State of Steel - February 2024

Pricing - Heading downward but by how much?

Structural tubing prices have dropped since the beginning of January. Square and rectangular tubing prices began dropping on January 10th and have now seen 3 decreases since that time. A drop in customer demand, inflated inventories, and an overall slowing in economic conditions are credited for the lower prices. Structural tube pricing continues to be fluid and the overall sentiment is that we may continue to see pricing drop gradually following the CRU index trend.    

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 prices are all beginning to feel the slowing economy. Over the last few weeks, we have seen prices remain flat to decreasing on standard items. The February surcharge on contract business was lowered $4 over January. While decreases are never “announced” in mechanical tubing, the overall sentiment is that we should see flat pricing for the next few months. 

The CRU index, which is an indication of where coil and sheet steel prices are sitting, decreased $46 per ton on February 7th and now sits at $1,007 per ton. That is a decrease of $89/ton since last month’s reading. Buyers are expressing hesitancy in the flat spot market. Buyers are reluctant to place new orders given their relatively robust inventory position and still uncertain demand outlook.

             

Cast Iron Pricing & Surcharges

There have not been any base price increases on cast iron since April 1st of 2022. Since November of 2023, Dura-Bar’s surcharges have seen a gradual increase in price but do appear to be flattening out going through the 1st quarter. (see chart below). February surcharges saw surcharges remain flat in comparison to last month.         


Metal Production

In the week ended January 27, US raw steel production decreased 0.1% week-over-week to 1,680,000 tons (-1.0% YoY).  US capacity utilization was 75.6% vs 75.9% last year. (Source: AISI)

US Steel is going to permanently idle battery #15 at the Clairton coke plant. The unit had been on hot idle. (Source: SMU)

Cleveland Cliffs announced it has successfully completed a hydrogen (H2) injection trial at its Indiana Harbor #7 blast furnace, the largest blast furnace in North America. This represents the second Cliffs blast furnace to utilize hydrogen as a reductant and fuel source, following the successful trial at Middletown Works in May 2023. (Source: SMU)

World crude steel production for the 71 countries reporting to the World Steel Association was 135.7 million tons in December 2023, a 5.3% decrease compared to December 2022. (Source: WorldSteel)

Scrap & Steel Inputs

Ahead of the February scrap trade, the outlook for scrap prices currently remains uncertain, although some market sources think the 30% drop in scrap collections due to winter weather should offer some support. (Source: Platts)

AMM #1 scrap numbers are currently at $510 per ton and appear to remain flat in comparison to January. 

Steel Constraints & Roadblocks

The USW said in a press release that Nippon Steel will transfer its obligations to a Houston-based holding company called Nippon Steel North America (NSNA). According to the USW, this means that Nippon would not assume the union’s labor, pension, retiree insurance and other agreements itself. Instead NSNA would acquire the business and take responsibility for all the contracts. The USW expressed concern given there is no financial information available for NSNA, and thus there is no information available to determine the soundness of NSNA to stand behind the obligations it would owe USW members and retirees. (Source: AMM)

Cleveland Cliffs stated that its US Steel offer no longer exists, and that if they can’t close their deal with Nippon, the Cleveland Cliffs offer will not be a backstop. (Source: Bloomberg)  

Oil & Gas Industry

The US rig count increased 0.2% week-over-week to 621 rigs as of 1/26. The rig count is down 19.5% year-over-year. (Source: Baker Hughes)

Oil prices rose on Tuesday. The WTI futures increased 0.73% for March to settle at $73.31 a barrel. U.S. crude output set a record of 13.3 million barrels per day in December before pulling back to 12.6 million barrels per day in January due to winter storms. (Source: CNBC)

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 2/8/24):

DOM Tubing lead times remain consistent.  We are now anywhere from 6 to 12 weeks depending on size. Cold Drawn Seamless tubing has flattened and now stands at 10 to 15 weeks. HRS tubing can be obtained on the spot market, but Timken (domestic mill) is 25+ weeks behind on their product lead times and foreign HRS is roughly 4-to-6-month lead times.

Structural Tubing mill lead times have lowered and run approximately 3-6 weeks upon receipt of order dependent on size. 

Dura-Bar Continuous Cast Iron mill lead times lowered slightly and are approximately 2-4 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 6.8 weeks, still above the long-term average since 2016 of 5.6 weeks. Other product lead times were mixed last week with CRC lead times down to 8.2 weeks, HDG lead times down to 8.1 weeks, and plate lead times up to 4.0 weeks. (Source: Platts)

Employment / Hiring

Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 218,000 for the week ended Feb. 3, the Labor Department said on Thursday. Economists polled by Reuters had forecast 220,000 claims for the latest week. The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 23,000 to 1.871 million during the week ending Jan. 27, the claims report showed. (Source: Reuters)

Nonfarm payrolls increased by 353,000 in January. The unemployment rate is unchanged at 3.7% and average hourly earnings rose 0.6%; up 4.5% year-on-year. (Source: Reuters)

Economic Factors

The Institute for Supply Management (ISM) said on Thursday that its manufacturing PMI increased to 49.1 last month from a slightly downwardly revised 47.1 in December. It was the 15th straight month that the PMI stayed below 50, which indicates contraction in manufacturing. That is the longest such stretch since the period from August 2000 to January 2002. (Source: Reuters)

U.S. central bank officials signaled on Wednesday that they were in no rush to lower borrowing costs until they were confident inflation was headed down to the Fed's 2% target. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25% to 5.50% range. (Source: Reuters)

Ford announced that it is slashing production of its F-150 Lightning electric pickup truck, while adding workers to its ICE vehicle factories. (Source: Wall Street Journal)

Existing home sales declined 19% in 2023 from the prior year to 4.09 million. That total was the lowest full-year level since 1995. (Source: Wall Street Journal)

Imports 

Steel imports in 2023 declined by 7.2% year-over-year. (Source: US Department Of Commerce)

 

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