Pricing - How long can we go? Playing Limbo with steel pricing...

Structural tubing prices continued to decline in the 3^rd quarter. Unfortunately, pricing continues to plummet and freefall with no idea what the new “floor” will be. Structural tube continues to be fluid and deals continue to be made in a competitive marketplace. Possible stabilization is coming due to there being no real price advantage over imported steel.

While structural tube prices have declined, mechanical tube prices have been flat - seeing a slight decrease in pricing of late. Lead times have shortened in the third quarter on DOM, CDS, and now HRS. HRS tubing can be obtained on the spot market and mill lead times have decreased from 30 plus weeks to 20-25 weeks behind on their product lead times. DOM Surcharges and fuel surcharges have dropped in the 3rd quarter and look to remain low. 

Nucor announced it will lower plate prices by $40/ton with the opening of its October order book. Nucor has kept plate prices unchanged since April. (Source: SMU) 

Cast Iron Pricing

There have not been any base price increases on cast iron since April 1^st of 2022. Since May of 2023, Dura-Bar’s surcharges have seen a gradual decline in price since April of 2023 and appear to remain flat going into the 4th quarter.  

Scrap & Steel Inputs

The September scrap trade kicked off this week with one Detroit mill entering the market with tiered bids across grades, offering to buy prime at down $50/ton month-over-month. Initial bids for obsolete grades out of the region were more robust with shredded offered at flat month-over-month. (Source: Argus)

Metal Production

In the week ended September 2, US raw steel production decreased 0.2% week-over-week to 1.729mt (+1.2% YoY). US capacity utilization was 76.0% vs 77.5% last year. This marks 59 consecutive weeks where capacity utilization has been below 80%. Year-to-date production is 59.844mt down 1.8% year-over-year from 60.948mt last year. (Source: AISI)

Argus estimates that around 410 thousand tons of steelmaking capacity will be taken offline in September for scheduled maintenance outages, with incremental tons also being taken offline in 4Q for maintenance outages.  (Source: Argus)

Lead Times

Understanding lead times for steel products is important to every participant in the supply chain. Lead times for steel products are as follows (as of 09/13/23):

DOM Tubing lead times have loosened up quite a bit. We are now anywhere from 4 to 10 weeks. Cold Drawn Seamless tubing has recently gone down as well and now stands at 10-18 weeks. HRS Tubing sits at 20 to 25 weeks.    

Structural Tubing mill lead times are low and run approximately 1-4 weeks upon receipt of order.  

Dura-Bar Continuous Cast Iron mill lead times are shorter and approximately 1-3 weeks depending on size, grade, and finish. If it’s a large bar, special grade, size, or shape then the lead time could be longer. 

Average HRC lead times were slightly higher last week at 5.4 weeks, below the long-term average since 2016 of 5.6 weeks. Other product lead times were mixed last week with CRC lead times at 6.6 weeks, HDG lead times at 7.7 weeks, and plate lead times at 5.8 weeks. (Source: Platts)

Oil & Gas Industry

The US rig count decreased 0.2% week-over-week to 631 rigs as of 9/1. The rig count is down 17.0% year-over-year. (Source: Baker Hughes)

Employment / Hiring

Approximately 0.216 million Americans filed for unemployment insurance last week, the lowest since February. This was better than economists’ expectations of 0.234 million claims, and better than last week’s upwardly revised claims number of approximately 0.229 million claims. Continuing claims decreased during the week ending August 26 (continuing claims have a week lag in terms of reporting) and stand at approximately 1.679 million continuing claims. (Source: Reuters)

The unemployment rate was 3.8%, up significantly from July and the highest since February 2022. The “real” unemployment rate jumped to 7.1%. Nonfarm payrolls grew by a seasonally adjusted 187,000 for the month, above the Dow Jones estimate for 170,000. (Source: CNBC)

Economic Factors

While inflation has come well off its 40-year highs of mid-2022, it is still considerably above the 2% level where the Federal Reserve would like it.

The consumer price index rose 3.2% from a year ago in July, slightly below expectations. The core CPI ran at a 12-month rate of 4.7%, also below the estimate. Both measures were up 0.2% on the month.

The annual inflation rate in the US accelerated for a second straight month to 3.7% in August from 3.2% in July, above market forecasts of 3.6%. Oil prices have been on the rise in the previous two months, which coupled with base effects from last year, pushed the inflation higher. On the other hand, inflation slowed for electricity prices (2.1% vs 3%), food (4.3% vs 4.9%), shelter (7.3% vs 7.7%), new vehicles (2.9% vs 3.5%) and apparel (3.1% vs 3.2%). Also, faster decreases were seen in cost for utility gas service (-16.5% vs -13.7%), medical services (-2.1% vs -1.5%) and used cars and trucks (-6.6% vs -5.6%). Core inflation rate however, which excludes food and energy, slowed for the fifth month to 4.3%, in line with market expectations. (Source: U.S. Bureau of Labor Statistics)

Imports/Exports

SOURCE: United States Department of Commerce, Enforcement, Compliance