction shown in this table do not add up to the total because we have only included those with the most relevance to the steel industry.

Comparing July to June, manufacturing employment was just 0.2% higher, matching the growth seen the month prior. Construction saw a 0.4% increase as well MoM, outpacing the 0.2% gain in June. The construction sector is still being driven by the residential market despite strong headwinds. Though homebuilding has slowed, overall commercial and industrial buildings have taken a more notable hit. Heavy and civil engineering, a sector that suffered little during the pandemic, expanded as well and is now nearly a million jobs above where it stood before the last recession.

The three-month and 12-month comparisons show a decent recovery. The only broad industry to lose jobs was auto manufacturing, which shed about 2,200 jobs as companies have struggled to obtain the parts necessary to produce finished vehicles.

Manufacturing employment added 30,000 jobs in July, marginally above the 29,000 jobs added in June. Construction’s 32,000 payroll gain last month was a marked gain from the poor showing in June and nearly matched the 34,000 added in May.

Construction and manufacturing unemployment diverged again in July. Construction unemployment fell 6.8% MoM from 385,000 in June to 359,000 in July. It’s the sixth consecutive monthly decline for the sector. Manufacturing unemployment was up 5.6% MoM following a 10.2% jump the month prior. Manufacturing unemployment rose from 465,000 in June to 491,000 in July. Both sectors have been heavily impacted by supply-chain disruptions and labor force constraints, but construction has been more resilient.

The history of employment and unemployment in manufacturing and construction since January 2010 is shown below side-by-side in Figure 2, seasonally adjusted.

Figure 3 details employment comparisons between private and government jobs, as well as services and goods-producing jobs.

Explanation: On the first or second Friday of each month, the Bureau of Labor Statistics releases the employment data for the previous month. Data is available at www.bls.gov. The BLS employment database is a reality check for other economic data streams such as manufacturing and construction. It is easy to drill down into the BLS database to obtain employment data for many subsectors of the economy. The important point about all these data streams is not necessarily the nominal numbers, but the direction in which they are headed.

By David Schollaert, David@SteelMarketUpdate.com

Job gains in July were widespread. Leisure and hospitality led the way with 96,000 added to payrolls. The industry is still 1.2 million workers shy of its pre-pandemic level, though.

Professional and business services was next with 89,000 new jobs. Health care added 70,000 and government payrolls grew by 57,000. Goods-producing industries also posted solid gains, with construction up 32,000 and manufacturing adding 30,000. Retail jobs increased by 22,000.

July’s gains were the best since February and well ahead of the 388,000 average jobs rise over the past four months. Total nonfarm payroll employment has increased by 22 million since the historic collapse in April 2020 when most of the US economy shuttered to deal with the Covid-19 pandemic.

Results were even more impressive given previous months’ totals which were revised slightly. May was raised by 2,000 to 386,000 and June was up 26,000 to 398,000.

Wages in July continued to rise. Average hourly earnings jumped 0.5% for the month and 5.2% from a year ago, also ahead of estimates. The labor force participation rate declined by 0.1 percentage point to 62.1%, its lowest level of the year, holding below the pre-pandemic level of 63.4%.

Side-by-side in Figure 1 below is a snapshot of the pace of hiring since April 2021 and the total number of non-farm workers employed in the US since 2000.

The number of long-term unemployed (out of work for at least 27 consecutive weeks) decreased by 269,000 in July to 1.1 million. That figure accounted for 18.9% of the total unemployed in the month. Of note, this measure has returned to its February 2020 level.

The historic picture for the duration of unemployment since January 2005 is broken down into <5 weeks, 5 to 14 weeks, and >15 weeks in Figure 2. The total number of unemployed was 6.255 million at the end of July, a decrease of 79,000 compared to June. The decline put the result just 37,000 above the pre-pandemic unemployment total in February 2020.

July’s results show that roughly 16.2 million more people now have jobs compared to the 22.5 million thrown out of work during the worst of the pandemic in April 2020. As of Aug. 8, 27.2% had been unemployed for more than 15 weeks, 34.8% for 5 to 14 weeks, and 37.9% for less than five weeks.

As part of July’s employment report, the Labor Department released its monthly report on job openings, layoffs, and quitting through the last day of June. Also known as the “JOLTS” report, the data indicates how much demand there is for workers in the US economy and the extent to which employers are still struggling with labor shortages nearly two years removed from the worst of the pandemic.

June’s job openings have declined consecutively from March’s record number. The report suggests that workers remain in high demand and are still quitting more often. There were about 10.7 million job openings in June, 605,000 fewer job openings than in May, and 1.2 million fewer than the record of 11.9 million set in March.

The charts below (Figure 2) detail the total persons unemployed by duration from 2005 through May 2022 and the total job openings over the same period.

The official unemployment rate, U3, reported in the Bureau of Labor Statistics Household survey (see explanation below), increased from 3.5% in February 2020 to 14.7% in April 2020. A steady decrease followed until this past March, where it remained unchanged at 3.6% for four months. July’s measure of 3.5% is now back it to pre-pandemic form and its best reading in more than two decades.

A more encompassing view of unemployment (U6) that includes those holding part-time jobs for economic reasons as well as discouraged workers not looking for jobs was unchanged at 6.7%, after falling the month prior.

Another gauge, and a more definitive view, are the number employed as a percentage of the population. Last month, the employment-to-population ratio was 60.0%, a marginal increase from 59.9% in June.

Figure 3 details side-by-side parallels of the unemployment rate (both the U3 and U6 rates) since 2005 as well as the labor force participation rate and employment to population ratio over the same period.

Initial claims for unemployment insurance, which are reported weekly by the Department of Labor, rose by 4,000 to 260,000 in the week ended July 30, and up 31,000 news claims since our last report a month ago. The increase pushed the total above the 250,000 threshold, showing some stress on the labor market. And if they move much higher it will raise a red flag, the Department of Labor said.

“Continuing claims were up 48,000 in the week ended July 23 to 1.416 million. The insured unemployment rate remained at 1% in the week ended July 23. The new data on initial and continuing claims don’t have any implications for the July employment report, as the data are outside the payroll reference period, which is the week that includes the 12^th,” Economy.com reported.

Human resources consulting firm Challenger, Gray and Christmas Inc. produces a monthly employment update for the US. It reported that job cuts in July totaled 25,810 a decrease of 20.6% from 32,517 announced the prior month. July’s total is 36.3% higher than the same year-ago period when 18,942 cuts were announced.

July marks the second-highest monthly total all year. It is the third time this year that cuts were higher in 2022 than in the corresponding month a year earlier, the report said.

Year-to-date, employers announced 159,021 cuts, down 31.3% from the 231,603 cuts announced through the same period in 2021. It is the lowest January to July total since Challenger began tracking job cuts in 1993.

It wasn’t all good news though. The automotive sector leads all industries this year with 25,088 through the first half of the year. July alone saw 9,510 cuts from the sector. The tech sector had the second-highest number of cuts last month with 3,558 for a total of 9,338 this year. Financial firms announced the third-most cuts in July, cutting 2,165 payrolls, for a total of 12,965 for the year.

Job cut levels are currently nowhere near where they were in the 2001 and 2008 recessions, though they may be ticking up. If we’re in a recession, the labor market has yet to feel it, the report said.

Figure 4 shows the four-week moving average of new claims since January 2005, seasonally adjusted. It also shows the total reported job cuts per month, according to Challenger, on a three-month moving average.

Explanation: On the first Friday of each month, the Bureau of Labor Statistics releases the employment data for the previous month. Data is available at www.bls.gov. The BLS reports on the results of two surveys. The Establishment survey reports the actual number employed by industry. The Household survey reports on the unemployment rate, participation rate, earnings, average workweek, the breakout into full-time and part-time workers and lots more details describing the age breakdown of the unemployed, reasons for and duration of unemployment.

By David Schollaert, David@SteelMarketUpdate.com

Adjusted year-to-date production through Aug. 6 totaled 54,470,000 net tons, at an average utilization rate of 80.1%. That’s 3.1% below the same period last year when production was 56,216,000 net tons, though the utilization rate was lower at 80.2%, AISI said.

Output rose in three of five regions last week but was offset by declines in the Midwest (-10,000 net tons or -4.8%) and Northeast (-4,000 net tons or -2.4%).

Production by region for the week ending Aug. 6 was: Northeast, 162,000 tons; Great Lakes, 567,000 tons; Midwest, 197,000 tons; South, 731,000 tons; and West, 66,000 tons—for a total of 1,723,000 net tons, down 4,000 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.

By David Schollaert, David@SteelMarketUpdate.com

“We reserve the right to review and re-quote any offers that are not confirmed with either a Nucor sales acknowledgement or written acceptance by both parties,” the company said.

The price hike is the first by Nucor since mid-March, when the steelmaker increased sheet base prices by $125 per ton.

That March price hike was supported by the full-scale invasion of Ukraine in late February by Russian forces. The war led to a temporary shortage of key raw materials such as pig iron and sent hot-rolled coil prices up by roughly $500 per ton over about seven weeks.

Prices have fallen since mid/late April and averaged $805 per ton as of last week. That’s down ~16% from $955 per ton in early July and down ~46% from a post-war peak in late April of $1,480 per ton, according to SMU’s interactive pricing tool.

Some market participants have reported numbers well below that figure in recent days.

SMU will next update prices on Tuesday, Aug. 9.

By Michael Cowden, Michael@SteelMarketUpdate.com

The contract was initially set to expire on July 31, and a strike was averted at the last minute when the two sides agreed to continue talks.

While Algoma believes the compensation package—which includes wage and cost of living increases totaling 15.2% over four years, signing bonuses of $6,000 upon ratification, as well as numerous increases to employee and retiree benefits—is superior to those offered by its competitors, the president of Local 2251, Mike Da Prat, has a different opinion. As he told SooToday.com: “A good deal, there is no signing bonus.”

Da Prat contended that bad deals have signing bonuses, and the amount of the signing bonus is a reflection of just how bad the deal is. “It’s meant to attract the short view rather than the long view,” Da Prat said. “The fight for us right now, regarding the cost-of-living adjustment [COLA] is for the young workers going forward. … They are the ones who are going to be detrimentally affected when the COLA becomes part of the wage structure.”

Algoma Steel president and CEO Michael Garcia said in a statement that, “We have worked tirelessly over the last several weeks to come up with a monetary proposal that is seen by both the company and the Union bargaining committee as fair, competitive, and affordable through all points of the steel cycle. We accomplished this with USW Local 2724, whose bargaining committee and membership approved largely the same offer we have presented to Local 2251. We will continue our efforts to find a way forward that avoids a business interruption.”

Late in July, Local 2724—which represents Algoma’s salaried workers—ratified its own labor agreement with the steelmaker, with 59.9% of its membership voting in favor.

With an Aug. 15 deadline looming, Da Prat insists 2251 union members are open to continued discussions, but they will not entertain the current offer by holding a vote on it.

It’s also crunch time for Stelco, another Canadian flat-rolled steelmaker, where USW Local 2782 will be in a legal position to strike as of Aug. 22.

This means we could see two important flat-rolled steel suppliers to Canada and to the Great Lakes/Midwestern US come offline over the next 1–2 weeks should new labor deals not be reached.

Have some news or just want to chat? Email me!

By Becca Moczygemba, Becca@SteelMarketUpdate.com

Here are just a few examples. For starters, more people are optimistic about the second half than was the case a just a few weeks ago.

And while almost all survey respondents report that mills are willing to negotiate lower sheet prices, more are reporting that lead times are stable – another big change over just the last month.

It’s possible the result above is simply a reflection of the fact that lead times can’t physically get a lot shorter than they are now.

That said, I think it’s worth framing the feedback on lead times in the broader context not just of sentiment but also of demand:

Approximately 30% of respondents reporting declining demand. That is by no means a good thing. But it is a better reading than we saw over the prior two surveys – when we were seeing the highest number of people reporting declining demand since the early days of the pandemic.

Another notable trend is that fewer manufacturers are buying imports.

Only 21% of manufacturer respondents said were buying imports in our last survey, the lowest reading we’ve seen since at least Q3 2020.

That shouldn’t come as a surprise to those of you who have been following our coverage of the rapidly declining spread between US prices and the landed price of imports.

Good news, right?

Perhaps. But imports are sometimes mistakenly associated with bad times for steel. Look back to last year: imports were running high even as US prices were hitting their highest levels ever.

In short, steel imports can be a sign of strong industrial activity. And the lack of them – following the outbreak of the pandemic, for example – can be a sign of poor demand.

And make no mistake, it’s not all roses. Some of the cross currents in of our data are hard to fit into a consistent narrative.

More respondents are reporting stable demand. And yet more also report that they are reducing inventories. Does that mean demand is stable at lower levels?

Also, nearly all service centers continue to lower spot prices to their customers, which might run contrary to the narrative at the mill level that prices are at or near a bottom.

So what do you think. Are buyers running inventories low amid stable demand, which means we could see the market snap back up on any sort of disruption – labor-related or otherwise? Or is this just a “dead cat bounce,” a modest uptick as lead times get into the seasonally busier fall months?

PS – Don’t just read our survey data. Make sure your company’s experience is reflected in it. Contact Brett Linton at Brett@SteelMarketUpdate.com to become a data provider. (Contrary to what you might have heard, our surveys only take a few minutes to complete.)

By Michael Cowden, Michael@SteelMarketUpdate.com

The union said it had received a “no-board report” from the Ontario Ministry of Labor on Friday, Aug. 5. The development triggered the legal strike date.

“We will be updating the membership with new information as it becomes available,” Local 8782 said.

A no-board report is issued when a government conciliator from the Ontario Ministry of Labour determines that a company and a union can’t come to terms for a new labor agreement. Approximately two weeks after that happens, the union is in a legal position to strike – and the company is in a legal position to lock out workers.

“We continue to work towards a fair contract for our members in hopes that a strike is not needed,” Local 8782 president Randy Graham said in an email to Steel Market Update on Monday, Aug. 8

A similar development occurred in late July at USW Local 1005, which represents Stelco’s Hamilton Works in Hamilton, Ontario. USW Local 1005 is in a legal position to strike as of Tuesday, Aug. 16.

“We have only asked that you be compensated relative to other workers in the steel industry,” Local 1005’s negotiating committee said in an update to members last week, noting that Stelco has been “extremely successful and profitable” in recent quarters.

“Although we are far less optimistic of avoiding a labor dispute today than we were 4 months ago, there is still time for Stelco to re-engage in meaningful talks and negotiate,” the committee said.

A strike or lockout at Local 8782 would probably be more disruptive.

Lake Erie Works is an integrated steel mill. Its furnaces make liquid metal, and its hot-strip mill makes hot-rolled coil that can be further processed into pickled-and-oil (P&O), cold-rolled or coated products.

The mill, which employs roughly 1,200 union members, is Stelco’s only steel-producing facility.

Steelmaking operations at Hamilton Works, represented by Local 1005, have long been shuttered. Hamilton’s “Z-line,” which makes galvanized and galvannealed products, remains operational. But such downstream products require a stable source of hot band – one typically provided by Lake Erie Works.

If Lake Erie Works were to stop running, it’s not clear where Stelco would source the hot-rolled coil necessary to make downstream P&O, cold-rolled and coated products.

Stelco did not respond to a request for comment for this article on Sunday, Aug. 7.

Negotiations at Algoma, Cliffs and US Steel

Labor negotiations are also underway at Algoma, another Canadian flat-rolled steelmaker. The Sault Ste. Marie, Ontario-based company and USW Local 2251, which represents hourly production workers, extended talks and narrowly averted a strike last week.

Local 2251 in an article in local publication SooToday.com said that extension officially expires at 11:59 p.m. on Monday, Aug. 15.

They agreed to a 15-day extension of talks. “This extension demonstrates the willingness and desire on both sides to reach a fair and equitable agreement for operations of the facilities today and throughout the transition to electric arc steelmaking,” Algoma CEO Michael Garcia said on an earnings conference call with analysts last Thursday. He declined further comment citing the sensitivity of the talks.

USW contract negotiations are also taking place between the USW and US steelmakers Cleveland-Cliffs and US Steel. Contracts between the US mills and the USW don’t expire until Sept. 1.

In Canada, in contrast, Stelco’s contract with the USW expired at the end of June. And Algoma’s contract with Local 2251 expired at the end of July. That has made the stakes higher and the brinksmanship around possible labor actions potentially more disruptive.

By Michael Cowden, Michael@SteelMarketUpdate.com

Sandeep will explain some of the most innovative safety technology advancements —including not only AI but also sensor fusion and edge computing. He’ll also talk about smart wearables and how using them more broadly could dramatically improve safety.

The big idea: To use these technologies to create proactive, as opposed to traditionally reactive, safety measures. The goal: To create a far more accident-free steel industry.

Keep in mind that AI can be used not only when it comes to what we traditionally think of as safety issues—slips and falls, for example. It can also be deployed to prevent heat-related illnesses like heatstroke. Recall that July saw 28 states, including many with steel operations, under heat advisories and excessive heat warnings.

Everguard.ai was formed in 2020. Although the company is still young, it has already received backing from the Boston Consulting Group and South Korean steelmaker SeAH.

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 Ken Simonson, chief economist for the The Associated General Contractors of America (AGC).

By Becca Moczygemba, Becca@SteelMarketUpdate.com

 

Congress provided such a requirement in the Appropriations Act passed in March of this year, indicating concern that any extension or change to Section 232 remedies be backed up with facts.

The ITC announced the fact-finding proceeding in May 2022. Late in July, the Commission heard testimony from interested parties on the costs and benefits of these import measures. In going through the statements, I was struck by how familiar the arguments were. The expected witnesses (companies, trade associations, attorneys) made the expected arguments – on the impact of the tariffs on businesses that rely on imports, on inflation, on climate, and on the welfare of domestic producers.

Patrick Bloom, vice President of government relations at Cleveland-Cliffs Inc., gave testimony stating long-advanced arguments about excess global capacity in steel, major investments by Cliffs, and the successful reduction in import volumes into the United States. Cliffs took a shot at the “misguided, disastrous trend of globalization.” The clogged ports and shortages of components are “undeniable evidence that the practice of outsourcing manufacturing to China and other countries is a fundamentally flawed model.”

Bloom did not explain that parts shortages and other disruptions were not solely caused by globalization. The pandemic, war and other causes helped too.

The testimony by Steel Manufacturers Association president Philip Bell claimed that Section 232 tariffs were an unalloyed boon to the country. No doubt they have done some good things. But those benefits have not been free. Bell noted the large price increases in 2018, shortly after the 232 tariffs went into effect. He did not mention the inflationary steel price increases in 2021, which the Section 232 tariffs helped make possible. Steel prices have declined significantly since last year’s peak. But they are still much higher than they were before the tariffs took effect in 2018. Import competition, as always, moderates prices.

American Iron and Steel Institute (AISI) president Kevin Dempsey took a more cautious tone about Section 232 import restrictions, asserting in his testimony that “the available evidence suggests there has been no significant broad negative impact to the economy as a whole.” Citing a report from the Economic Policy Institute, a Washington think tank supported extensively by domestic steel producers, Dempsey asserted that steel price increases had “no meaningful real-world impact on prices of steel-consuming products.” That is far from self-evident.

Prices paid by consumers are, as noted above, affected by the level of import competition. Rather than noting the competitive impact of the tariffs on US companies making downstream products, Dempsey noted that consumer prices increased only a little. Foreign competitors do not face a 25% tariff on their steel inputs, and so they can export their products to the United States at lower cost than their US rivals – leading to lost jobs here at home. The longer these effects persist, the more US jobs will be lost.

On the consuming industries side of the ledger, major trade associations representing businesses that use steel in manufacturing weighed in, again using familiar arguments (with the addition of inflation, which has only appeared as a major issue in the last year or so). Steel users and traders emphasized, as they always do, the costs to their companies. But they failed to acknowledge that domestic producers were faced with similar pressures in the years before 2018.

The American Metals Supply Chain Institute (AMSCI) testified that steel and aluminum tariffs, coupled with the Section 301 tariffs on Chinese components, contributed significantly to supply chain disruption because of insufficient availability of components (including steel) from domestic sources. Companies have reduced production in the US as a result, and some have announced the closure of operations in the United States because of international competitive pressure. US producers of materials for the construction industry experienced inflation of 36% in fabricated structural metal used in construction in April 2022 compared to year-ago levels. Other construction-related steel products suffered from even higher inflation.

The Auto Care Association argued that the Section 232 and 301 tariffs put tremendous pressure on participants in the automotive aftermarket industry. Organization president and CEO Bill Hanvey said that industry employs 4.5 million workers, more than 20 times the employment in today’s steel industry. The costs imposed by the tariffs impose “a significant strain” on businesses that cannot pass these costs on to their customers. For the Section 301 tariffs, the only solution is to relocate sourcing outside of China. But that is not feasible yet. It requires start-up investments in new facilities that impose financing costs and regulatory compliance that the generally small companies in the aftermarket sector cannot afford.

A similar story was told by the Precision Metalforming Association (PMA) president David Klotz. Composed largely of small- to medium-sized companies fabricating metals for thousands of applications, PMA members rely on steel and aluminum costs remaining competitive with their international competitors. The Section 232 and 301 tariffs, imposed by their own government, make that impossible.

These are a few examples of nearly one hundred statements delivered to ITC commissioners over three days in July. Written comments are due by August 12. The ITC is scheduled to report its findings on Section 232 and 301 import restrictions by March 2023.

The points raised by all witnesses make good reading for their constituencies. But rarely do they attempt to acknowledge the other side’s points or weigh benefits against costs. Thus, they do not help the ITC do its job. In Section 301 reviews, the ITC must find facts to assist the office of the United States Trade Representative (USTR) in determining the “effectiveness” of continuing the remedies to achieve the statutory objective of eliminating the offending foreign practice.

Under Section 232, the ITC must find facts regarding the impact of the remedies on all major sectors of the economy, including consumers. Ultimately, President Biden must decide whether the continuation of the remedies, with or without modification, is necessary to adjust imports such that the national security of the United States is not threatened with impairment.

Only by balancing the points made by all sides (net costs and benefits to the economy and the industry affected) can a rational determination be made. This will be hard—but the parties so far have not engaged the points made by the other side. Thus, the president and his advisors will have to balance the benefits and hardships on their own—unless the parties in their written comments rise to the occasion.

I have my own ideas on how to balance the costs and benefits. Others do too. As the ITC proceeding continues, with final comments during August, I hope the that weighing costs and benefits of long-term government protection will get more attention. It cannot come too soon.

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz
5335 Wisconsin Avenue, N.W., Suite 440
Washington, D.C. 20015
Phone: (202) 617-2675
Mobile: (202) 250-1551
E-mail: lewis.leibowitz@lellawoffice.com

SMU’s Future Buyers Sentiment Index, which measures buyers’ feelings about business conditions three to six months in the future, recovered by 21 points from our previous survey and now stands at +64 (Figure 2). In mid-July our Future Sentiment Index had fallen to +43, a nearly two-year low. Earlier this year we saw the highest Future Sentiment readings recorded in our 13.5-year history. Late April and early May both registered +80.

Recall that as steel prices peaked last September, Current Sentiment reached an all-time high of +84, while Future Sentiment peaked two months later at +78. The lowest levels over the past decade both occurred in April 2020, at -8 and +10 respectively.

Measured as a three-month moving average, the Current Sentiment 3MMA declined two points to +61.33 last week, a decline of eight points compared to one month prior (Figure 3). Ten weeks ago, the Current Sentiment 3MMA peaked at +77.83, the highest level since December 2021.

The Future Sentiment 3MMA declined three points this week to +56.67, down nine points from one month prior (Figure 4). Back in May, the Future Sentiment 3MMA reached a record high of +74.67, surpassing the previous record of +73.67 in March 2017.

One helpful way to measure changes in Sentiment is to graph the survey-to-survey change in the Current Sentiment 3MMA Index (Figure 5). The latest survey-to-survey 3MMA change is down two points compared to mid-July. Two weeks prior, we saw a six-point decline, which was the largest survey-to-survey change since April 2020. Between November 2020 and June 2022, the survey-to-survey change in our 3MMA Sentiment readings was steady, never exceeding two points. In late June of this year, it began to exceed that range and did so through July.

What SMU Survey Respondents Had to Say

“While sales are dramatically off from 2021 YTD … it is still a good year.”

“Losing money on every order.”

“I think demand will falter as the higher interest rates … pull back business.”

“We still have regular buys, but I am concerned about futures.”

“We have inventory and can fill spot requirements quickly.”

“We’ll do better and better once we actually hit the bottom of this market and our inventory isn’t under water anymore.”

“The margin compression is just too much to overcome on pure service center CTLS/slitting/distribution.”

“I just don’t see much positive happening. Future demand is cloudy, and companies are getting conservative about business.”

“We continue to book orders.”

“Still have to work through inventory glut with lower demand requirements.”

“I expect a reduction of orders in the next 60 days.”

Tracking steel buyers’ sentiment is helpful in predicting their future behavior.

About the SMU Steel Buyers Sentiment Index

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

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

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

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

By Brett Linton, Brett@SteelMarketUpdate.com

Total finished steel imports totaled 2.25 million tons in June, down 6% from May and 12% less than March’s 46-month high. The latest license data shows July finished steel imports at 2.13 million tons (previously at 1.79 million tons).

Due to large month-on-month swings in semifinished imports in recent years, the chart below shows total imports on a three-month moving average (3MMA) basis in an attempt to more accurately display trends. Through final June figures, the 3MMA is up to 2.77 million tons, down from May but still the eighth highest level in the past four years. The latest license data suggests that the 3MMA could decline to 2.72 million tons through July.

Current import levels remain high compared to recent years: recall 2021 averaged 2.63 million tons per month, 2020 averaged 1.84 million tons per month, and 2019 averaged 2.32 million tons per month. In January 2022 the 3MMA had reached a 42-month high of 2.94 million tons. The lowest 3MMA level in SMU’s recent history was October 2020 at 1.36 million tons.

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

The two charts below show monthly imports grouped by product category: flat-rolled imports and pipe and tube imports. June flat-rolled imports rose to 1.13 million tons, up 9% from the month prior. July licenses are currently showing 972,000 tons of flat-rolled steel set to enter the country. Pipe and tube imports were 493,000 tons in June, down 7% from May’s 2.5-year high. July pipe and tube import licenses are currently in line with June.

We have an interactive graphing tool available on our website here. Readers can explore historical import data, in total and by product. If you need assistance logging into or navigating the website, contact us at Info@SteelMarketUpdate.com.

By Brett Linton, Brett@SteelMarketUpdate.com

The request came from Atlas Tube Inc., Bull Moose Tube Co., Maruichi American Corp., Nucor Tubular Products Inc., Searing Industries, Vest Inc., Wheatland Tube Co., and the United Steelworkers union.

The inquiry examines whether certain pipe and tube products – those completed in Vietnam from hot-rolled steel produced in China, Korea, India, or Taiwan – are circumventing AD and CVD orders on the following products:

• Circular welded carbon quality steel pipe from China and Taiwan
• Circular welded non-alloy steel pipe from South Korea and Taiwan
• Welded carbon steel standard pipe and tube from India
• Circular welded carbon steel pipe and tube from Taiwan
• Light-walled rectangular pipe and tube from South Korea
• Light-walled rectangular carbon steel tubing from Taiwan

Opposition comments have already been filed by foreign producers SeAH Steel VINA Corp. and Vietnam Haiphong Hongyuan Machinery Manfactory Co.

By Laura Miller, Laura@SteelMarketUpdate.com

The number of active US rigs fell by three to 764 rigs, with oil rigs down seven, gas rigs up four, and miscellaneous rigs unchanged from last week. Last week we saw the highest total US count since March 20, 2020. Compared to this time last year, this week’s US count is up 273 rigs, with oil rigs up 211, gas rigs up 58, and miscellaneous rigs up four. See Figure 1 for a history of active US rig counts.

The Canadian rig count declined by one to 203 rigs, with oil rigs up three and gas rigs down four. This week’s count is up 47 rigs compared to levels one year ago, with oil rigs up 45, gas rigs up three, and miscellaneous rigs down one. See Figure 2 for a history of active Canadian rig counts.

International rigs increased by nine to 833 rigs for the month of July and are up 82 rigs from the same month one year ago.

For more in-depth information on the energy market, Steel Market Update publishes an “Energy Update” report each month covering oil and natural gas prices, detailed rig count data, and oil stock levels. Our next report will be published next week for our Premium members.

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

About the Rotary Rig Count

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

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

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

By Brett Linton, Brett@SteelMarketUpdate.com

The Luxembourg-based company reported $2.8 billion in sales during the second quarter—an 18% rise from the previous quarter and an 83% jump from Q2 2021. Q2 net income also rose 18% sequentially and showed growth of 118% year-on-year to reach $634 million.

Globally, the company sold 815,000 metric tons of seamless pipe and 75,000 metric tons of welded pipe during the quarter. While showing a 48% rise from Q1, welded tube sales actually declined 5% year-on-year.

Q2 sales in North America rose 18% sequentially to $1.58 billion. This was a spike of 124% from the same quarter last year.

“In North America, sales increased thanks to higher OCTG prices throughout the region reflecting higher US drilling activity and low distributor inventory levels together with higher volume of OCTG delivered in US onshore,” the company said in its Q2 earnings report.

Oil and gas drilling activity continues to rise around the globe, led by North America and the Middle East, Tenaris said. It expects further sales growth and stable margins for the remainder of the year, despite a seasonal slowdown in Q3 and fewer shipments to pipeline projects.

Last month, Tenaris announced it intends to purchase Shreveport, La.-based Benteler Steel & Tube Manufacturing Corp. in a deal worth $460 million. The transaction is expected to close in Q4 and will add 400,000 metric tons of capacity to Tenaris’ profile.

Tenaris has operations in 16 countries. In the US, it currently operates eight manufacturing facilities and four pipe service centers. The company recently joined the Steel Manufacturers Association as a producer member.

By Laura Miller, Laura@SteelMarketUpdate.com

Both net income and sales were 27% higher year-on-year at $37.6 million and $709 million, respectively.

“The continued strength of our three business segments in the second quarter drove another record-breaking performance for Olympic Steel. … During the second quarter, Specialty Metals achieved record quarterly sales and earnings, Pipe and Tube continued its run of strong results, and our Carbon Flat business delivered strong EBITDA,” CEO Richard Marabito said.

Tons sold in both its carbon flats and specialty metals flats segments were lower YoY, with carbon flats down 14% to 210,604 tons and specialty flats down 4.5% to 38,386 tons. Average selling prices were higher, however, in both segments at $1,760 per ton and $5,913 per ton, respectively.

“While metal pricing is declining during the third quarter, we remain optimistic regarding underlying demand and our ability to consistently produce earnings in all market cycles,” Marabito added.

The company is investing in all three of its business segments. It is adding a second automotive stamping line in Winder, Ga.; expanding its pipe and tube facility in Des Moines, Iowa, with a 30,000-square-foot addition; and has leased an 80,000-square-foot white metals fabrication facility in Bartlett, Ill. It is also investing further in automation as well as “actively seeking additional acquisitions.”

Headquartered in Cleveland, Olympic operates 42 facilities across North America.

By Laura Miller, Laura@SteelMarketUpdate.com

If you need help accessing the survey results, or if your company would like to have your voice heard in our future surveys, contact Brett@SteelMarketUpdate.com.