Pricing - Inflation weighs heavily on overall economic sentiment.

Persistent inflation remains a significant concern, although there have been some signs of stabilization. It’s this uncertainty that has caused structural tubing prices to begin heading back downward. We have seen an additional 3 small decreases in just the last 3 weeks for US hollow structural sections (HSS), with sources confirming that a $100 per short ton price increase earlier this May failed to gain market acceptance. The domestic steel market continues its softness this past week, the price direction is trending downward for carbon flat roll and many other steel products. Buyers are being very cautious, not knowing when the bottom is likely to be reached in the market.

Mechanical tubing prices are still flat for this month due to demand being down. Drawn Over Mandrel (DOM), Cold Drawn Seamless (CDS) and Hot Rolled Seamless (HRS) tubing prices are all stable. There is no June surcharge on DOM tubing. It is reported that buying activity is slower as the service centers are starting to be more cautious.

Nucor’s weekly published Consumer Spot Price (CSP) listed the HRC base price for the week of June 3 at $780/ton, unchanged from last week. The Cleveland-Cliffs Monthly Hot Rolled Coil Spot Price for June is $850/ton. No one would place any orders at that price.

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 have seen a gradual decrease in price. Overall, pricing this year has been very flat and has trended downward month over month. (see chart below). June surcharges decreased slightly in comparison to last month.    

Metal Production

In the week ended June 1, US raw steel production increased 0.5% week-over-week to 1.743mt (-0.5% YoY). US capacity utilization was 78.5% vs 77.8% last year. Year-to-date production is 37.180mt down 2.6% year-over-year from 38.172mt 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

Ahead of the June scrap buy week, some mills issued cancelation notices for remaining May scrap deliveries that were not received by the close of business on May 31 on the expectation that scrap prices in June will decline $20-30/ton month-over-month. (Source: Platts)

In June 2024, the US scrap market is expected to see a decline in prices driven primarily by lower demand. The overall trend indicator has dropped to 45.7, suggesting a downturn in market sentiment compared to previous months. This is reflected in the forecasted scrap price change of -2.4% month-on-month, signaling an anticipated reduction in prices. (Source: Fastmarkets)

Oil & Gas Industry

The US rig count was flat week-over-week at 600 rigs as of 5/31. The rig count is down 16.1% year-over-year. (Source: Baker Hughes)

WTI futures traded at $76.22 per barrel, as of June 10^th, 2024. Year to date, WTI prices are up by 3.79%. Brent futures traded around $80.06 per barrel, an increase of 0.41% in the last 24 hours. Year to date, Brent prices are up by 1.26%. (Source: USA Today)

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 6/10/24):

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 their product lead times and foreign HRS is roughly 4-to-6-month lead times.

Structural Tubing mill lead times remain low to average and run approximately 2-4 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 were flat last week at 4.5 weeks, below the long-term average since 2016 of 5.6 weeks. Other products’ lead times were mixed last week with CRC lead times down to 7.6 weeks, HDG lead times up to 7.6 weeks, and plate lead times flat at 4.0 weeks. (Source: Platts)

Economic Factors

The Manufacturing PMI® registered 48.7 percent in May, down 0.5 percentage point from the 49.2 percent recorded in April. The overall economy continued in expansion for the 49th month after one month of contraction in April 2020. (A Manufacturing PMI above 42.5 percent generally indicates an expansion of the overall economy. (Source: Reuters)

As of June 2024, the US Dollar Index (DXY) is performing strongly, reaching around 104.7. This increase is supported by robust US economic data, particularly a stronger-than-expected jobs report in May 2024, which has reduced expectations of immediate rate cuts by the Federal Reserve. Additionally, rising Treasury yields and weak European economic data have further bolstered the dollar's strength​ (Source: Barchart.com)​.

As of June 2024, inflation in the U.S. has been showing signs of easing but remains above the Federal Reserve's 2% target. The headline Consumer Price Index (CPI) is approximately 3.2%, while the core CPI, which excludes food and energy prices, stands at about 4%​​. This reduction from previous highs suggests a positive trend, but core services inflation remains relatively sticky due to tight labor markets​ (Source: J.P. Morgan & St. Louis Fed)​.

The US Consumer Confidence Index, as measured by The Conference Board, is 102.0, up from 97.5 in April. This rise follows three months of decline, indicating a modest improvement in consumer sentiment. Meanwhile, the Expectations Index, which gauges consumers' short-term outlook for income, business, and labor market conditions, rose to 74.6 from 68.8 in April. Despite this improvement, the Expectations Index remains below 80, suggesting ongoing concerns about a potential recession. (Source: The Conference Board)

Steel Constraints & Roadblocks

ArcelorMittal’s Dofasco EAF facility is reportedly experiencing an unplanned outage. The outage was communicated to mill suppliers on May 29 and follows issues with a transformer that are expected to last up to 10 days. (Source: AMM)

A protest outside the ArcelorMittal Mexico plant in Lazaro Cardenas, Michoacán, is threatening to impact blast furnace operations at the mill. The company said the protest/blockade has already resulted in 100 thousand tons of lost production. The mill has an annual production capacity of 2.5 million tons of flat steel, 1.8 million tons of long products, and 1 million tons of slabs. ArcelorMittal said it previously met with the Sindicato Minero union to review and pay out profit-sharing payments for workers. According to the steelmaker, a group of union members are blocking access to the mill because they disagree with the amounts they received. (Source: SMU)

USS Gary #8 furnace is expected to be operational again the end of the month, NSBS is taking their 5 days maintenance outage this week.

Environmental Regulations pushing to produce low-emission steel in the U.S. are challenged by competition from higher-emission, low-cost Chinese steel. U.S. policies are aimed at promoting cleaner production methods, which may increase production costs but aim to ensure long-term sustainability and competitiveness​ (The White House)

Employment / Hiring

Total nonfarm payroll employment increased by 272,000 in May, and the unemployment rate changed little at 4.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in several industries, led by health care; government; leisure and hospitality; and professional, scientific, and technical services. (Source: BLS.gov)

The unemployment rate ticked up to 4% but remains historically low, extending a 30-month streak of unemployment at or below that level. And in another bright spot for workers, average hourly earnings jumped 4.1% in May from the year before, up from a 3.9% annual rate in April. (Source: NBC News)

One potential sign of weakness in the May employment report was a drop in the proportion of Americans who either have a job or are looking for one; it fell from 62.7% to 62.5%. Most of the drop occurred among people 55 and over, many of whom are retiring baby boomers. (Source: AP)

The unexpectedly strong report made plain that while the labor market has softened around the edges in recent months, its still-solid performance is set to underpin economic growth and keep the Fed on the sidelines and taking its time in deciding when to begin lowering borrowing costs. The hotter-than-expected wage gains also raised the prospect that elevated inflation may prove stickier than hoped although the impact from the rise in the unemployment rate could temper that. (Source: Reuters)

Imports & Exports

The Biden administration has implemented increased tariffs on various steel products to counteract China's unfair trade practices. Tariffs on certain steel and aluminum products have been raised to 25% to protect American industries from being undercut by cheaper, high-emission Chinese steel (The White House)

China’s exports in May grew at their fastest pace in more than a year despite trade tensions, though imports fell short of analyst expectations, according to customs data released Friday. Exports jumped 7.6% in May from the same month last year to $302.35 billion, rising at the fastest pace since April 2023. Imports rose by 1.8% to $219.73 billion, missing estimates of about 4% growth. (Source: AP)