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The Steel Story at the Start of 2024

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MCN Editor Dan Markham The price of hot-rolled coil was on the ascent as 2023 drew to a close. The upswing probably won’t carry too far into 2024. 

Steel Market Update’s Michael Cowden said in a conversation with Algoma CEO Michael Garcia that after the HRC price had fallen to a recent low of $645 in late September, the mills pushed through a series of hikes in the final quarter. The average price reached $950 per ton by late-November, with Nucor publicly calling for prices near $1,100.  

As the price stretched upward, lead times extended outward, particularly for cold-rolled and galvanized. “The mills have a pretty strong hand now,” Cowden said. “It doesn’t look like summer when there were increases that didn’t really stick. This looks more like we saw in the first quarter.”

Additionally, Cowden said, service centers were following suit. He noted 85 percent of the distributors surveyed by SMU were raising prices, while the other 15 percent were simply holding firm. No one was lowering prices. 

The strong gains may pull the peak forward, SMU’s respondents suggested. Initially, sentiment indicated HRC prices would reach their apex in February or even March, but now customers believed it may come as early as this month.
 
One question that continues to perplex the industry is whether the once-reliable idea that sheet and plate pricing move in tandem has been upended, with a significant spread between the two existing for most of 2023, though one that narrowed some toward the end of the year. Cowden asked Garcia whether we could expect a return to the old model or has there been a shift in the path for the two steel products. 

“The premium is really much higher than historical and it’s been like that for 18 months. It’s contracted a little bit over the last few months, more from the rise in coil than a drop in plate, Garcia said.

He noted there are a few demand drivers for plate that distinguish it from coil, citing the significant infrastructure build that’s not just taking place in North America, but worldwide. Additionally, there’s a little less investment on the supply side for plate and plate buying tends to follow projects, rather than sentiment. 

“There’s not a lot of speculative buying for people wanting to take an inventory position. With all that, I would expect the premium to continue a little higher than historical going forward,” he said. 

Beyond pricing, the steel market in 2024 will feature several noteworthy themes. First among them is the transformation of U.S. Steel to its new ownership under Japan’s Nippon Steel, a deal that closed in the final days of 2023 following a well-publicized sale process. The interest in the steelmaker, most notably exprssed by rival domestic steel producer Cleveland-Cliffs, is a testament to the company’s improved reputation in the industry.

The bidding war leading up to Nippon’s purchase reflected “a tremendous shift in management that’s led to an extraordinary re-evaluation of U.S. Steel. It’s a remarkably well-run organization,” World Steel Dynamics’ Managing Director Adam Green told Metal Center News. “The future prospects of them being a six-million-ton producer of sheet, the profitability of their electric arc furnace unit and their traditional footprint downstream” made them an attractive target of acquisition.

On the demand side, WSD believes construction, both residential and nonresidential, will be weak in 2024. Public construction will offset some of that, with the various government spending projects starting to come into bloom. However, that will do more for long products than sheet, he said. 

Of course, the other major topic dominating steel production at this point in time is decarbonization, which every mill in North America, and the world, is tackling in some form or another. Yet it’s worth noting the producers here have a leg up on most of their global competitors, with North America already out front in terms of emissions. “We’re sitting in a place where the U.S. is, competitively speaking, one of the top handful of countries producing with a lower overall carbon footprint,” Green said.