US steel mill outages crimp supply

Multiple upcoming steel mill outages are crimping short-term supply and adding to extended lead times.

The outages combined with hot rolled coil (HRC) lead times that extend into mid-April or early May could help keep the market at elevated prices through the first half of the year.

An estimated 331,000 short tons (st) of steel production will come off from March through May across outages at US flat steel mills run by BlueScope, NLMK USA, Nucor, and Steel Dynamics (SDI).

Most of the outages are occurring in April, with the largest being a 40 day outage beginning 9 April at NLMK USA's Portage, Indiana electric arc furnace (EAF) mill. 
That company is laying down slabs in Portage so it can continue to produce flat products during the melt shop outage, but it is unclear how much slab supply it will have. The company also operates a re-rolling mill in Pennsylvania.

The outages are part of the reason the Argus US Midwest HRC ex-works lead times have doubled to 6-8 weeks on 28 February from 3-4 weeks just at the beginning of the year. US steel mills have also kept their utilization rates below 74pc since mid-October, according to data from the American Iron and Steel Institute, further lessening available spot supply.

The longer lead times have helped US flat steel mills to push HRC prices up significantly since late-November, with prices up by 59pc since 29 November to $1,000/st on 28 February. Worse than expected performance at mills with new steel production, particularly Nucor's Gallatin mill in Kentucky and SDI's Sinton mill in Texas have also helped keep production tight as well.

Many service centers have continued to try to only buy on their heavily discounted contracts to avoid uncompetitive spot prices, and while some of their customers require spot tons they are being forced by the mills to pay the stated spot prices.

By Rye Druzin