The COVID-19 global pandemic is hammering steel demand, and despite cuts in domestic capacity, that lagging demand is taking a toll on the US flat rolled steel market.
For example, the Federal Reserve has reported that industrial manufacturing fell by 5.4% in March, the first month that parts of the US issued stay-at-home orders. Overall Q1 production dropped by 7.5%, the largest dip since Q2, 2009. The order to halt operations at non-essential businesses, sources agree, will continue to impact demand in May, June and July.
Falling demand is also evidenced by two more points: domestic mills’ 56.1% capacity utilization rate (its lowest point since 2009), and an announcement made earlier today by executives at JSW Steel, noting plans to temporarily idle operations at its hot rolled mill in Mingo Junction, Ohio, for approximately four weeks. A similar idling has been announced for their Baytown, Texas plate and pipe mills.
“Unfortunately, market conditions in carbon flat rolled steel and pipe consuming sectors have dramatically changed due to demand deterioration caused by the coronavirus pandemic and the turmoil in global oil and gas markets,” said JSW President and CEO John Hritz in a statement.
The US has been the worst hit by the virus, which is evidenced by today’s news that 22 million Americans have filed for unemployment benefits in the past 4 weeks. All in all, sources note, “it seems that everyone is trying to adapt to this new normal.”
Yet there are small pockets of good news. Volkswagen has announced plans to restart production at its Chattanooga, Tennessee auto plant, during the last week of April. Fiat-Chrysler has said it will restart production at their plants in the first week of May. Ford has also said it is considering a slow restart of its plants at some point in Q2.
For now, however, the US flat rolled steel market is still taking a to-be-expected beating.
"My personal opinion is that the market hasn't hit bottom yet," a source said. "But the good news is that capacity has been cut significantly. I think the mills are going to make some deals to get June booked, and hopefully, the lockdown orders will be lifted sooner than later and people can get back to work, safely."
The US HRC spot market price range, which was hovering at $24-$26 cwt. ($529-$573/mt or $480-$520/nt) ex-mill, one week ago, has softened to $24-$25 cwt. ($529-$551/mt or $480-$500/nt) ex-mill, although some sources have reported deals available below that range. “Lead times for hot rolled are short, as in three-weeks-to-get-material short,” a source noted.
US CRC prices, which were heard in the range of $33-$36 cwt. ($728-$794/mt or $660-$720/nt) ex-mill before Easter, are now trending at $33-$35 cwt. ($728-$772/mt or $660-$700/nt) ex-mill. As with other flat rolled segments, deals are available based on volume.
And while base-price HDG coil is still “officially” holding at $35 cwt. ($772/mt or $700/nt) ex-mill, “if you have a decent sized order, it’s essentially a name-your-price game right now,” another source added. "Some customers are being quoted at or below $30 cwt. ($661/mt or $600/nt), ex-mill." Base-price Galvalume coil price points are similar to what’s being heard for base-price HDG.