Pricing - Downhill slide continues

Structural tubing prices have dropped since the beginning of January. Square and rectangular tubing prices began dropping January 10^th and have now seen 6 decreases since that time. Hot-rolled coil prices in the US Midwest declined slightly on Tuesday March 5, but remained around $40 per hundredweight amid soft demand and buyers expecting hot band prices to continue deteriorating in the near term. Structural tube pricing continues to be fluid and the overall sentiment is that we may continue to see pricing drop a little more before flattening out.   

Mechanical tubing continues to follow a similar trend to structural tubing. Drawn Over Mandrel (DOM), Cold Drawn Seamless (CDS) and Hot Rolled Seamless (HRS) tubing prices are all continuing to slowly decrease. The March surcharge on contract business was cut in half over February. Demand was sluggish, with buyers holding out for more attractive prices and evidenced by reportedly minimal trading activity.

HRC prices continue to slide, and sources say the reversal of the downward trend is unlikely to happen soon. However, Nucor and Cleveland-Cliffs announced target minimum base prices for HRC, with Nucor now targeting $825/ton and Cleveland-Cliffs targeting $840/ton. This marks the first attempted price increase since early January. (Source: SMU)

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 and look to remain low going through the 1st quarter. (see chart below). March saw surcharges decrease slightly in comparison to last month.       

Metal Production

In the week ending on March 2, 2024, domestic raw steel production was 1,716,000 net tons while the capability utilization rate was 77.3 percent. Production was 1,776,000 net tons in the week ending March 2, 2023, while the capability utilization then was 79.5 percent. The current week’s production represents a 3.4 percent decrease from the same period in the previous year. Production for the week ending March 2, 2024, is down 0.6 percent from the previous week ending February 24, 2024, when production was 1,727,000 net tons and the rate of capability utilization was 77.8 percent. Year-to-date production is 14.859 million tons which is down 3.8% year-over-year from 15.450 million tons last year. (Source: AISI)

World crude steel production for the 71 countries reporting to the World Steel Association was 148.1 million tons in January 2024, a 1.6% decrease compared to January 2023. (Source: worldsteel)

Scrap & Steel Inputs

The March scrap buy week kicked off with a mill in Detroit offering to buy shredded scrap at a $50/ton month-over-month discount and busheling at a $70/ton discount. This decline would be greater than initially expected, however, this offer has not yet been accepted and the scrap trade hasn’t settled. (Source: SMU)

AMM #1 scrap numbers are currently at $430 per ton which is a decrease of $80 per ton from a month ago.    

Steel Constraints & Roadblocks

The USW union met with Nippon Steel this week to discuss Nippon’s proposed acquisition of US Steel. Following the meeting, the union leadership sent a letter to USW members indicating that no progress was made in the discussions and the meeting lasted for less than an hour. The USW leadership stated that Nippon has still not earned the trust of the USW. (Source: SMU)

President Biden’s administration is reportedly examining Nippon Steel’s connections to China, which could potentially represent a hurdle for the transaction to receive regulatory approval. Nippon Steel has nine facilities in China with total production capacity of ~3.6 million tons (~5.5% of Nippon’s total). (Source: Bloomberg)

Oil & Gas Industry

The US rig count decreased 0.3% week-over-week to 621 rigs as of 2/16. The rig count is down 18.3% year-over-year. (Source: Baker Hughes)

Crude oil futures posted a weekly loss as lackluster demand out of China collided with a market that the International Energy Agency views as well-supplied. The West Texas Intermediate contract for April fell 92 cents, or 1.17%, to settle at $78.01 a barrel on Friday. The Brent contract for May dropped 88 cents, or 1.06%, to settle at $82.08 a barrel. U.S. crude and the global benchmark lost 2.45% and 1.76%, respectively, for the week. (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 3/8/24):

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 3-5 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 significantly shorter again last week at 5.0 weeks, now below the long-term average since 2016 of 5.7 weeks. Other products’ lead times were flat to shorter last week with CRC lead times flat at 7.4 weeks, HDG lead times down to 7.8 weeks, and plate lead times flat at 4.0 weeks. (Source: Platts)

Employment / Hiring

U.S. job growth accelerated in February, but that likely masks underlying softening labor market conditions as the unemployment rate increased to a two-year high of 3.9%. Nonfarm payrolls increased 275,000 in February. December and January payrolls were revised lower by 167,000. Average hourly earnings gain 0.1%; up 4.3% year-on-year (Source: Reuters)

Economic Factors

The ISM Manufacturing PMI registered 47.8% in February, down from 49.1% in January. This marks the 16th consecutive month of manufacturing contraction. (Source: Reuters)

Federal Reserve policymakers weighing when to start interest-rate cuts got fresh reasons on Friday to remain on standby, after a government report showed robust job growth in February but also signs of labor market cooling that could help the Fed's battle with inflation. (Source: Reuters)

Steady hiring and cooling wage growth last month offered the latest evidence that the U.S. economy is making progress toward a so-called soft landing that brings inflation down without a recession. (Source: Wall Street Journal)

US housing starts were lower for a second consecutive month in January. Total privately owned housing starts were at a seasonally adjusted annual rate of 1.331 million in January, down 14.8% month-over-month, and down 0.7% year-over-year. (Source: SMU)

Imports 

Based on preliminary Census Bureau data the U.S. imported a total of 2,547,000 net tons (NT) of steel in January 2024, including 1,914,000 net tons (NT) of finished steel (up 21.7% and 18.0%, respectively, vs. December 2023). Total and finished steel imports are down 2.4% and 4.4%, respectively, vs. January 2023. Over the 12-month period February 2023 to January 2024, total and finished steel imports are down 7.6% and 13.5%, respectively, vs. the prior 12-month period. Finished steel import market share was an estimated 22% in January 2024. (Source: AISI)