Pricing - What happened to leveling off? Here we go again.

Structural tubing prices have hit bottom and are now back on the way up.  We have now seen 3 increases on structural tubing since mid-October. Mills are holding firm on elevated offer prices, with most major mills’ December order books full and into January, sources say. Meanwhile, tentative agreements between the Big Three automakers and the United Auto Workers union could boost demand and provide further support to the hot band market.   

Mechanical tubing seems to be following a similar trend to structural tubing. Drawn Over Mandrel (DOM), Cold Drawn Seamless (CDS) and Hot Rolled Seamless (HRS) tubing are all ticking upward. Over the last few weeks, we have seen prices increase due to coil and the steel indexes rising. These increases are reversing the lows we have seen over the last few months. While decreases are never “announced” in mechanical tubing, we had been seeing several months of lowering prices until last week (see estimate in chart below).   

Cleveland-Cliffs announced its fourth price increase since the end of September, with Cliffs now targeting a minimum base HRC price of $1,000/ton, effective immediately. The prior three increases were largely successful. Nucor followed Cliffs’ lead in raising prices but announced it will increase its spot HRC prices to a minimum of $950/ton (Source: Company Press Release)

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 remain flat going into the 4th quarter (see chart below). November surcharges saw very little change and even slightly dipped.      

Metal Production

In the week ended November 4, US raw steel production decreased 0.5% week-over-week to 1.699mt (+6.6% YoY). US capacity utilization was 73.9% vs 71.5% last year. Year-to-date production is 75.322mt down 0.7% year-over-year from 75.855mt last year. (Source: AISI)

Algoma Steel is planning two 20-day outages next year as it brings the second phase of its plate mill modernization project online. The first outage will occur in April 2024. The second will occur later in the year. (Source: SMU)

US Steel is officially idling its UPI operations in California at the end of this year. The USS-UPI mill was capable of producing 1.5 million tons annually of cold-rolled and galvanized steel sheet and tin mill products. (Source: SMU)

Forecasts per Worldsteel Association, show that steel demand will grow by 1.8% in 2023 and reach 1,814.5 Mt after contracting by 3.3% in 2022. In 2024, steel demand will see a further increase of 1.9% to 1,849.1 Mt.

Steel Constraints & Roadblocks

UAW members at auto parts supplier Mobis North America in Toledo, Ohio, have authorized leaders to call a strike when their contract expires next week. There are 400 workers at the plant that supply completed chassis modules to Jeep’s Toledo Assembly Complex. (Source: SMU)

The UAW reached a tentative agreement with GM this week. The UAW now has tentative agreements with all the Big Three OEMs, and if these agreements are ratified the strike that commenced on September 15 would officially end. No specific timeline for the ratification vote has been provided yet. (Source: Reuters)

The Auto Alliance for Automotive Innovation (AAI), which represents the full automotive industry from auto OEMs to equipment suppliers and battery producers, sent a letter to the US congressional leadership stating the proposed acquisition of US Steel by Cleveland-Cliffs could have negative implications for the auto industry and increase costs for average drivers, and thus it deserves antitrust scrutiny from the subcommittee and government regulators. (Source: SMU)

Oil & Gas Industry

The US rig count decreased 1.1% week-over-week to 618 rigs as of 11/3. The rig count is down 19.7% year-over-year. (Source: Baker Hughes)

U.S. crude oil production this year will rise by slightly less than previously expected while demand will fall, the U.S. Energy Information Administration (EIA) said on Tuesday. The EIA issued the new outlook after Saudi Arabia and Russia extended voluntary production cuts of 1.3 million barrels per day through December as demand concerns weigh. U.S. crude oil production will rise to 12.9 million bpd in 2023, the agency said, compared with its previous estimate of 12.92 million bpd. (Source: Reuters)

Crude oil appears to have settled into a range between $80–$90 per barrel for West Texas Intermediate, as the concerns about disrupted supply out of the Middle East are offset by better production out of the United States and slowing global demand. Any breakout of this range is likely to be through the upper end in this tense geopolitical environment.

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 11/14/23):

DOM Tubing lead times have extended quite a bit. We are now anywhere from 8 to 10 weeks. Cold Drawn Seamless tubing has recently gone up as well and now stands at 14 to 20 weeks. HRS Tubing sits at 18 to 24 weeks.    

Structural Tubing mill lead times ticked up and will run approximately 3-5 weeks upon receipt of the order.  

Dura-Bar Continuous Cast Iron mill lead times remain short and are 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 much higher last week at 9.2 weeks, above the long-term average since 2016 of 5.6 weeks. Other products’ lead times were mixed last week with CRC lead times up to 9.3 weeks, HDG lead times up to 9.4 weeks, and plate lead times down to 5.0 weeks. (Source: Platts)

Economic Factors

The savings rate has declined to 3.4%, so consumption will no longer be driven by the spending of excess savings; however, job and wage growth should allow for continued growth in consumer spending, albeit at a lower rate. Business spending will remain muted as inventories are drawn down.

The steady decline in the inflation rate seen since it peaked in the summer of 2022 stalled somewhat over the summer. That “last mile” of the journey toward the 2% target established by the Federal Reserve (Fed) is proving rather difficult, as stubborn services inflation has largely offset the success in eliminating goods price inflation. The tight labor market has kept wage inflation high, and the recent settlement between the major auto manufacturers and United Auto Workers is an indication that negotiating power may be tilting toward the side of labor. (Source: Cerity Partners)

Employment / Hiring

Approximately 0.217 million Americans filed for unemployment insurance last week. This was slightly better than economists’ expectations of 0.218 million claims, and better than last week’s upwardly revised claims number of approximately 0.220 million claims. Continuing claims increased during the week ending October 28 (continuing claims have a week lag in terms of reporting) and stand at approximately 1.834 million continuing claims. (Source: Reuters)

Scrap & Steel Inputs

US import pig iron prices increased this week on higher demand driven by mills continuing to restock, with the import pig iron price hitting $450/ton. (Source: AMM)

November Chicago #1-bushel scrap sits at $430/ton which is up $30/ton from October.

The November scrap trade kicked off earlier than expected this month with one major Detroit-area mill bidding prime grades up $30/ton and shred up $20/ton month-over-month. (Source: Argus)

Imports