Steel capacity utilization reached 84.1%, up from 83.4% the previous week.
Steel output last week totaled 1.86 million tons, up 0.6% from the previous week. On a year-over-year basis, steel output jumped by 14.5%. Last year at the same point, steel capacity utilization reached 73.3%.
For the year to date, steel output has reached 82.58 million tons, up 20.0% year over year.
Infrastructure bill boost
On Monday, President Joe Biden signed the Infrastructure Investment and Jobs Act into law on the heels of months of debate in Congress.
The over $1 trillion bill includes $550 billion for infrastructure improvements for roads, bridges, the electric grid and more.
“This law makes this the most significant investment in roads and bridges in the past 70 years,” Biden said during remarks on the South Lawn on Monday. “It makes the most significant investment in passenger rail in the past 50 years and in public transit ever.
“So, what — what that means is you’re going to be safer, and you’re going to get there faster, and we’re going to have a whole hell of a lot pollution — less pollution in the air.
“The bipartisan law will modernize our ports, our airports, our freight rail to make it easier for companies to get goods to market; reduce supply chain bottlenecks, as we’re experiencing now; and lower cost for you and your family.”
Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including softening steel prices, the House’s passage of the over $1 trillion infrastructure bill and more:
Steel prices appear poised for a decline in coming months as auto steel demand shows weakness and new capacity is set to come online.
According to a report by Bloomberg, U.S. Steel Corp. recently offered “excess prime” steel that was previously earmarked for automotive companies. The firm made 50,000 tons of high-end steel from U.S. Steel Corp.’s Gary, Indiana facility — which is among the primary suppliers to U.S. auto companies — available to buyers after automakers declined to take on expected volumes.
While demand for automobiles remains strong, automakers continue to struggle with the ongoing semiconductor shortage.
Lead times for semiconductors have extended far above an average threshold of 9-12 weeks, hitting 22 weeks in October.
According to the Susquehanna Financial Group, power-management components stand at 25 weeks. Microcontroller lead times have ballooned to 38 weeks.
Falling auto production
Due to such shortages, automakers in recent months have either curtailed production or halted assembly lines altogether. Data from the Federal Reserve showed U.S. auto production plummet by 28.3% from August to September. September auto production fell to a seasonally adjusted annual rate of 1.06 million vehicles.
While some automakers have managed to reopen shuttered factories, production is expected to remain far below average.
Metals producers around the world have felt the burden of rising energy costs, as we’ve noted in previous articles. Zinc prices, for example, have since retraced but earlier this month soared to 14-year highs. Belgian zinc producer Nyrstar said it would slash production in response to rising energy costs.
As for steel, September output declined from 154.4 million metric tons the previous month. Meanwhile, output declined by 8.9% on a year-over-year basis.
Top producer China saw its output fall from 83.2 million metric tons to 73.8 million metric tons in September.
“The steel industry has actively responded to changes in domestic and international demand and made efforts to overcome difficulties such as high raw and fuel material prices and rising pressure on ‘double carbon’ environmental protection,” CISA said. “The overall operation trend in the first three quarters was good, making outstanding contributions to meeting the steel demand of downstream industries and ensuring the sustainable recovery of the national economy. However, it also faces challenges such as a more complex market environment and difficulty in reducing costs and increasing efficiency.”
India, the second-largest steel producer, churned out 9.5 million metric tons amid a coal crisis of its own. The total marked a 7.2% year-over-year increase. However, output declined from August’s 9.9 million metric tons.
Meanwhile, Japanese output reached 8.1 million metric tons, or up 25.6% year over year.
E.U. production totaled 12.7 million metric tons, or up 15.6% year over year.
Production last week totaled 1.87 million net tons, AISI reported. The weekly total marked a drop of 0.6% from the previous week. However, output increased by 20.7% from the same week in 2020.
For the year to date (i.e., through Oct. 23), production reached 77.0 million net tons. Capacity utilization during that period reached 81.3%.
The total marked a 20.3% year-over-year jump from 64.0 million net tons. The capacity utilization rate reached 67.1% during the same period in 2020.
Steel prices flatten
As we’ve noted in recent weeks, steel prices’ over yearlong ascent appears to have at least, for now, slowed down.
The U.S. hot-rolled coil price closed last week at $1,922 per short ton, down 0.16% month over month, according to MetalMiner Insights data. Meanwhile, the hot-dipped galvanized price closed at $2,208 per short ton, down 2.39% month over month.
In addition, the cold-rolled coil price closed last week at $2,131 per short ton, or down 0.98%.
Plate prices have bucked the trend, however, reflecting the runup in oil prices. U.S. steel plate closed last week at $1,829 per short ton, up 7.46% month over month.
AISI advocates for infrastructure bill
Earlier this month, House Speaker Nancy Pelosi indicated intentions to vote by the end of October on the infrastructure package under consideration.
Fast forward to the last week of the month and there has still not been a vote.
“The ability of our nation to proceed on a path to economic recovery depends on reliable, safe and efficient modes of transportation,” AISI said. “Our industry like so many others rely on the nation’s roads, rail and water transportation to move raw materials and finished products. Since 2018, American steelmakers have invested $16 billion dollars in modern, state-of-the- art, environmentally responsible steel production to meet our nation’s infrastructure needs.”
General Motors and GE Renewable Energy have signed a memorandum of understanding to explore the development of a supply chain for rare earths and other materials needed for electric vehicles and renewable energy.
Steel prices in India have nearly doubled over the last year, reflective of rising steel prices across the globe.
But for India, several factors such as a steep rise in the prices of raw material like iron ore — and of late, coking coal — have contributed to the steep hike.
Due to China’s decision to cut steel production and exports, India is also experiencing a price increase. High domestic demand had led China to remove rebates and impose export taxes on certain steel products this year to discourage exports. Steel production is also set to be capped in order to reduce carbon dioxide emissions.
India’s steel industry has been impacted by the price hike in various ways.
For some major steel manufacturers, it has led to large profits. For many small and medium enterprises that manufacture steel and engineered products, it has led to losses.
Protests have been lodged with the Indian government due to the shortage of raw materials. After China, India is the world’s second-largest steel-producing country. The price escalation in India started in the second half of 2020-21 and has continued nearly unabated since then.
In June, for example, the wholesale price of hot rolled coils (HRC) shot up by approximately US $40 (Rs 3,000) to be approximately $1,533 (Rs 69,000) per ton. Cold rolled coils shot up by about $66 (Rs 5,000) to sell at approximately $1,146 (Rs 86,000) per ton. Prices of both HRC and CRC were nearly half in the same period in 2020. These forms of steel are used in the automobile, construction and transport sectors.
Because it is steel, the price hike has had a cascading effect on consumer goods, construction and other activities, too.
Steel plants in the country have hiked steel prices by around $80 (Rs 6,000) per ton in just the last eight days.
CNBC TV18 reported JP Morgan India was of the view that Indian steel prices were still about 15% discounted to imported steel prices. When the busy season post festivals, starts in India, post-festive season, demand could go up, leading to some increase in local steel prices.
The sudden rise in steel demand once the COVID lockdown had ended caught Indian steel companies off guard. The uptick in steel consumption along with a renewed focus on infrastructure and government initiatives (such as “Make in India”) have led to an increase in steel demand.
In 2017, as part of the national steel policy, the Indian government announced India would try to reach 300 million tons per year year of crude steel production capacity by 2030.
Furthermore, a local coal crisis, which some experts predict could last for quarters, has hit the steel sector.
Like China, India is also staring at a power crisis due to coal shortage. Over 70% of India’s power still comes from coal-powered plants.
The 64 reporting countries to World Steel produced a total of 156.8 million tons (5.06 million tons per day) for August, compared to 171.3 million tons (5.71 million tons per day) in April, which was the highest monthly production of the year on a tons-per-day basis.
China continues as the world’s top producer by eight times more than the second-largest producer, India. Chinese production during August reached 83.2 million tons (2.68 million tons per day), over 50% of global production.
China, however, posted a fourth consecutive month of production declines on a tons-per-day basis. Since April, China’s daily steel production fell by 17.8%.
The automaker cited semiconductor supply chain disruptions and “historically low inventories.”
“During the quarter, GM provided an update for investors that its wholesale volumes in North America in the second half of 2021 would be down about 200,000 units from the first half, largely because of supply chain disruptions in Malaysia caused by COVID-19, with most of the impact occurring during the third quarter,” the automaker said. “GM’s financial outlook is still expected to be within the calendar year guidance range previously provided as the company continues to develop solutions to mitigate the impacts of the semiconductor shortage and Chevrolet Bolt EV recall.”
Meanwhile, Fordreported total sales in the U.S. fell 17.7% in September. Unlike its truck and car segments, Ford SUV sales jumped by 3.4%.
Meanwhile, the August rate increased by 8.9% from August 2020.
During the first eight months of 2021, construction spending totaled $1,034.5 billion. The year-to-date total marked a 7.0% year-over-year increase.
Private construction spending reached a seasonally adjusted annual rate of $1,242.2 billion, or down 0.1% from July. Residential construction rose 0.4% to $786.6 billion. Nonresidential construction fell 1.0% to $455.6 billion in August.
Public construction spending reached a rate of $341.9 billion, up 0.5%. Educational construction rose 1.1% to $79.8 billion. Highway construction rose 1.6% to $98.3 billion.