Podcast: US steel prices to benefit from capacity cuts

MEPS’s latest Market in Minutes podcast episode heard how the Federal Reserve’s recent interest rate cut and mill maintenance outages should mitigate the downward pressure on US steel prices.

US market consultant Laura Hodges drew on research featured in MEPS’s International Steel Review to present a 12-minute overview of the factors influencing the United States market. Among the recent developments explored, in conversation with MEPS managing editor Tom Sharpe, were: Nippon Steel’s planned acquisition of US Steel; port workers’ strikes on the US East Coast; market uncertainty ahead of the presidential elections; a trade case against galvanised steel imports from 10 countries; and weakness in the automotive and construction sectors.  

However, Hodges suggested that the 0.5 percentage point interest rate cut and the rebalancing of domestic steel supply with demand will be the main drivers of rising prices in the coming months. Their influence could help to rebalance a market that has suffered from subdued steel demand for several months, she suggested.  

“The good news, last month, was the Federal Reserve's decision to cut interest rates”, she told the Market in Minutes podcast. “After a year of holding them at five-plus per cent, they cut them 50 basis points. 

“Not only that, they signalled that further rate reductions would be coming by the end of the year. That’s a significant shift that will be a positive development given how much autos and construction need financing.”  

Rebalancing supply and demand

Commenting on US mills’ upcoming maintenance outages, Hodges highlighted Cleveland-Cliffs’ decision to indefinitely idle its No. 6 blast furnace, in Cleveland, Ohio, after a two-week maintenance period in October. She said: “That blast furnace is 1.5 million short tons of annual capacity. So that, plus all the other maintenance outages planned over the coming months, should really start to make a difference and adjust supply with demand.” 

This week’s news that members of the International Longshoremen’s Association Union (ILA) had begun a strike over pay may apply upward pressure to US steel prices by disrupting imports. The industrial action affects ports along the US East Coast, from Maine to Texas. 

Hodges said that, although the dock workers represented by the ILA “only handle containerised shipments” she expected the strikes to “create some chaos” at US ports. 

MEPS's Market in Minutes podcast episodes are part of the Speaking of Steel podcast series. Click on the below links to hear the full US-themed instalment via your preferred podcast provider. 

YouTube 

Spotify 

Apple Podcasts 

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