Some believed that sheet prices would go shooting up this fall on a raft of maintenance outages at steel mills. As we creep into fall, that doesn’t appear to be what’s happening in practice.
By our calculations, approximately 1.3 million tons have or were scheduled to come out of the market between September and the end of the year. Figure 1 provides the details.
On the news side alone, you could have made a case that there should have been nowhere for prices to go but up. U.S. mills continued to increase prices, with Nucor doing so publicly, even if it was incrementally.
Futures markets roared back to life, albeit temporarily, on news in September that Cleveland-Cliffs would place the C-6 furnace at Cleveland Works on hot-idle in October until demand improves. (This also is known as indefinitely.)
On top of all that, a wide-ranging trade case against imports of coated sheet from 10 countries could have broad repercussions as more traders and overseas mills stop making product available in the U.S. market. The trade case also could cause some U.S. coated steel customers to pivot toward domestic sources, which could go a long way toward filling up new domestic coating capacity.
Coated Case Deep Dive
Figure 2 highlights the alleged antidumping margins in the coated case. None of those margins are small, so you can see why some companies have already hit the pause button on imports of galvanized, Galvalume, and aluminized steel from certain countries targeted in the case.
Countervailing duty (CVD) margins aren’t listed because the petitioners in the case, which include not only U.S. mills but also the United Steelworkers (USW) union, provide evidence of subsidy programs to the U.S. Department of Commerce (DOC), which then calculates CVD margins based on that evidence.
Here are some key dates to watch as the case progresses through the DOC and the International Trade Commission (ITC):
- Antidumping (AD) and CVD petitions filed: Sept. 5
- DOC decision on case initiation: Sept. 25
- ITC preliminary hearing: Sept. 26
- ITC preliminary vote: Oct. 18
- ITC preliminary AD and CVD injury determinations: Oct. 21
- DOC preliminary CVD determination: Nov. 29 (A postponement would push this to Feb. 2, 2025.)
- Deadline for allegations of critical circumstances in CVD case: Jan. 22
- DOC preliminary AD determination: Feb. 12 (A postponement would push this to April 3.)
- DOC final CVD determination: Feb. 12
- ITC final CVD injury determination: March 31
- DOC issues CVD order: April 7
- Deadline for allegations of critical circumstances in AD case: April 7
- DOC final AD determination: April 28
- ITC final AD injury determination: June 12
- DOC issues AD order: June 19
So when would duties be collected? U.S. Customs and Border Protection (CBP) typically begins collecting duties when DOC publishes its preliminary AD and CVD determinations in the U.S. government’s Federal Register. However, AD/CVD laws include a critical circumstance provision meant to offset possible surges in imports between the case filing and duty collection dates. If petitioners make claims of critical circumstances and their claims are verified, duties can be applied retroactively for 90 days.
Core case petitioners have until Jan. 22 to make claims of critical circumstances in the subsidy case and until April 7 for claims in the dumping case. It’s also worth noting that while several domestic mills are participating in the case, they’re not all on the same page. Nucor, for example, did not join the petition against Mexico, where it operates a sizeable coating joint venture with the Japanese steelmaker JFE. Additionally, U.S. Steel, Wheeling-Nippon, and the United Steelworkers are sitting out the portion of the case against Canada. (The steel union has 225,000 members in Canada.)
Survey Says
Given all that, why didn’t the theory that prices would spike in the fall pan out? (At least, steel prices haven’t spiked at the time this article was filed.)
At risk of stating the obvious, blast furnaces aren’t typically idled indefinitely when demand is great. It’s no coincidence that we hear from many of you that demand is anything but that.
Also, according to our survey results, buyer sentiment slipped following a Steel Summit bounce. It remains well below levels from a year ago, and steel buyers report that mills, despite the coated trade case and the Cliffs idling, remain willing to negotiate lower prices. What’s more, 43% of survey respondents tell us that they aren’t meeting forecasts (see Figure 3). That’s the highest reading we’ve had on that question since we started asking it a few years ago.
Here is what some survey respondents had to say on the matter:
- “Slightly down, but seasonally predictable.”
- “Mixed bag; some locales exceeded forecast, others did not.”
- “Most customers are fairly flat.”
- “Some softness in automotive and spot.”
- “Nobody is meeting their forecast in 2024. This year sucks.”
Figure 4 reveals that the service centers are experiencing something similar. Most report that they are releasing less steel than a year ago. We haven’t seen a sustained period of approximately 70% to 80% saying they’re releasing less steel year over year since the spring of 2020.
I don’t want to go too far down the rabbit hole with comparisons to spring 2020, but we’ve seen something similar when it comes to service centers’ sheet inventories. Julys and Decembers are typically higher for seasonal reasons, such as holidays and automotive shutdowns. But even once you take that into account, we’re seeing sheet inventories at comparable levels to the spring of 2020, which obviously was not a good time for steel.
Given all that, why haven’t prices collapsed? For one, most service centers are holding the line on prices, and some are trying to increase them (see Figure 5). That’s a massive change from July and early August when approximately 80% to 85% of centers said they were cutting prices. Not surprisingly, the shift occurred when mills stopped lowering prices too.
Also, according to a Steel Market Update survey in September, most see hot-rolled coil (HRC) prices holding in the $700s/ton over the next two months. Only a small minority (6%) see them falling into the low $600s/ton again.
Here is what some survey respondents had to say on the question of future HRC prices:
- “Soft demand for flat-rolled even with outages. Up but not too much.”
- “Protectionism by domestic mills will keep prices up. Higher raw material costs too.”
- “Mills are getting aggressive with their increase announcements and need to be in the $700s.”
- “No real, strong drivers either direction. Mills setting the bottom.”
- “If demand was better, it would go higher.”
- “Very soft demand, but mills showing some discipline (for now).”
- “We are obviously bearish on this rally. We just still see poor-to-OK demand and plenty of capacity out there (even with the mill outages).”
- “Indirect effect of the trade cases and slight improvement in the market in general.”
That’s a lot of talk about iffy demand. But, look, we’re not saying that prices couldn’t improve later this year or early next. Buyers could destock, which would limit price gains in the short term, but it also could lead to a rebound once inventories are back in line. There also is a case for higher prices in late Q4/Q1 2025 if the coated petition leads customers to shift supply chains in a significant way away from overseas producers.
In the meantime, I think it’s safe to say that this isn’t a market like the ones we’ve seen in recent years—where even a small disruption could send prices soaring. If things do move higher this time, it might be a slow burn.
Steel 101 and Tampa Steel
SMU has two events coming up: The first is Steel 101 in Starkville, Miss., on Oct. 8-9. Attendees will learn how steel is made in the classroom, and then they’ll see it being produced during a tour of nearby SDI Columbus. That experience makes the knowledge stick.
Then we’re onto the Tampa Steel Conference on Feb. 2-4, 2025. More than 500 people attended last year, and we’re looking forward to another strong showing.
Courtesy: www.thefabricator.com
