Meanwhile, steel scrap availability is high, with many facilities holding high unused stocks from previous purchases. Moreover, the outlook for automotive production is for an increase in light vehicle production through the second half of 2022, over the first half of the year, translating to greater flows of prime steel scrap to the market.

Steel scrap supplies are expected to seasonally tighten late in the first quarter as flows are restricted by winter weather. We belive that the premium of busheling over shredded will widen again in 2023, beyond the historical average:

• Increased light vehicle production through the second half of 2022 over the first half of the year will increase availability for prime steel scrap
• Shredded steel scrap pricing has held up better than that of busheling amid ample busheling supplies; nevertherless, we expect shred pricing to post steeper cuts this month than bushelling and return the premium to the prime grade
• Shredder feed is accumulating while automotive output, and its supply of prime steel scrap, is strengthening in H2 over H1

Given the uncertainty in downstream steel demand, it is more likely that steel prices could report another slide before the end of the year — further impacting profit margins in these markets.

The post US steel scrap price analysis October 2022 appeared first on Fastmarkets.

Do lighter vehicles mean less steel?

The automotive industry has been moving towards the perfect balance between sustainability and durability for some time now. Along with enhancing performance and improving fuel economy, car manufacturers are continually seeking to reduce the overall weight in vehicle production.

Because of its strength-to-weight ratio and lower density, aluminum scores higher than steel when it comes to vehicle lightweighting.

Is aluminium a real threat to steel in automotive production?

John Catterall, Vice president, Automotive Program American Iron and Steel Institute AISI

“There has been a trend where steel has done a good job of pushing back. I mean, when the aluminium 150 body came along, there was a prediction that all future truck bodies would be converted to aluminium – but we did a lot of good work in proving to the OEMs that maybe wasn’t the right thing to do.”

Catterall continued “So when it comes to body structures… even the aluminium industry is talking about their targets, which seems to be in the closures now, the side doors, the hood, the lift gates etc….”

“But certainly, when it comes to the smaller vehicles, I think there is an opportunity for steel to get back into some of those closures that have been converted to aluminium. It’s a little easier to convert back a closure because it’s a bolt-on system. So there is still an opportunity for steel in the closures, especially in the smaller vehicles, to get some of that demand back.”

How does the electrification of transport impact steel use in automobile production?

Dean Kanelos, Market Development & Product Applications Manager, Nucor

“With electrification, things are changing. Before this, CAFE (Corporate average fuel economy standards) was the major driver for reducing the weight of a vehicle because the OEMs were required to get the weight down to avoid paying penalties. So, the OEMs were willing to pay extra for lightweighting to get some of the weight out of the vehicles, I mean, not a lot of weight, because they could optimize steel as well… But it’s a lot easier to switch over to aluminium, especially for large body panels, doors things like that.”

Kanelos continues “Electrification may change that, and the reason is that we are starting to approach a cost for battery systems of about $100 per kilowatt-hour, and with that, there is a trade-off between reducing the cost of the vehicle to get the same range for the EV… You can either increase the battery slightly or you could potentially go to aluminium, magnesium or composites to get that weight off, but by doing that, you are going to pay more for that vehicle. Vehicles are not exactly cheap right now, so affordability becomes part of the equation, including everything from repairability to other aspects.”

Kanelos continues “… steel as you know has done a very good job of reinventing itself over the years, and we will continue to do that; we are not staying still. So when OEMs are deciding how they will meet those challenges in the future in a cost-effective way, steel will definitely be part of that equation.”

For exclusive access to steel and aluminium price trends, forecasts and news, speak to our team for a free demo of the Fastmarkets platform.

So what does steel’s changing role in automotive mean for steel producers?

Brian Bishop, Executive Vice President Cleveland Cliffs commercial

“Automotive is in the midsts of reinventing itself with the EVs, so being a part of that reinvention in and of itself makes it exciting to be a provider”

Bishop continues…”Providers have the opportunity to help shape that evolution. At Cleveland Cliffs we are really excited about that and there are a lot of opportunities, research and development capabilities that are second to none, and we really look to utilize those to help shape that future and the evolution of the automotive space”

How is the chip shortage impacting steel demand?

Brian Bishop, Executive Vice President Cleveland Cliffs commercial

“Relating to the chip shortages and how that’s suppressing demand… If you think about it, where would the build rates have been for vehicles in North America prior to Covid? We would have probably been near 16 to 16 and a half million units on a steady rate, and that dipped down to 13 million units of build last year. Now it’s projected around 14 and a half million this year,”

Bishop continues… “So if you use the analogy of one ton of steel, per vehicle, the depth of the 13 million that we hit in 2021. If you use the 17 million annualized build rate, there are about 4 million tons of demand that are really out of the market… As the chip shortage starts to get remedied, things get back to a healthier build rate, that demand is there and that’s exciting from a steel producers standpoint to build upon.”

When do you think the chip crisis will end?

Brian Bishop, Executive Vice President Cleveland Cliffs commercial

“I wish I had the answer to that. I think the consensus is that things will continue to stabilize through the rest of this year and improve through 2023, and then kind of onwards and upward from there. Tying all of that together there are a lot of facets to be energized about.”

To keep up with steel price trends, forecasts and news, visit our metals and mining page.

The post The death of steel in automotive – fact or fiction? appeared first on Fastmarkets.

Limited supplies of steel scrap and alternative steelmaking raw materials have sent shockwaves through the US steel market. Broken trade flows, inflated steel prices and the pull of decarbonization have changed the way US steelmakers think, plan and run their day-to-day operations. Is the US steel industry seeing an end to globalization and entering a new era of domestic sovereignty? Read the full article here.

Find out more at the Scrap & Steel North America Conference, where you can connect with steel industry leaders to discuss and debate these complex issues.

The post Broken trade flows appeared first on Fastmarkets.

The impact of the war in Ukraine has shone a spotlight on supply shortages of prime scrap in the United States steel raw material market. Disruptions in the global export market coupled with rising inflation and the pull of decarbonization are forcing US steelmakers to seek long-term solutions to protect their supply chains.

Tight metallics supply contributed to a surge in US steel prices, with hot-rolled coil (HRC) steel prices up by 15% on the month in March to $1,393 per ton.

At the beginning of the year, HRC steel prices in the US were declining from record highs, with buyers destocking to maintain inventory values. Last year’s peak was the highest price Fastmarkets has recorded since we started tracking US HRC in 1960.

However, after the start of the Ukraine war at the end of February, costs for steel raw materials including busheling steel scrap, merchant pig iron (MPI) and steel slab surged on the back of supply chain disruptions.

With raw material costs spiking, steel producers limited offers for flat-rolled spot tons and slowed order intakes to prevent buyers from stocking up at lower prices — so they could have enough time to pass through the higher costs to customers. At this time, US steelmakers could maintain margin stability on value-added products like cold-rolled coil (CRC) and hot-dipped galvanized (HDG). Plate prices remained stable.

Over the next four quarters through March 2023, the outlook for steel prices including HRC prices should soften, as the market rebalances and potentially returns to levels last seen at the end of 2020.

Could local be the new global?

In 2021, Russia and Ukraine exported approx. 62% of MPI to the US. The invasion of Ukraine by Russia effectively led to the removal of two of the primary merchant metallics suppliers to the country, triggering panic buying among US steel producers, seeking scrap as a substitute iron unit.

However, some large producers are investing in technology to produce higher quality shredded scrap as prime scrap becomes more costly and harder to acquire. The spread between No1 busheling and shredded scrap makes shred an even more economical choice.

At the same time, steel producers sought more pig iron from China, Brazil and India as unable to source material from Ukraine due to the war.

For example, pig iron makes up about 10% of Nucor’s raw materials, with half coming from Ukraine and Russia before the war. To make up the shortfall, the steelmaker reduced the amount of pig iron in its melting mix by increasing the amount of prime scrap. Nucor’s ownership of two direct-reduced iron (DRI) plants aided this agile response. In addition, Nucor has an increased focus on producing low-copper shredded scrap which will allow for the use of less pig iron.

The consolidation of the US steel market is gaining momentum, with many large steelmakers investing in or owning alternative iron assets, for example:

• ArcelorMittal Calvert just bought Voestalpine in Texas
• Steel Dynamics owns Iron Dynamics
• US Steel is building a pig iron operation in Gary, Indiana
• Nucor owns two DRI plants in Louisiana and Trinidad and Tobago
• Cleveland Cliffs own a Hot Briquetted Iron (HBI) plant in Toledo, Ohio

Margin pressures and resource scarcity are top of mind for US steel producers. Many large players will continue to seek more local, reliable raw material access, including vertical integration, to maintain healthy production margins.

What is the outlook for the US steel scrap market?

US domestic prime scrap prices have surged resulting in the benchmark Chicago busheling scrap settlement rising by $190 per long ton in March and $75 per long ton in April. The tightened merchant metallics supply and firm prime scrap prices also encouraged an increase in shredded scrap in March, with the Chicago shredded scrap price rising by $135 to $615 per long ton delivered.

The rise in prime scrap prices also indicates that the semiconductor chip supply issue experienced over the last year still looms. Automotive production – a key generator of prime scrap – appears to be less positive than anticipated for 2022. US monthly car production average at 8% less over January and February than in the fourth quarter of 2021.

The firmness in steel scrap was outpaced by a far greater surge in MPI, with US demand being the key driver of prices, given its position as the global leader in MPI imports. MPI arrivals from Russia and Ukraine to the US last year accounted for 34% and 28% of total imports respectively.

With the conflict in Ukraine ongoing, Brazil is now the primary MPI supplier to the US with shipments from Brazil to the US market jumping by 130% on the month to 195,000 tonnes.

But can the Brazilian export market keep up with the US steel industry’s growing demand? Possibly not.

Brazil’s capacity is way too small to meet US requirements on its own. For example, in April 2020, Brazil exported 278,000 tonnes of MPI which was its highest ever April. The US steel market monthly import requirements over Q2 2017-21 averaged 483,000 tonnes.

So even if Brazil repeated its record-breaking month, and the US was to take only 85% of this volume, the US would receive around 237,000 tonnes of Brazilian MPI — leaving a shortfall of nearly 50%.

Do you want to know where the US import market is heading? Request a free demo and experience our US steel price data and US steel forecasts today.

The US steel industry stands at a precipice overlooking both future successes and failures. Yes, Buy American is a bold statement of policy and intent, but it must be followed up with real actions and firm commitments, all of which come with business-altering costs, trade-offs, and new existential risks.

Rethinking and rebuilding supply chains to be more local, efficient, and resilient are noble ambitions but will require many billions in capital investments, more waves of consolidation and integration as well as the reworking of supplier networks, which will lead to painful sourcing disruptions and pricing volatility. Those who identify and mitigate those risks will emerge as the winners in this transformational phase for the global economy.

It’s not business-as-usual and will be no short-cuts but with thoughtful and committed leadership the industry can emerge stronger, more sustainable, and resolute but the path forward is undeniably perilous.

Lisa Gordon and Sean Barry also contributed to this article.

The post Where will the US steel market get its prime scrap? appeared first on Fastmarkets.

The plan

The infrastructure plan is now worth $1.2 trillion, eliminating the $400 billion support for the aging and disabled as well as $100 billion for workforce development from the original American Jobs Plan.

In this legislation, traditional infrastructure spending remains a focus with about $500 billion headed toward roads, bridges, ports, airports, public transit and freight. A focus on the environment and the technologies of the future retains a foothold in the current plan with about $80-100 billion earmarked toward improving broadband infrastructure, access to low-cost internet, increasing the fleet of electric buses and ferries, improving the electric charging network, and environmental remediation.

While not the size of the original American Jobs Plan, this legislation will still support growth in the commodities markets. Transportation infrastructure directly supports steel demand while the environmental aspects are indirect contributors to steel demand.

Steel still gets a boost

Speaking at the Fastmarkets Steel Success Strategies conference in early November, just as the bill was headed to the President’s desk to be signed, Kevin Dempsey of the American Iron & Steel Institute (AISI) stated that the legislation could provide as much as 40-45 million net tons (Mt) of additional steel demand over the next five years.

Any growth will be pleasing to an industry that’s lost another 4% per year over the past five years and remains loosely predicated on the assumption that for every $20k spent on “infrastructure”, an additional ton of steel is required. The AISI estimates that $850 billion dollars of the plan provide both direct and indirect effects on steel, some of which could be felt in the markets as early as next spring.

A key aspect of the law is the more stringent Buy America requirements, meaning that the demand generated by this investment is “all going to American steel,” according to Dempsey.

While traditional infrastructure spending will support consumption of rebar and other long products in particular, the development of broadband, electric vehicle charging networks, and green energy, for example, will see elevated demand for other products such as steel plate, coils, or pipe and tube – both for structural and conveyance.

Panelists at the conference, representing producers, traders, distributors and OEMs, touted the steel demand boost that will come from the targeted spending.

And the investments could help steel end markets grow. Significant challenges from crumbling infrastructure represent time and money lost in transporting goods and offering services, according to a note by the US Chamber of Commerce.

“GDP will increase, as the improvements to infrastructure lead to more revenue and productivity for businesses. Exports will increase, as infrastructure improvements reduce business costs and make US products and services more competitively priced,” the Chamber said in a summary of the positive effects of the bill.

Positive outlook for steel

Nevertheless, the expanded demand growth at the start will be met by persistent steel supply shortages and high prices, which started in late 2020. US hot-rolled coil prices indexed daily by Fastmarkets hit all-time highs in 2021. Prices peaked in late September but are down only 10% through November 19. Rebar prices, in comparison, remain at record-high levels with expectations for further increases in the near term as a result of long lead times and uncompetitive imports.

Moreover, even with new steel capacity entering the market in the next two years, prices could still be elevated by historical standards.

Indeed, the viability of new EAF steelmaking capacity coming onstream in the US over the next several years is not so controversial, with expected future market conditions demonstrating the need for new US steelmaking capacity. Indeed, assuming non-infrastructure demand remains stable, then without new capacity, imports will still be needed to supply the new requirements or make up the shortfall in domestic supply.

While Fastmarkets continues to forecast that prices have farther to fall over the next year, positive underlying supply and demand fundamentals will keep prices from collapsing; contrary to what we have seen in numerous previous market cycles. Instead, we are forecasting annual average steel prices to remain well above long-term historical averages in the coming years, which raises the costs and viability of these initiatives. The allotted funds may not stretch as far as envisioned when the original American Job Plan was floated in Spring 2021.

The post North American steel: The backbone of US infrastructure appeared first on Fastmarkets.

China’s exports slow
China’s seaborne prices did not follow global markets up this past month. In fact, most prices remained substantially unchanged, with the exception of line pipe grade X65, which lost $99 per tonne, partially reversing a $265-per-tonne surge in May that followed the announcement of export rebate cuts.

US rally to continue
Seamless prices are forecast to be supported into the third quarter of this year and then gradually moderate in the fourth quarter. Steel and raw materials costs will recede modestly in the second half of the year, giving room for OCTG producers to make competitive offers against imports.

Extremely high prices for electric-resistance welded (ERW) OCTG will enable seamless alternatives to continue to gain market share well into 2022.

Europe continues to follow scrap
European prices continued to largely follow scrap costs across most products because demand has been limited, but mills have been unwilling to cut margins further. But there are some exceptions. Commodity-grade line pipe rose rapidly thanks to a buoyant mechanical pipe market. Meanwhile, for a higher-margin product such as OCTG L80 with premium connection, there was no room to increase offers further this month.

Click here to view the Seamless OCTG and Linepipe Market Tracker in full.

If you are not a subscriber but would like see a free sample report, please click here.

The post RESEARCH: Seamless pipe price rise continues in most markets appeared first on Fastmarkets.

The biggest jumps were seen in China, which was hit by the unexpected announcement of the elimination of export rebates on welded pipes in April. Chinese seaborne prices reached $1,570 per tonne fob for longitudinal submerged arc-welded (LSAW) material and $1,260 per tonne for electric resistance-welded (ERW) products, with jumps of $450 per tonne and $310 per tonne respectively. This effectively makes Chinese material the most expensive globally, rendering it largely uncompetitive.

But price surges were also marked in the rest of the world, with LSAW jumping by the equivalent of $252 per tonne fob in Europe, $275 per tonne fob in India and $125 per tonne ex-works in the United States.

Chinese government cracks down on prices
While flat steel prices surged through mid-May and then stabilized in Europe, the US and India, China was on a roller coaster as the government started taking steps to influence prices lower, such as raising fees on iron ore and coking coal futures trading and pressuring mills to lower prices.

Given strong demand amid supply constraints, the success of such measures to contain prices will likely be mixed but will have steep consequences on pipe prices. Fastmarkets expects at least a month or two of higher-than-normal volatility.

US and Europe seek support after flat steel peaks
Fastmarkets forecasts the end of the upward price trend in flat steel is approaching, although no steep decline is expected. Pipe producers will look to hold their prices steady in the aftermath in order to recover margins. In the US in particular, as demand for ERW oil country tubular goods and small-diameter line pipe is on a modest rise, producers will weigh competitiveness against the need to recover costs.

Click here to view the Welded Linepipe and OCTG Market Tracker in full. If you are not a subscriber but would like see a free sample report, please click here.

The post RESEARCH: Welded pipe prices surge on substrate costs appeared first on Fastmarkets.

What sets Biden’s plan apart from previous infrastructure plans is that its focus is on the environment and future technologies, with a transition to a lower-carbon economy at its heart.

The portion most clearly defined as traditional infrastructure – roads, bridges, ports – would create an estimated 16 million net tonnes of steel demand throughout the plan, Fastmarkets estimates.

Fastmarkets also estimates demand will increase by an additional 10 million net tons of steel for social and green initiatives, including water pipe replacement, electric grid improvements, building renovations and the expansion of renewable energy sources.

Although there is a reduced emphasis on traditional infrastructure, the plan will significantly boost demand for steel and non-ferrous metals, sources said.

Learn more about how steel markets are changing at Steel Success Strategies 2021

Non-ferrous metals demand is poised for growth during the course of the energy transition but we believe a potential supply-situation could be brewing. Our initial estimates show that US refined copper demand could grow by an average of over 6% per year in the next five years, compared with our current estimate of 3.8% on average.

Fastmarkets is already forecasting a supply shortfall for refined copper in 2021-22 and for prices to reach all-time highs, which additional supply tightness will lend further support to.

To understand the full impact that the American Jobs Plan will have on the US metals market, read our report from Fastmarkets research team William Adams, Amy Bennett, Andy Farida, Alex Harrison, Kim Leppold, Alistair Ramsay and Thorsten Schier.

The post US infrastructure plans support promising outlook for steel, non-ferrous metals appeared first on Fastmarkets.

This increase was mirrored by import prices in the Middle East, largely because of offers from Chinese mills going up, but the market was on the rise even for suppliers in other regions.

In contrast, China’s prices for seamless oil country tubular goods (OCTG) have remained stable amid weak demand. And with prices being driven by costs, we believe that a downward trend for iron ore will allow Chinese prices to moderate in the second quarter of 2021.

Steel continues to support US prices
Seamless OCTG and linepipe prices in the United States held steady at the start of March, with seamless mills having the relative advantage over producers of similar electric resistance welded (ERW) materials due to the surge in steel substrate costs for welded alternatives.

The number of transactions remained modest, however, with operators and distributors buying only what is needed in the short term, given the high prices and the slow resumption of demand.

But strong steel prices will continue to support the seamless market into the second quarter, leaving seamless prices to peak in the third quarter. Even after that peak in pricing, we expect only modest price declines because pipe market fundamentals normally strengthen late in the year and provide price support.

EU margins reach bottom
With a global recovery in sight, we believe that European pipe producers are determined to pass along any further cost increases to buyers. For linepipe in particular, mills are already selling May production and seem to have found their footing.

Higher inventories weigh on the OCTG market, where it is possible to purchase from distributors at prices well below those for new-rolling material.

Click here to view the Seamless OCTG and Linepipe Market Tracker in full.

If you are not a subscriber but would like see a free sample report, please click here.

The post RESEARCH: Steel costs force seamless pipe prices higher appeared first on Fastmarkets.

With the holiday now ended, we have seen some sharp jumps in round billet prices and we expect there to be a strong domestic market by the end of this month.

Still, we do not expect seaborne prices to jump in the next month, despite the strong domestic market in China, because global demand remains modest. It is also worth noting that iron ore prices are hovering around a recent peak but are expected to decline in the coming months.

At the same time, offer prices for linepipe delivered to the Middle East have remained stable, but OCTG prices in the region continued to rise amid expectations for comparatively stronger demand.

US prices climb
Domestic seamless OCTG prices in the United States have surged over the past month, with increases of $210-350 per tonne depending on grade. No other region saw such rises.

Costs continue to be a key factor in the increases, including strength in the market for hot-rolled coil (HRC). This pushes the price for electric resistance-welded (ERW) OCTG higher relative to seamless material, which is also supportive of seamless prices.

Support from scrap and iron ore prices is expected to last into the second quarter of the year, when steel and scrap prices are forecast to moderate. Improving fundamentals in the pipe and tube markets will limit the price declines, however.

Europe, CIS see scrap costs declining
Prices for seamless OCTG and linepipe in the CIS declined while those in Europe increased. But scrap prices in the latter region went down.

European mills did not react immediately to the scrap price decline because their margins have been squeezed heavily in recent months. But seamless demand is expected to remain weak in the first half of the year, and when scrap prices stabilize below the January peak, some pipe price moderation will be expected.

Click here to view the Seamless OCTG and Linepipe Market Tracker in full.

If you are not a subscriber but would like see a free sample report, please click here.

The post RESEARCH: Seamless OCTG, linepipe prices static in China but rise elsewhere appeared first on Fastmarkets.