US steel price recovery comes to a halt

The recovery in US steel prices, that commenced in early May, came to a halt in recent weeks. Coil basis values struggled to reach the levels desired by the mills, as buyers remained cautious in their purchasing activity.

Distributors continue to carefully manage their inventories. Steel demand is slower to pick up than previously envisaged. Consequently, prices are expected to slip, in the near term. Despite relatively tight mill profit margins, downward cost pressures could weigh on coil values.

US ferrous scrap selling figures were mixed, in June, depending on grade. July’s outlook is for weakness in prime and obsolete prices, as a result of increased supply and limited mill requirements.

Steelmakers’ production volumes remain low. Latest data from the American Iron and Steel Institute indicates that the capacity utilisation rate at the country’s steel mills is approximately 55 percent.

Demand uncertain

Vehicle producers have reopened but are struggling to ramp up to pre-pandemic levels. Supply chains are still adversely affected by coronavirus-related disruption. Reports suggest that auto inventory levels are low and increased activity is imminent. Stampers indicate growing order intake, reflecting a positive sentiment in this sector.

The recovery in the general manufacturing industry is slower than expected. However, new projects are gradually being released which should aid the revival. Activity in the oil and gas segment remains weak. US companies are adjusting to the new social distancing guidelines, which has led to a negative effect on output.

Worst is over in Canada?

Although stock levels remain high, demand for steel products has improved slightly, in Canada. Supply chain participants are hopefully that market conditions are past the coronavirus-induced low point. Delivery lead times from domestic steel producers are longer than those of their US counterparts. Mill maintenance during the summer should prevent oversupply developing.

Canadian automotive plants have reopened, but most vehicle manufacturers are operating with reduced shifts. Activity in the construction industry was resilient, in recent months. However, a lack of new projects is observed. Steel consumption by the energy sector remains weak, but the recovery in oil prices, which now stand at around US$40 per barrel, provides of a source of optimism.