Steel price rise expected at auto strike end

: Metals, Petrochemicals
23/09/15

The US steel market expects prices to increase when the current automotive strike ends.

Steel sellers and buyers expect some level of price increase when the current United Auto Workers (UAW) strike against the Big Three US automakers concludes, citing depleted service center inventories and steel mills hungry to raise prices ahead of contract negotiations for 2024.

The UAW began a less disruptive "stand up" strike tactic this morning where initially only three facilities — one across each of Ford, General Motors (GM) and Stellantis — are on strike. The UAW has the option to expand the number of facilities they are striking. Currently around 13,000 of the UAW's 150,000 members are on strike, with the rest continuing to report to work.

A strike by all UAW auto members could cut US consumption of flat steel by as much as 409,000 short tons (st)/month with an additional 138,200st/month of other steel consumption and 134,300st/month of aluminum consumption, according to an Argus analysis of vehicle composition data. Copper consumption would be curtailed another 13,800st/month.

One large service center and a steelmaker both said a two-week or shorter strike would have little impact on consumption and prices. The buyer added that steel mills would likely react with price increases, while the mill said the squeeze of mill margins puts more pressure on steelmakers to raise prices. Any increase would then be whittled away later in the year with normal seasonality. The buyer added that a longer strike would require mills to make tough decisions about production. Others think it will take a month for the market to start feeling the auto slowdown.

Another buyer noted that with 1mn st of steel production coming off line for planned maintenance in September and October, the outages could help blunt the extra supply on the market from lower automotive production.

Steel producers have been battling declining prices most of the year, with the Argus US hot-rolled coil (HRC) Midwest and southern assessments down by 43pc from the peak in April to $690/short ton (st) on 12 September.

Service centers were already reducing their inventories before a strike was threatened in response to the fall in prices, and the potential for a strike only exacerbated concerns over holding onto tonnage. Large discounts were reported for a range of potential tonnages from 2,000-20,000st, with the lowest reported prices in the $610/st range. Some believe steel mills were trying to fill their books ahead of the strike, which could cut demand across all steelmakers, particularly the auto-heavy integrated mills at Cleveland-Cliffs and US Steel.

By Rye Druzin

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

24/12/26

Viewpoint: Real, tariffs to hit Brazil steel imports

Sao Paulo, 26 December (Argus) — Steel importers in Brazil are likely to face a tougher market in 2025 as government measures and the Brazilian real's depreciation to the US dollar make products from abroad less attractive. Brazilian steel importers are concerned that tariff-quota and antidumping policy changes made this year by the federal and state governments could raise costs for importing cargoes in 2025, likely exacerbating the impacts of a sharply depreciated Brazilian real relative to the dollar. The concerns come as US president-elect Donald Trump is already raising global trade tensions, with specific focus on Mexico, Canada and China, that could unleash waves of dueling trade measures. After seeing strong import growth in the post-Covid-19 recovery, Brazil steel importers are fretting they may lose momentum. Brazil's steel imports year-to-date November rose by nearly 24.4pc to 5.6mn metric tonnes (t) from the same period a year earlier. They are expected to end the full year 2024 up by 24pc, according to steel association Aco Brasil, after climbing by 50pc in 2023. Apparent consumption rose by 9.6pc to 24mn t in the 11 months through November, while production increased by just 5.6pc to 31.17mn t from a year earlier. Even with a 28pc depreciationof the real to the dollar in the 12 months through 24 December, prices for dollar-denominated steel imports still have a cost advantage over domestically produced steel. But that advantage is narrowing as the real weakens, with the price difference from imports over the domestic market narrowing to just $112/t in the latest assessment for hot-rolled coils (HRC) from $172/t in mid-October . "The dollar's [appreciation to the real] is messing up imports," one market participant told Argus , saying a wider price advantage for importers was necessary to offset issues like the exchange rate risk and the shipping time. Market participants also cited rising borrowing costs in Brazil as an additional challenge for imports, as many buyers rely on financing to purchase material from abroad. Brazil's central bank on 11 December unexpectedly hiked its target interest rate by a full percentage point to 12.25pc , citing the country's uncertain fiscal situation, accelerating inflation and challenging external conditions. Importers recently expressed concerns over Santa Catarina state's decision to no longer grant tax incentives for imports of six different steel and iron products for commercialization or resale in 2025. Although the timeline for implementing the measure was postponed to July and could face changes, importers remain concerned and are monitoring any possible reviews of the decision, sources told Argus . Santa Catarina's main port, Sao Francisco do Sul, accounted for over one-third of every steel product that is imported to Brazil from January to September, according to data from the country's distributors association, INDA, published in September. On the federal front, the government is likely to announce new and renewed antidumping measures for products coming mainly from China, Brazil's largest steel supplier. Another obstacle for importers would be a possible review of the tariff system for steel imports, which was implemented in June 2024 and led to additional tariffs of up to 25pc. The measure proved mostly ineffective at curbing imports into Brazil, and the industry group Aco Brasil said it would ask for adjustments . Despite the challenges, there is still room for importers to bring material to Brazil , as the country lacks steel to supply its domestic demand, another market participant said. "Brazil will always need imports because it still lacks some key home-made products to feed its market," the participant said. By Carolina Pulice Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US PGP prices set to rise in 2025

24/12/26

Viewpoint: US PGP prices set to rise in 2025

Houston, 26 December (Argus) — US spot polymer-grade propylene (PGP) prices are likely to increase into 2025, driven largely by several planned limitations on supply. By mid-December, the US PGP market had the sharpest contango structure between the prompt month and the forward month since Argus began tracking data over 10 years ago. A contango is when the next month's price is higher than the current month's price. On 12 December, December-delivery PGP at the Enterprise Products Partners (EPC) system at Mont Belvieu, Texas, traded at 35.75¢/lb, while January-delivery PGP traded twice at 38.75¢/lb. Argus ' PGP forward curve shows prices rising to over 40¢/lb by the second quarter of next year. Many factors are behind this record 3¢/lb premium for January PGP and the continued increase into mid-year. The first is that spot prices have dipped to their lowest levels since August 2023 on a rare period of no major supply disruption at propane dehydrogenation (PDH) units, which produce on-purpose propylene. Most propylene production in the US comes as a byproduct from refineries or as a co-product from steam crackers. All four US Gulf coast PDH units have been operating without major incident or extended shutdown since the late summer. Since mid-August, only Enterprise's PDH-1 was shut, for two weeks in mid-October, but this was not enough to stop the downtrend in PGP's spot price. US spot PGP prices declined by 40pc from a 12 August near-term peak of 58¢/lb to a low of 35¢/lb on 9 December. A second major factor behind the market's sharp contango is that PGP supply is set to tighten in 2025. Propylene supply will have a structural reduction when LyondellBasell's 264,000 b/d refinery in Houston begins shutting down units in January and completed closes by the end of the first quarter. The company sought to exit the refining business but could not find a buyer for the refinery, which produces 136,000 metric tonnes (t)/yr of propylene. There are no planned additions to US propylene capacity in 2025, and several US crackers that produce propylene as a co-product are set for turnarounds in the first quarter. Meanwhile, propylene demand is set to structurally rise in the second half of 2025, when Formosa's new 250,000 t/yr polypropylene plant in Point Comfort, Texas, is scheduled to come online. A third major factor indicating that US spot PGP prices in December are the lowest they will be for at least several months is seasonality. One market participant said that spot activity to end 2024 is largely characterized by sellers destocking inventory ahead of the state of Texas' ad valorem taxes on inventories. This tends to cause seasonally lower prices in December and then a rise in prices in January as the market restocks inventory. This trend has persisted for the last four straight years. These three major factors — uninterrupted supply to end 2024, supply tightening in 2025, and seasonal buying patterns — all stand behind the sharpest contango into the next year for propylene in 10 years of record keeping. The forward curve for PGP indicates a rise of 5¢/lb between now and the middle of next year. The forward curve, though, does not account for any unplanned shutdowns of PDH units, which happen frequently as PDH units are operationally less reliable than propylene-producing crackers and refineries. In July, the US had three of its four PDH units shut down, taking 2.9mn t/yr of on-purpose propylene capacity offline. Such incidents could spike prices for PGP above the uptrend expected into next year. By Michael Camarda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

China's GFEX launches polysilicon futures contracts

24/12/26

China's GFEX launches polysilicon futures contracts

Beijing, 26 December (Argus) — China's Guangzhou Futures Exchange (GFEX) has launched futures contracts and options for polysilicon today. This is the third contract that GFEX has launched, following the launch of its contracts for silicon metal in December 2022 and lithium carbonate in July 2023. The launch of polysilicon contracts is aimed at easing a supply surplus and ensuring market development, given increasing new capacities at polysilicon producers and lower-than-expected demand from the downstream silicon wafer industry in the past two years, according to market participants. The new contracts are for benchmark N-type polysilicon and substitute P-type polysilicon. The exchange has set a premium of 12,000 yuan/t ($1,644/t) for the N-type over the P-type. It is offering seven contracts starting from June 2025 until December. The most-traded June contracts for N-type polysilicon on the GFEX closed at Yn41,570/t on 26 December, up from the launch price of Yn38,600/t, with trading volumes totalling 301,655 lots, equivalent to around 905,000t. GFEX has established delivery points for the new contracts in eight provinces, including Inner Mongolia, Sichuan, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang. Output and consumption in these regions account for 93.1pc and 91pc of the country's total output and consumption respectively, according to GFEX. South China-based GFEX launched in April 2021 and is partly owned by China's four operational futures exchanges — the Shanghai Futures Exchange, Zhengzhou Commodity Exchange, Dalian Commodity Exchange and the China Financial Futures Exchange — with each holding a 15pc stake. Market reaction Some market participants expect the new futures contracts will ease pressure from ample spot inventories and shore up spot market sentiment in the coming months. But the market has yet to see immediate effects on the first trading day. Argus -assessed domestic prices for 5-5-3 grade silicon metal — a key feedstock in the production of silicon powder, which is the feedstock for polysilicon — held at Yn11,200-11,400/t delivered to ports on 26 December, unchanged from 24 December given limited buying interest from consumers. The most-traded February contracts for 5-5-3 grade silicon on the GFEX closed at Yn11,190/t on 26 December, down from Yn11,585/t on 25 December. China is the world's largest polysilicon producer, producing 1.74mn t during January-November, up by 33pc from a year earlier, according to data from the China nonferrous metals industry association (CNIA). It has an production capacity of over 2mn t/yr, according to industry estimates. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Japan’s crude steel output to recover in FY2025: IEEJ

24/12/26

Japan’s crude steel output to recover in FY2025: IEEJ

Tokyo, 26 December (Argus) — Japan's crude steel output is expected to recover during April 2025-March 2026, given higher output in wider domestic industries, according to government affiliated think-tank the Institution of Energy Economy Japan (IEEJ). The country's crude steel output will increase by 4.1pc on the year to 86.5mn t in 2024-25, according to the IEEJ's projection on 24 December. This will mark the first year-on-year growth in four years. A recovery is mostly attributed to an uptrend in wider domestic industrial sectors including automobile, electric and industrial machinery, IEEJ said. It sees domestic car output increasing by 1.8pc to 8.9mn units from a year earlier. IEEJ did not provide further details, but it suggested that expanding investment for digital and green transformation will underpin the steel demand throughout the period. The think-tank also predicts that the country's steel product exports will increase by 1.2pc on the year following an upward trend in the global manufacturing sectors. Japan delivered around 32mn t of steel products overseas during 2023-24, according to the industry group the Japan Iron and Steel Federation (JISF). The country's crude steel output has been sluggish throughout 2024, partly owing to weak demand from the construction and automobile sectors. Rising material costs and labour shortages have led to fewer construction projects in the country, weighing on steel demand. Operational suspensions at major auto manufacturers including Toyota and Daihatsu, following alleged false reporting on safety test results, also pressured steel demand. This partially led to the tenth consecutive month of year-on-year decline in booked orders of ordinary steel for car use in October, according to JISF. By Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US BD demand awaits 1Q rebound as risks loom

24/12/24

Viewpoint: US BD demand awaits 1Q rebound as risks loom

Houston, 24 December (Argus) — US demand for butadiene (BD) is expected to increase in January, but buyer sentiment for the remainder of the first quarter remains uncertain. Inventory restocking in January is expected to draw down excess supply and provide near-term price support, according to market participants. Derivative manufacturers aim to rebuild inventories following earlier-than-normal destocking initiatives this year. Many buyers employ standard inventory control management strategies to avoid paying higher end-of-year inventory taxes, particularly in Texas. Others cut costs to improve year-end financial statements. Domestic demand in February and March is less clear, as market participants question whether the market will rebound from persistently low demand at the end of 2024. US BD prices on a contract basis fell by 12pc during the fourth quarter , owing to weak demand and oversupply. Demand was depressed by BD consumer turnarounds in October, seasonal slowdowns between November-December and trade pressures tied to derivative imports. US tire shipments this year are expected to rise by 2.1pc to 338.9mn units, surpassing the record set in 2021, according to the US Tire Manufacturers Association. However, market participants along with US trade data reference a jump in tire imports from Asia-Pacific. Both Bridgestone and Goodyear have said low-cost tire imports and structural changes in segment profitability across the Americas are eroding their market share, fueling capacity rationalization, asset sell-offs and plant closures in the region. Acrylonitrile butadiene styrene (ABS) is another segment at risk of stronger competition from low-cost, Asia-origin imports. Ineos Styrolution plans to permanently shut down its ABS plant in Addyston, Ohio, in 2025 because the facility cannot compete with imported material. "Over the past few years, we have seen the ABS market become increasingly competitive, particularly with growing competition from overseas imports," Ineos Styrolution chief executive Steve Harrington said in late October. Protectionist trade policies are likely to be a feature of president-elect Donald Trump's second administration, potentially altering business investment decisions and durable goods trade flows. Even if demand does not improve, planned maintenance in the first half of 2025 is expected to tighten BD supplies. A heavy turnaround cycle for steam crackers will concentrate in the first and second quarters, constraining availability of feedstock crude C4. One integrated US Gulf coast producer plans to enforce BD allocations while its assets are offline for planned maintenance. A separate, non-integrated producer has not announced BD sales controls, based on feedback from its customers. This same BD supplier was short on feedstock supplies for parts of this year, with the crude C4 merchant market illiquid in North America. A third producer has scheduled a cracker turnaround starting in January, but no indications emerged that would limit term volumes from its BD unit. Reduced BD supply during cracker maintenance is likely to pull volumes away from the export market until the second half of 2025. Export spot cargoes in the fourth quarter more than doubled from the third quarter, serving as a critical outlet to clear the domestic market of surplus BD supplies, even as lower export prices pressured US margins. By Joshua Himelfarb Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more