Pricing - Inflation uncertainty in the market looms large.

Persistent inflation is still too high and further progress to bring it down is not assured by the Federal Reserve. It’s this uncertainty that has caused structural tubing prices to begin heading back downward. The steel indexes are currently ranging from $811 to $820 for HRC (hot rolled coil). We have seen 3 small decreases in just the last 10 days for US hollow structural sections (HSS), with sources confirming that a $100 per short ton price increase earlier this month failed to gain market acceptance. “We’re basically heading back to square one,” a producer source said. Structural tube pricing continues to be fluid and the overall sentiment is that these latest decreases may stave off any additional decreases. If it is accepted, there may be some flattening in future weeks. 

Mechanical tubing prices are still flat for this month although we did see a slight increase due to surcharges. Drawn Over Mandrel (DOM), Cold Drawn Seamless (CDS) and Hot Rolled Seamless (HRS) tubing prices are all stable. The May surcharge on contract business sits at $27 per ton. It is reported that buying activity is slower as the service centers are starting to be more cautious.

 The Nucor Consumer Spot Price (CSP) for 5/6/24 is down $65 from the previous week to $760/ton and the CSI number for the West Coast is $840/ton, down $50. The Cleveland-Cliffs Monthly Hot Rolled Coil Spot Price for June is $850/ton. The monthly HRC number will change as market conditions warrant.

Cast Iron Pricing & Surcharges

There have not been any base price increases on cast iron since April 1^st of 2022. Since January of 2024, Dura-Bar’s surcharges had seen a gradual decrease in price until now. May saw the first increase since the beginning of the year. (see chart below). May surcharges increased slightly in comparison to last month.    

Metal Production

In the week ended April 27, US raw steel production decreased 0.9% week-over-week to 1.701mt (-3.8% YoY). US capacity utilization was 76.6% vs 78.6% last year. Year-to-date production is 28.550mt down 2.9% year-over-year from 29.391mt last year. (Source: AISI)

The Brussels-based World Steel Association says steel demand in China in 2024 will remain around the level of 2023, but in 2025 it sees Chinese steel demand hitting a downtrend with a 1 percent decline. India has emerged as the strongest driver of steel demand growth since 2021, and their projections suggest Indian steel demand will continue to charge ahead. (Source: worldsteel)

The federal government of Mexico has implemented new tariffs on hundreds of imports from countries with which it doesn’t have trade agreements, a move that appears mainly directed at China.  In a decree published on Monday, the government said that 5-50% tariffs would apply to 544 products across a range of categories including steel, aluminum, textiles, wood, footwear, plastics, chemicals, paper and cardboard, ceramics, glass, electrical material, transport material, musical instruments, and furniture. (Source: www.dof.gob.mx)

Scrap & Steel Inputs

Per Fastmarkets most recent May survey, the trend indicator for May is at 59.4%, with a consensus close to equilibrium at 56%. Buyers are cautiously optimistic with a score of 52.6%, while brokers are bullish with 69.2%. 40% of the respondents expected higher prices and 19.1% expected lower prices. Inventory levels are assessed at 56.5%, slightly above the norm. (Source: Fastmarkets)

Ferrous scrap prices flat domestically of late and up to flat internationally. Fuel costs continue to be mixed, gasoline up, diesel down. 

Steel Constraints & Roadblocks

The final semi-annual maintenance outages are in the final stages of wrapping up in May with NSBS and USS. Approximately 380,000 tons have been taken out of the market in this time period. USS Gary #8 furnace is expected to be operational again at the end of May.

U.S. company, Esmark, said it made an all-cash offer to acquire United States Steel, ratcheting up competition to acquire the century-old steelmaker.  Esmark said it offered $35 a share Monday to acquire all issued and outstanding shares in U.S. Steel. “This is an iconic business that built the United States,” Bouchard said in an interview. “It should be in American hands.” (Source: Wall Street Journal)

Recent sharp gains in steelmaking raw materials like iron ore and silico-manganese are likely to deter mills from ramping up their production. That will weigh on prices for raw materials and finished steel.

Oil & Gas Industry

The US rig count decreased 1.0% week-over-week to 613 rigs as of 4/26. The rig count is down 18.8% year-over-year.  (Source: Baker Hughes)

The U.S. oil production is now 1.4% higher in 2024 than last year’s record pace. In addition, U.S. natural gas production is 1.1% higher than a year ago in May 2023. America is now producing more oil than any other country has in history directly challenging the Middle East. (Source: Bloomberg)

Brent crude oil futures fell 52 cents, or 0.6%, to $82.64 a barrel as of May,8th. U.S. West Texas Intermediate crude futures fell 67 cents, or 0.9%, to $77.71 a barrel. (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 5/8/24):

DOM Tubing lead times remain consistent. We are now anywhere from 6 to 8 weeks depending on size. Cold Drawn Seamless tubing is slightly higher in comparison to DOM and now stands at 8 to 10 weeks. HRS tubing can be obtained on the spot market, but Timken (domestic mill) is 15-17 weeks behind on their product lead times and foreign HRS is roughly 4-to-6-month lead times.

Sutructral Tubing mill lead times remain low to average and run approximately 3-5 weeks upon receipt of order dependent on size.  

Dura-Bar Continuous Cast Iron mill lead times remain flat 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 increased last week to 4.8 weeks, below the long-term average since 2016 of 5.6 weeks.  Other products’ lead times were flat to longer last week with CRC lead times flat at 7.5 weeks, HDG lead times up to 7.7 weeks, and plate lead times flat at 4.0 weeks. (Source: Platts)

Economic Factors

The manufacturing sector slipped back into contraction in April, as evidenced by the ISM Manufacturing PMI declining to 49.2%. Among the six largest manufacturing industries, only transportation equipment and chemical products experienced growth. The ISM’s New Orders Index also retreated into contraction, registering at 49.1%. Despite this overall decline, three of the six largest manufacturing sectors—computer and electronic products, chemical products, and fabricated metal products—reported an increase in new orders, indicating areas of sustained demand. (Source: Reuters)

The dollar index gained 0.26% to 105.42, on track for its first consecutive daily gain in nearly a month, with the euro down 0.18% at $1.0749. Against the Japanese yen, the dollar strengthened 0.55% to 154.73 after tumbling more than 3% last week, its biggest weekly percentage drop since early December 2022.

The main concern among traders and investors is whether inflation is on course to reach the U.S. central bank's 2% target and when Fed Chair Jerome Powell might cut rates. The market is still very much waiting for the CPI report next Wednesday. We're basically stuck in a bit of a range here until we get data," said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York.  Investors are still very cautious at this point. They don't want to over extrapolate from one data point or a couple of developments," he said. (Source: Reuters)

In April, consumer confidence hit its lowest level since July 2022, mainly due to growing unease about current job conditions and future economic prospects. The Present Situation Index, which evaluates current business and employment conditions, fell to 142.9, down from 146.8 in March. Concurrently, the Expectations Index, which forecasts the short-term economic outlook, slipped to 66.4 from 74, signaling potential recession concerns as readings below 80 typically suggest economic downturns. Rising prices continue to weigh on consumer confidence, especially for food and gasoline. While there is a slight increase in the perceived risk of a U.S. recession over the next 12 months, it remains lower than the peak observed in May 2023. (Source: Yahoo!Finance)

Employment / Hiring

Private-sector employment in the U.S. increased by 192,000 jobs in April, while March employment gains were revised upward from 184,000 to 208,000. Job growth, which had slowed in the second half of 2023, has accelerated over the past three months. The recent rate of job growth nearly matches that of the first half of 2023. The manufacturing sector added 9,000 jobs, and construction saw an increase of 35,000 jobs. (Source: ADP)

U.S. unemployment rate rose to 3.9% in April from 3.8% in March. Average hourly earnings gained 0.2%; up 3.9% year-on-year.  Nonfarm payrolls increased by 175,000 jobs last month, the Labor Department's Bureau of Labor Statistics said. Revisions showed 22,000 fewer jobs created in February and March than previously reported. (Source: Reuters)

Imports