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Structural Tubing Report

Turning Slowly

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A construction downturn will undoubtedly hamper structural tubing in 2024. Will government spending come to the rescue? 

U.S. structural tube prices have been on an upswing over the past few months, though that has been cost-driven with the recent escalation of hot-rolled coil prices. Overall demand for both hollow structural sections and pipe piling hasn’t changed significantly, with the only major move being toward larger product sizes. 

“While up 5 percent last year, overall consumption of HSS (which accounts for about 90 percent of the structural tube market) hasn’t been meaningfully different from what it has been for the past three to four years,” says Nate Carruthers, director of marketing for Bull Moose Tube.

Though that has been the case in general, Jeff Cole president of Atlas Tube, notes that there has been some variation of demand for certain size ranges and end-use applications. He says that about 75 percent of HSS produced in the U.S. is 8 square and smaller – tubing that is largely sold through distribution to be used in various end use applications. 

Recently there were some significant investments made to produce larger size HSS, including jumbo sizes, which hadn’t been produced domestically. Cole points out that until Atlas built its jumbo mill in Blytheville, Ark., in 2021, there wasn’t any domestically produced jumbo HSS available in North America. “Now we are the only domestic mill making certain specialty HSS sizes, Cole declares, including up to 22-inch square, 28-inch rounds and 34- by 10-inch rectangles, all with 1-inch wall thickness and available in custom lengths. Atlas Tube claims that larger jumbo HSS and piling sections are available with short production lead times and through a network of nationwide stocking distributors.

Holly Schaubert, director of HSS for the Steel Tube Institute, points out that last year’s increased demand followed a 3.5 percent drop in structural tube shipments in 2022, which she largely attributed to a number of construction projects that had been put on hold because of high inflation and rising inflation rates. 

She says it was somewhat surprising that those factors didn’t have as much of an impact in 2023 as well. “I guess that those projects have to come to fruition at some point, so after waiting for a while companies decided to proceed.” 

That isn’t to say that there isn’t still a lot of hesitance by construction, heavy equipment and other structural tube users to rebuild inventories after largely working down their backlogs over the past few years, says Damon Gaynor, co-president of distributor Industrial Tube and Steel. He maintains that while demand for structural steel isn’t horrible, it isn’t super strong.

This isn’t surprising given that, while it has other end-use applications, structural tube is primarily used in construction and Carruthers believes that overall construction activity could slow down this year, albeit not in a huge way.

The latest construction spending data from the U.S. Census Bureau, however, has not shown this quite yet with overall spending (not adjusted for inflation) up 0.4 percent month on month in November, including a 0.2 percent rise in private nonresidential construction, a 0.6 percent increase in in commercial construction and a 0.1 percent increase for infrastructure. 

But Rick Preckel, a partner at Preston Pipe notes that this is because of the backlog of projects already in progress, adding that it takes time for the concerns about interest rates to go through the system and it is construction start data that will give the first indication of what is in the hopper for structural tube demand. He points out one major forward looking indicator – the American Institute of Architects’ Architecture Billings Index – was negative for most of 2023 (at 45.3 points in November). 

Carruthers is a lot more positive about 2025 and beyond than this year, given that for at least the first half of 2024 demand from certain construction sectors should be a little iffy. Meanwhile, Phil Gibbs, an equity research analyst for KeyBanc Capital Markets, points out that demand for structural tubing – both HSS and pipe piling – could get a shot in the arm from recently passed legislation such as the IIJA bipartisan infrastructure bill, the Inflation Reduction Act and the CHIPS & Science Act. One reason, Schaubert says, is because while these bills will help in coming years, the industry hasn’t seen a big pickup in demand from them yet.

One example of this year’s softening is coming from warehouse and distribution center construction, which Carruthers says started to tail off during the second half of 2023 after reaching record levels in 2022 with the increase of e-commerce during the COVID-19 pandemic. Since warehouses have been a very large piece of overall commercial construction, it could have a meaningfully negative impact on HSS consumption. 

The effect of a decline in office construction could be limited, however. According to Preckel, office buildings tend to use more beams than tubing because they are high rise buildings. 

Even if that market remains soft, there’s belief that HSS could gain some market share there. Cole says his company’s engineering team is working with the design, fabrication and engineering communities on the benefits of using HSS – including jumbo HSS. “We’ve seen that HSS sections can offer cost savings versus wide-flange on these types of projects. When engineers use HSS, they can support more load using less steel to drop the total amount of steel used in a strucutre. This also supports sustainability goals by also reducing the embodied carbon in the structure. 

There are also several positive pockets of construction-related structural tubing demand, Carruthers points out, including for electric vehicle, battery and semiconductor chip manufacturing plants. However, the impact of manufacturing in general upon structural tubing demand is one of the “iffy” areas as the U.S. manufacturing production index (excluding automotive) is already negative and is expected to move even lower over the next few quarters before rebounding in the second half of the year. 

Also, he says, there are currently excess inventories of certain HSS-containing end products, such as commercial vehicles and heavy equipment, which could lead to a reduction in orders with companies looking to work those inventories down. 

In contrast, another positive pocket of HSS demand is seen to be alternative energy – particularly solar farms and structures. In fact, Cole says he is already noticing a spike in demand for solar applications coming from the IRA. 

Preckel agrees, noting that one growing application for structural and mechanical tube has been for the single-axis trackers that solar panels are mounted upon. Those are structures that twist to track the movement of the sun. Also, he says, pipe piling could be used to support wind tower structures, particularly for onshore windmills. 

Another major use for structural tube is heavy equipment used in construction, earthmoving and farm equipment, as well as lifting equipment. But such demand is likely to soften this year, largely due to backlog issues, Gaynor says, noting that with the OEMs’ backlogs shrinking they have inventories on the floor and are waiting to place orders. 

“U.S. domestic HSS capacity has been increasing and continues to do so,” Cole says, noting that from late 2023 through 2025 about 1.1-1.2 million tons of new capacity is expected to come online – capacity that he says will create a more competitive landscape. 

This is taking place even though the market is generally said to be balanced to slightly oversupplied at the moment. In fact, Gibbs terms its supply as being ample, resulting in some mills to not fully utilize their existing capacity. 

“More capacity has come online over the last year or so than we have seen over the past five years,” Gaynor says, questioning whether there is enough demand for this new capacity or if some more inefficient, high-cost mills will need to either consolidate or close. But others believe that they will do well despite the increasingly competitive marketplace because of the types of products and services they offer their customers. 

One major increase in structural tube capacity is the new 350,000-ton-per-year mill located on Steel Dynamics’ Sinton, Texas campus that Bull Moose brought online last May and is continuing to ramp up. In addition to HSS, it also produces pipe piling – a new product for Bull Moose. 

Carruthers says the new mill also expands Bull Moose’s HSS product offerings to include up to 18-inch rounds and up to 14 square. Previously only Atlas Tube was able to make 14 square HSS domestically, he says. 

Nucor Tubular Products has also brought on 14 square and 18-inch round HSS capabilities in the second half of 2023 and has announced plans to build a new mill in Gallatin, Ky., near Nucor’s steel plant there. Meanwhile, Nova Steel is continuing to ramp up its new HSS mill in Delta, Ohio, and Altex Tube is building a mill on Steel Dynamics’ Columbus, Miss., campus, that Preckel says will be largely focused upon selling structural and mechanical tube for solar applications. 

While generally when an industry has more capacity than demand it places downward pressure upon prices, the story is a little different for structural tube, Gibbs says. Despite changes in its supply-demand balance HSS prices tend to closely follow the pricing curve of HRC – its main substrate. 

Therefore, as has been the case for HRC, HSS prices have been very volatile over the past year, Gibbs says, with prices going from $1,450 a ton at the beginning of 2023 up to $1,750 a ton in late April and then bottoming out at $1,150 a ton at the end of the summer. 

Then, following back-to-back HRC price increases and the resultant increase in bookings, the mills have since successfully announced four HSS and pipe piling price increases, bringing HSS prices back up to about $1,600 a ton by the first week of January, Carruthers observes. However, as of mid-January no new price hike based upon the new minimum HRC base price floated by Cleveland-Cliffs on Jan. 3 has been announced. 

This comes as some distributors have been sitting on the sidelines, wary of being caught with high-priced inventories should HRC prices – and therefore structural tube – prices start to move downward in the coming months. Carruthers says that isn’t surprising given the speed and magnitude of the price increases had been unexpected and should HRC lead times shorten, prices could start moving downward. 

Although HSS competition will most likely continue to ramp up, Cole says he doesn’t expect there to be a massive swing in overall HSS demand, especially for smaller sections, in the near future. 

Carruthers agrees, noting that while there will be some headwinds this year, including weaker demand for warehouses and data centers and increased competition with the new production capacity coming online, things could pick up later in the year, especially if, as expected, the Federal Reserve starts cutting interest rates.

At Bull Moose, tubing product enters the line as a round product and comes out square. 
(Photo courtesy Bull Moose Tube)