Supply issues slow Canada's flat steel price decline 

4th March 2024

The volatility of North American flat product prices shows few signs of abating after regional producers lost a proportion of their recent price gains in a matter of weeks.

The price premium usually commanded by mills in the United States, when compared with those in neighbouring Canada, narrowed during February. Canadian producers, which had struggled to maintain the recent pace of growth during January, were able to minimise the extent of the price erosion in the latest declaration.   

According to MEPS’s February International Steel Review, Canadian hot rolled coil transaction figures decreased by 8.9% month-on-month. This was significantly less than the concessions that US-based producers were forced to concede in the same timeframe. 

Similar trends are noted for cold rolled coil (CRC) and hot dipped galvanised (HDG) coil. In a trend partly influenced by recent exchange rate fluctuations, CRC and HDG values, in both countries, are almost identical in US dollar terms. 

MEPS International steel market analyst Chris Jackson expects flat product prices in Canada to come under negative pressure in the coming months, however.  

“Canadian flat steel manufacturers, like their US counterparts, will struggle to halt the downward price spiral”, he said. “There was an overriding feeling that the previous price gains were never sustainable, given the level of demand.” 

Supply-side issues 

Since the turn of the year, Canadian steel prices have been bolstered by local supply issues.   

Two incidents at Algoma Steel’s Ontario site, in January and February, curbed domestic availability. The latter of these – believed to be caused by contact between slag and moisture in a hot iron trough – injured 12 workers. 

MEPS respondents in Canada reported that mill delivery lead times extended, for all flat products, as a result. They claimed value-added material was particularly scarce. 

With Algoma temporarily out of the supply picture, Stelco and ArcelorMittal Dofasco were able to hold their price discipline. This was due to the relative strength of their mill order books, compared with producers in the US.   

Steel production at Algoma’s Ontario site has now resumed. It is reported that the business will be working through production backlogs in the short term, however. 

Despite generally low demand, Canadian steel consumption compares favourably with other parts of the world.  

Demand from the construction sector is firm, albeit at a low level. A relatively mild winter and a high likelihood that interest rates have peaked could help that sector. MEPS respondents report that there is a lot of pent-up demand, notably for high-rise apartments. The constant need for new housing, especially in major cities, persists. 

Nonetheless, the Canadian steel market’s recent supply issues were offset by weak trading in other sectors. 

Market requirements for flat products remain low at both service centre and end-user level. Demand for products based on flat rolled material, such as hollow structural sections and tubing, has softened. Restocking activity has also failed to pick up, to any great extent, since the start of the calendar year. Canadian buyers may be holding off from purchases in anticipation of lower prices.  

Consumer-related demand continues to be negatively impacted by recent economic policies. Interest rate hikes – implemented to combat inflationary pressures – have increased the cost of borrowing, cooling demand in many steel-consuming segments.  

Price erosion threat 

Domestic steelmakers, now quoting April delivery for hot rolled coil, will also have to contend with an increase in non-North American volumes. The expected reopening of the Great Lakes Seaway will lead to significant quantities of Asian and European material entering Canada in the coming months.  

Domestic producers are expected to use all the available tools in their armoury to stave off the threat of further price erosion.  

There is growing speculation that producers will undertake production outages for spring maintenance. The remote possibility of an official list price announcement, targeting an increase purely as a defensive measure, cannot be ruled out.  

Canadian flat rolled producers will struggle to keep their prices on a par with their contemporaries in the US. To date, the pace of the price decline may have been slower than in the US, but that is unlikely to continue.  

The Canadian market is, arguably, more exposed to import competition. Several steel producers, located in the US Midwest region, are handily placed to maximise Canadian opportunities. 

Overseas exporters will also continue to view Canada as a more attractive proposition, given the Section 232 regulations across the border.  

  • Monthly insight on the North American carbon steel market is published in MEPS's International Steel Review. The monthly report provides subscribers with steel prices, indices, market commentary and forecasts from across the globe. 
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