The steel plate market has slowed considerably in 2024. When will it rebound?The steel plate market had been a positive outlier in the industrial economy, though that has changed in the last 12 months. The market has become a little more irregular.
“You can just feel it out in the market – demand is weak, pricing is lowered, so it’s been a lot softer. When you get this many price reductions from the mill, everybody sits on the sidelines because they don’t know where the bottom is. Nobody wants to commit any money to inventory,” says Jerry Sharpe, CEO Delaware Valley Steel, outside Philadelphia, Pa.
On a similar note, Ryan Murphy, vice president of purchasing, Leeco Steel, LLC, Lisle, Ill., adds, “Demand for the first half of 2024 was very similar to the demand levels that we saw in the second half of 2023, so our tons per day shipped have been very consistent for the last 12 months. Unfortunately that was a step down from the first half of 2023 so the first half of 2023 was about 10 percent better than the level we’ve been at so far for the last 12 months.”
Damian Brennan notes another way to halve the market. The executive vice president and co-founder, American Heavy Plates, Hannibal, Ohio, says, “I would divide it up into two sections – there’s the 6-inch and under market and then you have over the 6-inch. Under 6-inch has been hit by more price competition, so you’ve seen more aggressive price reductions as Nucor has announced round after round after round of price cuts. Over 6-inch we’re seeing much less aggressive price discounting and the market itself is maintaining pricing strength.”
The softer segment has pulled in lead times. “Some mills have been more negotiable and agreeable than others but generally speaking I have not had a problem getting the steel I need,” says Sam Stein, manager, Triple-S Steel, Houston.
Murphy adds that lead times right now for plates that are 3/16-inch thick to two-inch thick are running at about three to four weeks. “That’s a little bit shorter than normal. Most of our suppliers like to see lead times closer to six or seven weeks. I think somewhere in that six-week range would be average and so we’re on the shorter side of normal.”
Murphy says that data from different trade organizations suggest the inventory peak has been reached it is starting to drift down. Still, it has a decent way to go before service centers will feel comfortable going out and buying more steel.
Furthermore, all agree that Nucor’s new facility has not yet really affected supply, as it’s still going through a lot of startup challenges. “Their new Brandenburg mill is still not rocking and rolling on the range of plate we carry. This time next year that could be a whole different answer. I have no doubt in my mind they will get there and make everything they claim they’re going to make. Right now they’re not there so they’re not affecting the market much one way or the other,” Stein comments.
“They can produce at a high rate if they want to, but I think they want to focus on really figuring out what’s the lightest, thickest and widest they can go to really stretch out the capabilities of that mill. Right now I don’t think that their impression or anybody’s impression is that the market is ready for that mill to produce 100 percent. I think that if they were to just run it as fast as they could and get as much steel out the door, it would just put more pressure on the market,” Murphy says.
“I think it’s been harder for them than they anticipated it would be. There are more kinks than they anticipated,” says Sharpe. But he’s confident that things will change. “They’re Nucor. They will figure it out.”
What we saw over and over again, Brennan says, is Nucor responding to other mills quietly discounting pricing. Thus, Nucor led a series of pricing cuts to try to stimulate demand. “I think what you’re seeing is price cuts that haven’t actually stimulated demand because it just leads to uncertainty and people will just choose to eat through their inventory and then buy the minimum quantities they can.”
Brennan adds that had wind tower demand materialized quickly, as Nucor and the entire industry expected, things would be in balance right now. But that demand has taken longer because of all the steps it took to get to a point where it could actually start building.
In the last six weeks, the U.S. industry only launched the first two ships capable of building big, offshore wind towers. Hopefully, the increase in production will follow, Brennan adds. “The demand for wind towers will come, though. We’re seeing inflation drop and Fed rates will soon come down. States are willing to renegotiate some of the power deals to account for higher building costs. Our ability to actually build towers is ramping up.”
Even with the softness, imports are playing a role in the market. Brennan says there’s one major source of plate supply and that’s Korea. He suspects those who bought foreign plate over the last six months to a year are regretting their decision because when it comes in, they’re finding that they have got steel worth much less than they expected it to be. “I do think in this market most customers are better off buying very close to when they actually need the steel rather than take risky gambles.”
Murphy says imports are always a part of the picture. “Last year the market imported about 590,000 tons of steel plate. We’ve been bringing more in and the numbers that we’ve had so far through July, it looks like we’re going to be closer to that 590,000-ton number than we are the 488,000-ton number. Most orders that go overseas for import are an order that could have been placed with a domestic mill.”
However, Murphy adds there are some products that we have to get from overseas because they just aren’t made here.
Among end markets, it’s a mixed bag, tending toward weakness. Sharpe says, “I would say infrastructure and some of that warehouse construction which we don’t participate in are the stronger and energy and other non-warehouse construction are the softer.”
Brennan says it looks like defense-related industries are strong. “You’ve got the Department of Defense, Department of Energy, making investments in U.S. manufacturing capacity because they realize in order to provide incredible deterrence to aggressors, you’ve got to be able to actually build ships. We’re seeing demand on the land-based wind towers and transmission towers and some of these other areas where the U.S. just is building more capacity in general that’s high in all the new electrical capacities.”
“The places where you’re seeing weak demand has been where industries have decided that because of high interest rates, projects are just too expensive to build. You’ve seen cancellations of some projects that have these very high financing costs,” he adds.
Murphy says the renewable energy side – solar and onshore wind towers – have been performing pretty well this year. However, agriculture equipment, material handling equipment and heavy construction equipment are all down. “Then some of those are probably related to robust sales over the last couple of years and maybe they just got a little bit ahead of themselves from an inventory standpoint.”
The pricing situation doesn’t help. When you’re in the inventory business, every time the mill decreases pricing it devalues inventory even if you don’t buy anything else because you can no longer sell it based on the cost at which it was purchased. “I have to now sell it based on the cost that I can replace it at and we’ve all been in this downward spiral for the last two quarters,” Sharpe says. “So, the quick answer is pricing stinks and it’s going to get worse,” Sharpe states.
Pricing has been spiraling downward for several months, though executives believe the plate pricing floor is getting closer. “I’m not sure exactly when it’s going to happen because it’s somewhat like the stock market where nobody ever rings a bell when it hits the bottom. You find out after it’s already kind of bounced back up,” Murphy says. “But our expectation for pricing is we’re going to find a floor sometime maybe later in Q3 or sometime in early Q4 and we’ll probably bounce around there for a little while as we go into 2025.”
So what are the expectations for the rest of the year and into 2025? Stein says he believes it will be flat to down through the end of the year as the plate market, particularly in the Gulf Coast area, has a little bit more room to fall. But 2025 depends on what happens in November. “I don’t see any one particular event that would change the trajectory but the general sentiment in the market might improve or weaken depending on the outcome of the election.”
“We’re going to be soft I think at least until the end of this year. I still think there’s another price reduction out there if not two. I think demand will stay soft during that time but I am optimistic about 2025. We’ll hopefully see an uptick in demand. There’s a lot of this infrastructure stuff built up out there that hasn’t been released yet, so hopefully we’re going to see that,” Sharpe adds.
Similarly, Brennan expects pricing to remain rocky on the lighter gauge material through the end of the year. He’s expecting the heavier plate to maintain pricing stability. “Going into next year we see lots of reasons to be hopeful for both demand and also a balancing of supply. Interest rates have not gone as people had hoped and long term higher interest rates inevitably lead to demand destruction. Then it’s always a question of whether it’s long-term destruction or it’s just deferred demand. We do think that some demand, once it’s lost, it’s gone forever. But we do have reason to believe that in 2025 a few macro trends will be pushing for increased pricing.”
Likewise, there are always threats. Stein’s major worry is oversupply, particularly if the foreign mills try to flood the market in the fourth quarter. If they’re trying to fill their quotas, they could take the price pretty low.
Also, Murphy says one threat is that interest rates continue to stay elevated. Rates stay high because inflation is higher than what the government would like and that’s not good for business. “If there is a change in administration, that could be a threat as well. The current administration is focusing on renewable energy. The other administration might take that money away and maybe put it toward fossil fuel. That could be a threat to one side of our business but may be a gain on the other side. Then there’s still potential out there for a recession. We do have a small concern about that.”
Last, there are different ideas on the long-range outlook for plate. Sharpe says, “If you go out a few years, I’m bullish on it. We’re making a ton of investments here in people, equipment, safety and quality because I think in a couple years things will really get strong again. If you’re talking about a six-month window, I’m not very optimistic. If you’re past six months, I’m optimistic.”
Murphy says, for the U.S., the outlook is still pretty solid. “We still have a lot of spending and building to happen on the infrastructure side in the U.S. In addition, the electrification of everything is a good thing for our plate business. Also, renewable energy is a big spend right now.”
“I think that companies like Nucor and SSAB are correct when they say that when the U.S. finally gets around to full production of domestic infrastructure at the level that we need to, we’ll have a plate shortage. So, I do think in the long run the outlook for plate is we need maybe a 20 to 30 to 40 percent increase in production to meet even the mid-term demands for 2025-2026,” Brennan concludes.
Caption:
Lead times for plate products are shorter than normal. (Photo courtesy Leeco Steel)