Steel Market Update

2023 started off rough for steel prices, and while Cold Heading Quality steel (or CHQ) pricing has not seen the decline that steel products have, we are still experiencing a much needed stabilization in the market. Once again, we spent some time talking to Bill Heileg , a partner at our steel supplier, G3 STEEL GROUP, LLC , to get his take on the market in Q3 and going into Q4 of 2023.

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“Like most flat roll products,” Bill began, “CHQ has base prices that are set on an annual basis. What we experienced in 2022 and well into Q1 of 2023 was oversupply in flat products; rod and bar products did not experience the same thing. When you have an overcapacity situation, you see a lot of movement in the spot-buy market, which is normal in supply and demand economics. When there is an oversupply of a commodity, spot-buy prices can go up above and fall way below what makes sense.”

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Bill continued, “All in all, prices?in 2023 saw first quarter increases with scrap and have come back down through the second and third quarters and look to have found a more stable level in the past two months.” That being said, prices are still well above (and likely to stay well above) pre-pandemic levels.

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As always, there are situations that could arise and throw a wrench in markets. The contract negotiations with the UAW are front and center in most people’s minds right now, but Bill doesn’t think there will be much impact on steel pricing. “Because they are contractual numbers, I don’t think [a strike] would do anything on Auto Side in 2023.” This is particularly true if the strike is short-lived or only impacts 1 of the Big Three US automakers. On the flip side, a strike at Ford, GM, and Stellantis would certainly have a large impact.

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One thing to keep a close eye on if the strike happens and if it is large and/or extended is scrap. This is because a lot of steel scrap comes from the automotive industry. As Bill put it, “If stampers are not producing doors, fenders, and body parts there could be a shortage of good clean scrap known as bundles and busheling. This could cause a spike in those scrap commodities which are used heavily in our CHQ products.” And of course, if the strike goes on for months, although it is not likely to, it will affect the supply chain once demand picks up. Bill predicts that we could see a scenario similar to “what happened after COVID where prices went crazy.”

The pandemic-specific supply chain woes are, thankfully, now in the rearview mirror. “We see everything moving forward,” Bill said. “For a long time, it was a strain on the supply chain to refill,” to catch up to the demand, but now “we strongly believe we are past this since Q2 of 2023.”