Global Steel Dynamics Forum Wrap Up Part 1

For the last two days, the WSD team has attended our Global Steel Dynamics Forum (GSDF) conference. In today’s news, we will provide some summaries of remarks made by key domestic and global steel industry leaders that have been compiled by WSD's editorial team. In Thursday’s news update, we intend to dive a bit deeper into our learnings and begin to discuss how our experience at this event has impacted our forecast.

In the lead up to the conference, both Nucor and U.S. Steel announced lower Q2 guidance. Nucor’s investor relations team stated, “the largest drive for the expected decrease in earnings in the second quarter of 2024 as compared to the first quarter of 2024 is the decreased earnings of the steel mills segment, due primarily to lower average selling prices, and to a lesser extent lower volumes.”

U.S. Steel struck a similar tone, stating that EBITDA guidance “is a at the lower end of our prior second quarter outlook and reflects stable domestic flat rolled steel end-use demand despite a dynamic spot steel pricing environment.”

Both Nucor’s and U.S. Steel’s investor guidance aligns with WSD’s recent market musings. Over the last six months we’ve observed that metal margins for HRC have declined from a peak of $600/ton in January to $325/ton (and declining) in June. Our EAF and BOF margin analysis also reflects this trend with EAF margins declining ~$330/ton from January through May and BOF margins declining ~$270/ton during this time (a June update of our margin analysis will be updated in the coming days.

With prices of hot-rolled coil continuing a downward trend (Nucor’s CSP was published at $715 per ton on Monday, June 17), SDI’s CEO Mark Millett was asked at GSDF about the moves by Nucor and Cliffs to publicly release spot, or market prices.

“HRC is sold across a spectrum of prices,” Millett said, adding “The selling price is not necessarily the market price.”

The prices released by rival producers have led to some confusion in the market, Millett noted, ostensibly with the expectation of one possibly becoming? “The Index.” He added: “The CRUs of the world have at least tried to get the (pricing) trend.”

Millett emphasized: “Every single (sheet) transaction is a value proposition” between seller and buyer. “Sheet is not a commodity.”

In a press conference following his fireside chat at the GSDF event Cliffs’ CEO Lourenco Goncalves underplayed demand weakness, telling the press in attendance that both auto and construction demand remain strong, but noting that Service Centers are sitting on the sidelines – a development that he believes will need to reverse sooner rather than later.

In response to a question from the audience, Goncalves said: “The current behavior of the (US-based) service centers doesn’t help.” He acknowledged they are “an important part of the supply chain, but their role is not to make prices go lower by importing…they need to understand what they are doing.”

WSD is of the opinion that in the coming weeks sheet import volumes will begin to fall sharply from peak levels of +12 million tons annualized. Increasingly, there are signs that U.S. mills will be pulling back utilization rates (particularly at the more flexible EAF steelmaking operations. These two factors are expected to loosen the feeling of the U.S. oversupply crunch that has driven a rapid price decline in the last few weeks. WSD does not believe that the downward momentum for US HRC prices is over—an additional $30-50 decline from current pricing levels near $715/ton does not feel improbable.

In our opinion, two factors will determine the timing and speed at which HRC prices will recover this summer. Given a significant decline in imports and some decline in domestic mill utilization rates, sheet demand and the inventory stocking/restocking cycle will be the determinants. Increasingly, we’re of the opinion that demand upside may be limited in the second half of the year as economic headwinds are increasingly gaining speed; therefore, inventory restocking may be the best hope for driving a pricing rally later this summer.

Source:? WSD USA Steel Dynamics Industry News, for more information or to sign up for a free trial, https://www.worldsteeldynamics.com/services/usa-steel-dynamics/

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