Pricing - New Year with a New Outlook?

Structural tubing prices have climbed dramatically over the last 2 months but did seem to flatline during the holidays. Pricing has remained level for the last 3 weeks over that same period. Structural tube pricing continues to be fluid and overall sentiment is that we may begin to see pricing remain steady to possibly decreasing in the next few weeks to months. The speculation is that it will begin dropping in February. 

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 the increased cost of 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 have been seeing several months now of increasing prices. For the first time in a while, DOM saw a surcharge in December for contract pricing.   

Cleveland-Cliffs kicked off 2024 with an attempted $50/ton spot HRC price increase, with Cliffs now targeting a base spot HRC price of $1,150/ton, effective immediately. (Source: Company Press Release)

Cast Iron Pricing & Surcharges

There have not been any base price increases on cast iron since April 1^st of 2022. Since November of 2023, Dura-Bar’s surcharges have seen a gradual increase in price and appear to be continuing to climb going into the 1st quarter. (see chart below). January surcharges saw its largest increase since March of 2023.          

Metal Production

In the week ended December 30, US raw steel production decreased 0.8% week-over-week to 1.680mt (+6.6% YoY). US capacity utilization was 73.1% vs 70.6% last year. Year-to-date production is 88.727mt up 0.2% year-over-year from 88.528mt last year. (Source: AISI)

The Illinois Environmental Protection Agency signaled its intention to deny US Steel's request to increase emissions at the two idled blast furnaces at Granite City. As a reminder, in June 2022, US Steel and SunCoke entered into a non-binding agreement for SunCoke to acquire and repurpose Granite City’s blast furnaces for pig iron production. (Source: AMM)

The World Steel Association has today released its Short-Range Outlook (SRO) steel demand forecast for 2024. Steel demand is forecast to grow by 1.7% in 2024 to reach 1,854.0 mil tons. Manufacturing is expected to lead the recovery, but high interest rates will continue to weigh on steel demand. Growth is expected to accelerate in most regions in 2024, but deceleration is expected in China. (Source: worldsteel.org)

Scrap & Steel Inputs

US Scrap prices shot up in December and are expected to continue their rise in January, sources said. (Source: SMU)

Turkish import scrap prices increased this week on tighter availability and firmer offers in part driven by increasing freight rates. Turkish HMS scrap import prices increased to $415/ton. (Source: Platts)

Steel Constraints & Roadblocks

US Steel agreed to be acquired by Nippon Steel in a $14.1 billion ($55/share) deal. The deal has been unanimously approved by the boards of both companies and is expected to close by October, pending approval from US Steel’s shareholders and regulators, the companies said. (Source: Wall Street Journal)

Following news of the announcement that Nippon will acquire US Steel, the United Steelworkers (USW) International President David McCall issued a statement expressing disappointment with the planned acquisition, and he indicated the USW intends to “exercise the full measure of the agreements” and “will strongly urge government regulators to carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States and benefits workers”. Further, US Senators J.D. Vance & John Fetterman spoke against the sale. (Source: SMU)  

Oil & Gas Industry

The US rig count increased 0.3% week-over-week to 622 rigs as of 12/29.  The rig count is down 20.2% year-over-year. (Source: Baker Hughes)

Brent crude futures were up $1.14, or 1.47%, at $78.73 a barrel, while U.S. West Texas Intermediate crude futures were up $1.57, or 2.17%, at $73.76. Both benchmarks are on track to end the first week of the year higher, rebounding from losses on Thursday triggered by hefty increases in U.S. gasoline and distillate stocks. (Source: Reuters)

Lead Times

Understanding lead times for steel products are important to every participant in the supply chain. Lead times for steel products are as follows (as of 12/12/23):

DOM Tubing lead times remain consistent.  We are now anywhere from 4 to 12 weeks depending on size. Cold Drawn Seamless tubing has recently gone up and now stands at 14 to 20 weeks. HRS tubing can be obtained on the spot market, but Timken (domestic mill) is 30+ weeks behind on their product lead times and foreign HRS is roughly 4–6-month lead times.

Structural Tubing mill lead times ticked up and run approximately 4-8 weeks upon receipt of order dependent on size.  

Dura-Bar Continuous Cast Iron mill lead times remain moderate and are approximately 3-5 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 shorter last week at 8.1 weeks, still above the long-term average since 2016 of 5.6 weeks. Other product lead times were also shorter last week with CRC lead times down to 8.8 weeks, HDG lead times down to 8.9 weeks, and plate lead times down to 4.0 weeks. (Source: Platts)

Employment / Hiring

Approximately 0.202 million Americans filed for unemployment insurance last week. This was better than economists’ expectations of 0.216 million claims, and better than last week’s upwardly revised claims number of approximately 0.220 million claims. Continuing claims decreased during the week ending December 23 (continuing claims have a week lag in terms of reporting) and stand at approximately 1.855 million continuing claims. (Source: Reuters)

Nonfarm payrolls increased by 216,000 in December while the unemployment rate remained unchanged at 3.7%.

Average hourly wages gained 0.4% which is a rise of 4.1% year-on-year. (Source: Reuters)

Economic Factors

The ISM Manufacturing PMI registered 47.4% in December, up from 46.7% in November.  However, this marks the 14th consecutive month of manufacturing contraction. (Source: Reuters)

General Motors US vehicle sales increased by 14.1% YoY in 2023 to ~2.6 million vehicles (all electric vehicles were only 2.9% of their sales). This was the highest level since 2019.  Edmunds expects industrywide sales to hit 15.5 million in 2023, which would be a roughly 14% increase compared to 2022. (Source: CNBC)

Construction spending in the US totaled $2.050 trillion in November, a 0.4% month-over-month increase. This marks 5 consecutive months of increased spending. (Source: SMU)

Imports