News & Announcements

POSTED May 4, 2020

Market Overview – Early May 2020

SCRAP

The AMM Shredded Auto Scrap Index for Chicago decreased to $227/GT down $50/GT from early Apr ’20. The index is at its lowest point of the year and down $70/GT since early Jan ‘20. There was some upward price pressure in early Q2 ’20 based on limited scrap inflows and exports to Turkey, but by the end of Apr ’20 pricing reversed course due to weakening demand for domestic mills and muted export activity on both coasts. Views on domestic scrap prices are mixed for the coming month.

CARBON PLATE

Mill lead times are 5-6 weeks from the West Coast and 6-8 weeks when rail is included from plate mills east of the Rockies. Domestic plate prices have eroded over the last two months due to lack of demand. Some domestic plate mills are temporarily taking capacity offline due to light order books. Evraz, the West Coasts only plate producer will idle operations during the first week of May ’20, while SSAB is moving a maintenance outage originally planned for Q4 ’20 ahead into the summer. Demand drops have resulted from shelter in place mandates, destocking at distributors and a drop in oil and gas construction activity.

HOT ROLL SHEET

Mill lead times are roughly 6-8 weeks for delivery from the Midwest to the West Coast with similar lead times from West Coast mills. A steep drop in hot roll coil demand from various industries including automotive and energy has lead to over a dozen US mill locations downsizing steelmaking capacity including facilities at ArcelorMittal, US Steel, and NLMK. Some capacity decreases have a temporary term while others are indefinite. Domestic mills have reduced workforces and idled blast furnaces to combat weaker demand. Prices for hot roll coil have eroded over the past 60 days, yet several domestic mills including ArcelorMittal, Nucor, and CSI issued a price increase of between $50-$60/ton in early May ’20. Some market participants suggest that the recent mill price increase announcement was an opportunity to stop prices from eroding further.

HSS TUBE

Tube mill rolling cycles are 4-5 weeks for West Coast tube mills. Domestic tube prices hit a three and a half year low in Apr ’20 due to sliding hot roll coil prices. Demand has been reduced at many tube mills, but prices are not expected to decrease in the next 30 days assuming the early May hot roll coil price increase announcement holds firm.

MERCHANT BAR

Lead times are roughly 4-6 weeks for most production runs on the West Coast. Domestic merchant bar mills announced a price decrease of $25/ton in late Apr ’20, which coincided with price decreases for raw material inputs (scrap). Lower demand for domestic bar mills has been cited across all industries. With scrap prices expected to decrease in the coming month, domestic bar prices are not expected to increase. Domestic bar mills have available inventory on some sizes.

BEAM

Lead times are roughly 6-8 weeks for West Coast delivery. Domestic beam mills announced a price decrease of $25/ton in late Apr ’20. The price decrease is believed to be due to softening demand and price decreases for raw material inputs (scrap). The Apr ’20 price decrease was the first beam price decrease in 2020. Domestic beam mills are experiencing a drop in demand due to idled construction projects stemming from the COVID-19 pandemic shelter in place mandates.

MARKET

Steel prices for all major product lines decreased in the month of April due to declining raw material prices and falling demand. According to the Institute of Supply Management (ISM), the overall economy contracted for the first time in Apr ’20 after 131 consecutive months of expansion. ISM indicates domestic manufacturing contracted with an index of 41.5 for Apr ‘20, which is down 7.6 from 49.1 in Mar ‘20. The ISM New Orders and Production Index remain in contraction with readings of 27.1 and 27.5, respectively in Apr ’20. The ISM New Orders are down 15.1 and the Production Index is down 20.2 compared to Mar ’20. ISM readings greater than 50 signal expansion. After achieving an unemployment rate of 3.5% in early 2020, which was equal to a 50-year low, the advanced seasonally adjusted insured unemployment rate was 12.4% for the week ending April 18th. Advanced seasonally adjusted insured unemployment reached 17,992,000, which marks the highest level of unemployment in the history of the series. The US Dept. of Commerce issued a Q1 ’20 estimate of GDP contracting at -4.8% due to COVID-19 effects on the economy compared to GDP expansion of 2.3% in 2019.

Sources Include: Domestic Steel Mills, US Labor & Commerce Departments, ISM, AMM, Bloomberg, AP

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