News
23/12/24
Viewpoint: US steel glut may dampen prices, profit
Viewpoint: US steel glut may dampen prices, profit
Houston, 23 December (Argus) — Persistent steel oversupply in the US may
continue to dampen domestic steel prices and steel mill earnings as the market
faces weak demand and rising import volumes. Buyers told Argus the market
remains oversupplied and has been for most of 2024, despite US steelmakers
lowering production through the first three quarters of 2024. Raw steel
production was 66.21mn short tons (st) this year through 28 September, a 1.11mn
st decline from the first three quarters of 2023, according to weekly data
published by the American Iron and Steel Institute (AISI). While steel
production is lower, many US buyers believe steelmakers are still producing too
much material, making it easy to buy spot tons. The Argus US hot-rolled coil
(HRC) lead time crossed into 2025 in mid-December, and HRC lead times have
averaged 4.3 weeks in 2024, down from six weeks in 2023. Facing these factors,
US steelmakers see lower profits or even losses during the final quarter of 2024
and potentially into 2025. The five largest steelmakers by production capacity —
Cleveland-Cliffs, Commercial Metals (CMC), Nucor, SDI and US Steel — reported
combined profits of $3.55bn for the first three quarters of 2024 — $4.35bn lower
than the same period of 2023. In recent fourth quarter earnings guidance, Nucor
and US Steel said they could post a profit and loss, respectively, at levels not
seen since the third quarter of 2020. Demand pressured by high rates A decline
in demand has been the fundamental issue this year and is expected to continue
to be moving into 2025. Many service centers reported lower steel consumption
forecasts for 2025 compared to this year, outpacing any decline in US steel
production. Automotive production and steel consumption from automaker
Stellantis is said to have sagged recently as that company struggles to tamp
down high vehicle inventories . High interest rates constrained demand and put
pressure on buying trends. The Associated General Contractors of America's (AGC)
chief economist Ken Simonson said recently that increased federal government
project announcements have not led to more construction contracts, and that
spending for major private construction categories are flat or shrinking.
Nonresidential construction is one of the largest consumers of steel products.
That lower trend in nonresidential spending is being masked by higher
residential investment, with construction spending at $2.17 trillion on a
seasonally adjusted annual rate in October, 5pc above the same period the prior
year and up by 0.4pc sequentially. Much of the increase was from higher spending
in residential projects. Coupled with this lower demand, new and better
operating steel mills could intensify the supply overhang. US Steel recently
started up its new 3mn st/yr Big River 2 flat steel mill in northeast Arkansas
and after years of production issues, Steel Dynamics' (SDI) 3mn st/yr Sinton,
Texas, mill is operating at higher rates. Australian steelmaker BlueScope also
reported that it is continuing to work on improving efficiency at its Ohio-based
North Star flat steel mill, which it completed an expansion to last year. Farm
tractor sales, another consumer of flat steel, stood at 196,000 units through
November, down by 30,900 units from the same period the prior year. The higher
production is coming online as steel prices are falling. The Argus US HRC
Midwest assessment had a third quarter average of $680/st ex-works, down by 27pc
since the first quarter average. Import volumes adding to oversupply Lower
global steel costs have led to stubbornly elevated import volumes, despite
persistent US oversupply and short lead times. Import volumes rose to 22.3mn st
in the first three quarters of 2024, up by 431,000st from the same period prior
year, according to data from the US Department of Commerce. By Rye Druzchetta US
steel mill profits, production, steel imports and prices Through 3Q 2024 Through
3Q 2023 Difference US steel mill profits ($mn) Nucor 1,740 3,739 -(1,999) US
Steel 473 975 -(502) Cleveland-Cliffs -(307) 554 -(861) SDI 1,330 2,027 -(697)
CMC 309 598 -(289) US production US steel mill utilization rate (%) 76.7 76.9
-(0.2) Raw steel production ('000st) 66,212 67,325 -(1,113) Imports Quarterly
steel product imports ('000st) 22,301 21,870 431 Argus-assessed pricing ($st) US
HRC MW ex-works $796 $911 -($115) US rebar MW ex-works $809 $904 -($95) Company
filings; AISI; US Department of Commerce; Argus CMC fiscal quarters adjusted to
most relevant calendar year quarter. Utilization percentage rate and production
tonnage estimates based on AISI data through 28 September. Send comments and
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