Steel

The Raw Steels Monthly Metals Index (MMI) rose by 7.8% for this month’s reading, as steel prices continued to rise.

April 2021 Raw Steels MMI chart

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Steel price gains slow

As we’ve chronicled in this monthly column, steel prices have been rising consistently since last summer.

Buyers have struggled to find supply in what eventually became an allocation market.

Steel prices have posted double-digit percentage gains on a month-over-month basis. However, that ascent appears to be slowing somewhat.

The US hot rolled coil price, for example, continued to increase. The US HRC three-month price rose 20% month over month to $1,280 per short ton. However, the price has flattened out thus far in April.

Are steel prices finally reaching a peak? That is not yet clear, but price gains have certainly started to slow.

Supply developments

Speaking of allocation markets and tight supply, buyers will take some solace in the fact that some new supply will be coming on stream, both in the short and medium terms.

Work continues on Steel Dynamics’ new Sinton, Texas facility, which is scheduled to open by mid-year.

Excluding costs associated with investment in the Sinton flat rolled steel mill ($18 million), the company said it expected its first quarter earnings to be in the range of between $1.94 and $1.98 per diluted share, which it said could represent a record earnings quarter for the company.

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green hydrogen

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Whether we agree with the rationale or not, the carbon footprint of everyday materials like steel and aluminum is becoming an increasingly important component of consumers’ purchasing decisions.

In the US, some states — like California — have mandated purchasing departments for state projects to report the carbon footprint or CO2 content of the products they buy. The move aims to measure and, if possible reduce, carbon content.

But in the US such moves are still patchy and largely state-led. Meanwhile, meaningful direction from the new Biden administration on the issue is still largely in development.

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Europe aims to reduce emissions

In Europe, the EU is coordinating moves to reduce greenhouse gas emission by the steel sector. The EU is providing funding for research and support in the form of infrastructure, such as hydrogen gas supply networks.

In a recent post, our ex-colleague Jeff Yoders wrote a fine piece on efforts by ArcelorMittal to commercialize reductions in the carbon content of an initially small proportion of its output — just 2% or 600,000 tons per annum — by issuing certificates, which certify the reduction in carbon footprint of their steel that can be used by customers who need to report the carbon content of their supply chain or those that face carbon taxes.

The vouchers allow buyers to show an offset of Scope 3 emissions, which can come from anything in a company’s value chain.

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The Construction Monthly Metals Index (MMI) ticked up 1.0% for this month’s reading, as US construction spending dipped in February.

April 2021 Construction MMI chart

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US construction spending

Construction spending in February reached a seasonally adjusted annual rate of $1,516.9 billion, or 0.8% below the revised January estimate of $1,529.0 billion, the Census Bureau reported.

Meanwhile, the February rate marked an increase of 5.3% year over year.

Furthermore, spending the first two months of 2021 totaled $213.2 billion, or up 4.9% year over year.

In the private sector, spending reached a rate of $1,165.7 billion, or down 0.5% from January. Under private construction, residential construction fell 0.2% to $717.9 billion. Nonresidential construction spending fell 1.0% to $447.8 billion.

Meanwhile, public construction spending reached a rate of $351.2 billion, or down 1.7% from January. Educational construction fell 3.2% to $86.9 billion. Highway construction reached $102.3 billion, or down 0.6% from January.

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infrastructure

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President Joe Biden released details of the so-called American Jobs Plan, which among its stated goals aims to modernize infrastructure, revitalize manufacturing and create what it says will be “millions” of jobs.

The proposal will include an investment of approximately $2 trillion over the next 15 years, the White House said Wednesday.

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Aluminum in infrastructure

On the heels of the announcement, domestic metals associations weighed in on the Biden administration’s wide-ranging proposal.

The Aluminum Association applauded the news in general terms, emphasizing aluminum’s role in infrastructure development.

“We are pleased to see the Biden administration and the Congress focusing on infrastructure investment as the national priority that it is,” Aluminum Association President and CEO Tom Dobbins said. “Aluminum is an essential element to America’s infrastructure future – used widely in the electric grid, solar panels, electric vehicle charging stations and buildings of all kinds. Major investment will also provide a once-in-a-generation opportunity to modernize the nation’s recycling infrastructure, vital to shoring up domestic aluminum supply chains and increasing manufacturing self-sufficiency.”

Dobbins added the Aluminum Association “stands ready to work with” the Biden administration and Congress on “investments that work for America’s vital aluminum manufacturing base.”

AISI supportive, but disagrees with funding

Meanwhile, in its own statement, the American Iron and Steel Institute (AISI) also praised the administration’s focus on infrastructure.

However, the industry group expressed its disagreement with the funding mechanisms in the proposal.

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steel

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After dipping slightly the previous week, US steel capacity utilization jumped to 77.6% for the week ending March 27, the American Iron and Steel Institute (AISI) reported.

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US steel capacity utilization rises

US steel capacity utilization picked up from 77.3% for the week ending March 20.

Meanwhile, steel capacity utilization for the same week in 2020 reached 75.3%.

Production during the week ending March 27 reached 1.76 million net tons. The output total marked an increase of 1.1% year over year and an increase of 0.4% from the previous week.

Meanwhile, for the year to date, production totaled 21.4 million net tons. US steel capacity utilization during that period reached 76.8%. Output during the period is down 5.6% year over year. Furthermore, US steel capacity utilization during the same period in 2020 reached 79.6%.

In addition, production for the week ending March 27, 2021, by region totaled:

  • Northeast: 166,000 net tons
  • Great Lakes: 617,000 net tons
  • Midwest: 189,000
  • Southern: 712,000 net tons
  • Western: 76,000 net tons

Steel price gains

Steel prices remain on the rise.

US hot rolled coil closed Wednesday at $1,310 per short ton, or up 8.8% month over month. Cold rolled coil, meanwhile, $1,490 per short ton, or up 8.36%.

Hot dipped galvanized is up 6.98%, hitting $1,578 per short ton on Wednesday.

ATI strike

In supply news, earlier this week we covered the United Steelworkers union’s announcement of a strike at nine Allegheny Technologies Inc. (ATI) sites.

In a statement, the union cited “unfair labor practices” and said members had not received a wage increase since 2014. In its own statement, ATI expressed disappointment in the move.

On Wednesday, the union released an update on negotiations with the company.

“In addition to the company’s unreasonable and unnecessary contract proposals, we believe ATI
has violated federal labor law and engaged in serious unfair labor practices,” the union said Wednesday. “Management’s conduct has undermined our ability to bargain for the contract we deserve, and their actions are intended to intimidate or coerce us from standing together to fight for a fair contract and to break our solidarity.

“In December 2020, before bargaining began, ATI announced shutdowns impacting workers in Louisville and Waterbury and the #3 Finishing Dept at Brackenridge, yet the company still refuses to grant these workers their shutdown benefits and pensions unless, we ratify their contract, thereby holding our members and their families hostage.”

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Continued tight supply for hot rolled coil in Western Europe has further pushed up prices for the flat product over the past 10 days.

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Hot rolled coil heats up

Some producers’ offer prices from late last week are now at least €900 ($1,060) per metric ton exw. Meanwhile, delivery times extend as far out as October, market participants said.

Cold rolled coil is on offer for €980 ($1,155), they added.

Western European steel factory

SVP_Productions/Adobe Stock

“It’s impossible to get anything before June,” one trader said.

Hot rolled coil offers in mid March reached €850-900 ($1,000-1,060) for May rolling and June delivery. However, traders warned then that the price and lead times were not certain and could rise further.

Import offers for hot rolled coil are now $900-910 cost and freight (CFR) for European ports. That is up from $890-900 transacted earlier in March for material from India and Japan, respectively for May and June delivery, sources also noted.

Import prices could also face more increases, a second trader warned.

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Three years have passed since former President Donald Trump imposed Section 232 tariffs on steel and aluminum.

The administration cited national security concerns when imposing the tariffs. In addition, it aimed to raise capacity utilization of the US steel and aluminum sectors. (For the week ending March 20, US mills reached a steel capacity utilization rate of 77.3%.)

steel tariff

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Some countries received exemptions and domestic buyers have been able to win exclusions, which have mitigated the strength of the tariffs.

Metals consumers have expressed their opposition to the tariffs. For example, the Coalition of American Metal Manufacturers and Users (CAMMU) called for an end to the tariffs last year, citing the negative economic impact of the COVID-19 pandemic.

However, a recent review of the tariffs offered a more positive view.

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EPI: Section 232 tariffs produced ‘near-immediate benefits’

According to a recent report this week by the Economic Policy Institute (EPI), the Section 232 tariffs offered “near-immediate benefits.”

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capacity utilization

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The US steel sector’s capacity utilization rate has consistently posted gains since a trough last spring at the outset of the COVID-19 pandemic.

This past week, however, the capacity utilization rate fell slightly.

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Capacity utilization dips to 77.3%

The US steel sector’s capacity utilization rate fell to 77.3% for the week ending March 20, the American Iron and Steel Institute reported this week.

Steel output during the week totaled 1.75 million net tons. The figure marked an increase of 0.7% year over year. Meanwhile, output declined 0.5% from the previous week, when capacity utilization reached 77.7%.

As for the year to date, production reached 19.6 million net tons. Capacity utilization during the period reached 76.8%. Production during the period fell 6.2% from the same time frame in 2020, when the rate reached 79.6%.

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Tangshan steel plant

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The recent curbs on steel making by the local government in one of China’s largest steel-producing cities, Tangshan, may have a cascading effect on steel procurement & demand, as well on iron ore supplies, some experts believe.

The Tangshan restrictions are in effect from March 20 to Dec. 31, 2021. Among other things, the restrictions penalize steel mills there that fail to meet emission control regulations.

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Tangshan part of countrywide effort

The curbs are in line with China’s fresh efforts to cut emissions meet carbon-neutrality targets. China aims to reach carbon neutrality by 2060.

Already, iron ore prices felt effects from the restrictions. Meanwhile, the long-term effect on the import-export of steel from China remains to be seen.

Daily iron ore consumption in Tangshan is also likely to drop drastically. The restrictions had led to the drop in iron ore futures but boosted hot-rolled coil (HRC) futures.

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hot-rolled coil steel

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A lack of local availability, plus anti-dumping measures on some third-country imports into the European Union, have further pushed up hot rolled coil prices in Western Europe.

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Hot rolled coil price surge

Offers for the flat rolled product from Western European mills are now €850-900 ($1,015-$1,070) per tonne ex works for May rolling and June delivery, traders told MetalMiner. That moved up by an average one-third from the €750 ($894) that producers were offering in early February.

Production cuts by Western European mills could, however, make it difficult to secure finished product at those times and prices.

“You cannot buy a single tonne,” one trader said about acquiring hot rolled coil from Western European mills at present.

Rises in raw material prices and reported difficulties in securing ferrous scrap are also pushing up prices, a second trader said.

Hot rolled coil is used in construction applications. The flat rolled product is also used as feedstock for welded pipe production. It’s also used for rolling cold rolled coil and and to produce further downstream.

Anti-dumping measures, Chinese demand

Also supporting prices on the Western European domestic market are EU anti-dumping measures on HRC from Turkey and China. In addition, high demand for finished product from China has offered support, sources said.

“The Chinese [economy] is doing very well,” the first trader said.

High hot rolled coil demand in Southeast Asia for building and infrastructure projects is also supporting Western European prices, sources noted.

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