Demand and pricing for steel plate have held up well through the first half. The latter may start to dip ?even if consumption remains solid.
The market for steel plate has been healthy for a long time, with no imminent signs of collapse. The players in the market only hope the same holds true of plate pricing.
Plate’s price resiliency in the face of declines in other steel markets has the supply chain on edge. Though few are expecting an immediate or profound decline in pricing in the coming months, the history of the steel market ups and downs gives them cause for pause.
“I am a little nervous about pricing,” says LeeAnn Trueblood, vice president of sales and purchasing at LB Steel, Harvey, Ill. “People are a little scared prices are going to change quicker than they can deplete their inventory on some of the lighter stuff.”
That apprehension is fairly universal.
“Everyone has the same fear right now, once pricing starts to go, how quickly is it going to go,” asks Steve Fleming, vice president of purchasing at Twinsburg, Ohio-based Churchill Steel Plate. “If it’s a gradual increase, everybody can manage through it. If there’s some kind of big drop, everybody would be dumping high-priced inventories to get back market value, which always creates an interesting process.”
“I’m in a lot of meetings and people are always asking, ‘What’s going on with the plate market,’” says Damian Brennan, vice president of American Heavy Plates, Clarington, Ohio. “They look at the hot-rolled market, they look at cold-rolled and see prices crumbling and plate is staying at the same steady, high number. Everyone is wondering how that’s happening.”
But Brennan believes there are some obvious answers to that question, particularly for the heavier plate products his company specializes in: there aren’t a lot of players out there on the production side. With fewer suppliers, it’s been easier for the mills to keep up pricing.
“If you’re buying 1 to 2 inch last month, you were looking at say a $150 to $200 price decrease. If you’re looking at heavy plate, 3 inches and heavier, you’ve seen maybe a $20 to $40 price decline. And if you’re looking at even heavier stuff, there’s pretty much been no movement at all.”
Moreover, says Ryan Murphy, vice president of purchasing for Lisle, Ill.-based Leeco Steel, the industry itself deserves some credit for the favorable pricing environment.
“I think we have a better chance of a softer landing as we go through this cycle because people have been a little better at managing their inventories and it doesn’t look like we’re going to have a huge wave of excess inventory to work through,” says Murphy. “As price starts to move down to a more normal level, it should help us ease down the slope.”
The distributors aren’t the only players who have displayed uncharacteristic discipline. “Producers have been more structured over the past 18 months, how they announce pricing, how many orders they take from everybody,” he adds. “In the past, it was like, ‘The order book is open, just send us in what you need and we’ll take care of it later.’”
Additionally, past history suggests a pricing environment this settled at such a high level would have served as a siren song for imported metal, but that hasn’t been the case this time around. Tariffs and quotas have continued to keep some material from the U.S. market.
The quota system in place with South Korea has been a particular bulwark against too much plate coming ashore. Additionally, Italian mills would have also been a prime supplier of plate products in the past. But they’re also somewhat cut off from the U.S. market due to Section 232, even with the lifting of that against EU members last year. “That assumes they’re using EU slabs. They’re not, they’re using Chinese and Indian slabs, so they can’t send it in without 232,” Brennan says.
Pricing was also kept aloft by the Russian invasion of Ukraine, which had effects on multiple fronts. The war forced the closure of the million-ton plate mill Azovstal. Additionally, the sanctions placed on Russia, and its effects on European power and other costs, have also contributed to the scarcity of imported product in the States.
While supply has been limited from overseas, the domestic picture is going to experience a major upheaval in the second half of the year. Nucor’s Brandenburg, Ky., plate mill is still on schedule to open before year’s end.
The $1.7 billion project, the largest in the company’s history, will have the capacity to produce 1.2 million tons of steel plate annually, covering 97 percent of the products demanded by the domestic market, Nucor claims.
During the company’s first-quarter conference call, Nucor executives confirmed the plant is slated for a fourth-quarter start-up. By the end of next year, the mill could be producing close to one million tons.
“Typically, in the first year of startup, we aim for a run rate by the end of the year of three-quarters of capacity,” Nucor’s Executive Vice President of Plate and Structural Products Al Behr told investors and analysts. “But how that looks through the year is determined on where the market sits and how we can respond to it.”
The distribution chain is obviously keenly attuned to the developments along the Ohio River.
“A new plate mill does not come around all that often. It’s been several decades since a new, modern heavy plate mill went into production,” says Andrew Sberna, vice president of sales for Churchill Steel Plate. “We’re anxiously awaiting having another tool in our arsenal.”
That’s the attitude of Pat Moore, marketing coordinator for American Alloy Steel, Houston. “We’re excited for it. That location should work out nicely for us as far as getting our plate materials. They’re going to produce all of the plate grades we stock.”
For a Midwestern company such as Churchill, the benefits are obvious. “The freight from Longview is expensive. From Kentucky to here will be a whole lot better,” says his colleague, Fleming.
How Nucor’s ramp-up affects the overall supply chain remains to be seen, though it will be dramatic. “That’s definitely going to affect the entire Midwest,” Trueblood says. “I hope they maintain market pricing.”
Naturally, Nucor executives believe the mill will displace imported material, which is what Brennan hopes is the case. “Nucor’s new mill is going to provide us some additional supplies, but also a pushback on imports even further,” Brennan says, noting domestic mills are also pushing a carbon border adjustment tax, to limit the amount of blast furnace-produced material from overseas.
While supply may be of concern for the distribution community, there’s less worry about demand. The market has been active for a while, and the long-range outlook, to the extent one’s available, is quite solid. “I don’t know if we’re crazy busy now, but we are moving tons. And our fabrication end of the business is really busy,” says Trueblood.
“Demand is really good,” Brennan says. “The one hole in demand the last two years is oil and gas.”
But with oil prices at elevated levels, that’s obviously beginning to turn around. “We’re seeing demand in 3- to 9-inch steel plate. That’s picking up fairly regularly month after month.”
Moore sees similar things with fracking in the Permian Basin. “They require a lot of specialty separators out there, and we have seen some of that business. Not just in the flat plate we sell, but we also have a plate rolling heavy fabrication division here in Houston that does first-stage fabrication. That’s kept us pretty busy.”
“Customers are saying the same song as they have for the last 18 months. Backlogs are long and extended. They expect to continue to be busy through the end of the year, and some are even saying they’ll be busy through the first half of next year,” says Leeco’s Murphy.
Churchill Steel Plate has benefited from some unease about market conditions keeping buying down at the start of the year. “We’ve seen a significant amount of inquiries where people are looking at stock-sized plate due to holes in their inventory. People thought the market was going to decrease and some of the larger outfits pulled back on their buys and they’re looking for plate to process,” says Sberna.
Murphy says the one soft spot in the market looking ahead is in warehouse construction, which had been a strong driver in the past two years. But the recent announcement from retail giant Amazon that it was looking to unload approximately 10 million square feet of warehouse space has obviously chilled that sector.
However, any softness there will be more than offset by a couple of major developments.
The Infrastructure Investment and Jobs Act was passed in 2021, but it’s effects have not yet been felt by the industry. Perhaps that’s a good thing. “Bridge manufacturers have been busy for the last year and a half. They’re curious how they’re going to get any busier because picking up employees is difficult for them as well,” Murphy says.
But the demand will be there, with money for projects starting to flow through the supply chain by next year. “Anything that can help with demand is a good thing,” says Fleming.
“I don’t think it will affect us for a couple of years, when things start running through and things get funded. But I think to some degree we’ll see some business from it, for weathering steel and steel used in some freeways,” says Moore.
The other long-term trend that could goose the plate market is wind power. The coming years are expected to see an explosion in the development of offshore wind projects, a major consumer of steel plate. Demand from the sector could reach as high as one million tons of steel annually, or almost as much as Brandenburg will add to the market. “If wind realizes its full potential, that supply will get sucked up pretty fast,” Murphy says.
In fact, one of the issues supporting the long-term outlook for the market is the areas of macroeconomic concern, such as high energy prices, are solved through the measures consuming plate products.
“I think there are some areas where demand gets pinched,” Brennan says of concerns there could be a contraction in the economy. “But the ones that rely heavily on steel plate seemed primed for growth rather than primed for shrink[ng.” [Caption]
Plate is cut at a Leeco Steel facility. (Photo courtesy Leeco Steel)