Pricing - Are we at the bottom or not? Uncertainty says... I don't know!

Structural tubing prices continued to decline over the 2nd quarter and may level off in the 3^rd quarter. Pricing is beginning to flatten out though due to the coil indexes and spot pricing appearing to hit bottom. Structural tube pricing continues to be fluid and deals continue to be made in a competitive marketplace. 

While structural tube prices have declined, we have seen several weeks now of flat pricing. Mechanical tube prices have fallen since last month due to weak demand and oversupply. DOM Surcharges and fuel surcharges have dropped in the 3rd quarter and look to remain low going into the 4th quarter.  

Most Hot Rolled Coil (HRC) spot base prices for the month of August range from $650 to $690 per ton. Nucor’s weekly published Consumer Spot Price (CSP) listed the HRC base price for the week of August 12 at $690/ton, unchanged from last week. (Source: Company Press Release) The overall sentiment is that we are close to the bottom on coil pricing, and we may begin to see several weeks of leveling off. 

There have not been any base price increases on cast iron since April 1st of 2022. Since January of 2024, Dura-Bar’s surcharges have seen a gradual decline in price and appear to remain flat going into the 3rd quarter. Dura-Bar’s surcharges now sit at their lowest since May of 2021.      

Metal Production

In the week ended August 10, US raw steel production increased 0.8% week-over-week to 1.735mt (-0.4% YoY). US capacity utilization was 78.1% vs 76.6% last year.  Year-to-date production is 54.156mt down 2.1% year-over-year from 55.334mt last year. (Source: AISI)

Scrap & Steel Inputs

The August scrap trade was largely completed last week, with August scrap prices unchanged month-over-month. Market participants initially expected scrap prices would be higher in August on reduced scrap collections; however, this was undermined by declining prices in the export market. (Source: Platts)

Negative effects from the volume of Chinese steel exports can also be seen in the major scrap import markets of South Korea and Vietnam. (Source: Fastmarkets)

Lead Times

Understanding lead times for steel products is crucial for everyone involved in the supply chain. Here are the current lead times for steel products (as of 8/16/24):

DOM Tubing lead times remain low.  We are now anywhere from 4 to 6 weeks depending on size. Cold Drawn Seamless tubing is slightly higher in comparison to DOM and now stands at 6 to 8 weeks. HRS tubing can be obtained on the spot market, but Timken (domestic mill) is 14-16 weeks behind their product lead times and foreign HRS is roughly 3-to-5-month lead times.

Structural Tubing mill lead times remain historically low and are 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 increased last week to 5.0 weeks, still below the long-term average since 2016 of 5.6 weeks. Other product lead times were flat to longer last week with CRC lead times up to 7.6 weeks, HDG lead times up to 7.7 weeks, and plate lead times flat at 3.9 weeks. (Source: Platts)

Oil & Gas Industry

The US rig count increased by 0.3% week-over-week to 588 rigs as of 8/9. The rig count is down 10.1% year-over-year. (Source: Baker Hughes)

The price of Brent crude fell by 3.4% in the last 2 weeks.

Economic Factors

Did the Federal Reserve wait too long to start cutting interest rates? That could be what many investors were thinking following an especially weak jobs report last week. There was significant volatility in financial markets. On one day, the yield on the 10-year bond fell 18 basis points to the lowest level seen since December 2023. The S&P 500 index of equities was down 2.3%, with an especially sharp decline in the values of some tech stocks and sharp declines in overseas equity markets. The value of the dollar fell 1.6% against the Japanese yen and fell strongly against other currencies. (Source: Deloitte)

US consumer prices increased slightly in July, with annual inflation slowing to 2.9%, its lowest level in nearly 3.5 years. This raises the likelihood that the Federal Reserve will cut interest rates next month.

Constraints & Roadblocks

The Canadian Steel Producers Association and the Aluminum Association of Canada issued a joint statement asking the Canadian government to impose import tariffs on Chinese steel, aluminum and electric vehicles. The associations are asking for the tariffs to be aligned with the US Section 232 and Section 301 tariffs.  (Source: Reuters)

Employment / Hiring

Weekly jobless claims fall 7,000 to 227,000

Continuing claims drop 7,000 to 1.864 million

Retail sales jump 1.0% in July; core sales gain 0.3%

Manufacturing production falls 0.3%

(Source: Reuters)

Imports & Exports

It’s reported that Chinese exports in July were weaker than anticipated. If US companies are frontloading orders, however, Chinese exports might surge in the coming few months, potentially creating a false impression of strength. In any event, July exports (measured in US dollars) were up 7% from a year earlier, slower than the 8.6% increase in June and slower than investors anticipated. Exports were up 12% to Southeast Asia and up 8% to both the United States and the European Union. (Source: Deloitte)