Predictions in Steel Production as Fall Approaches

By Andrew Wilson, Central States Manufacturing, Inc. 

Supply chain difficulties and inflation continue to create uncertainty in the economy. See what this means for the industry as we close out 2023. 

While the summer season bustles in other sectors, the construction industry historically tends to slow down. However, the industry and the economy continue to be challenged with supply chain issues and changing customer demands. While prices had decreased after the peak spring season, they’re on the rise once again. Does this mean a slow fall is coming? 

Total steel output from the mills has continued an upward trajectory. Altos Hornos de México (AHMSA) has still not restarted production. With continued problems and uncertainty over the deal to acquire the operations and exit their bankruptcy, the path to restart is not at all clear. Last week, SDI Sinton announced several weeks of unplanned stoppage for repair to the shear in the hot mill. The cold mill will continue to operate so we will have to see how this impacts the available supply. Mills are still operating well below the levels that they would like so there is still, in my opinion, room for some more downward movement in coming months. The mills are probably going to continue to talk about price increase while still being open to negotiation. 

Lead times have remained at what we would consider historically normal levels, which would suggest that there is currently a good balance of supply and demand. Automotive demand has remained strong, but there are some significant union negotiations about to get going; judging by the posturing between the OEMs and the Union negotiators, everyone is ready for a fight. The unions have built significant strike funds to prepare for the negotiation, meanwhile, this is not the OEM’s first rodeo, so they have no doubt been preparing for this by producing ahead to lessen the impact of any strike action. The potential for a softening of auto demand for steel is very real from my perspective, how long and how deep is unknown at this point. 

The inflation rate is finally approaching the Federal Reserve’s target level, and employment data is showing signs of softening, but consumer spending has remained high. There remains much uncertainty about the future of the Feds decisions on base interest, though it seems likely that we will still see more increases over coming months and that, in turn, is likely to have some downward pressure on the overall health of the construction industry spending.   

Steel futures are relatively flat out through the rest of the year. Many economists are predicting the back half of 2023 will see a softening of demand in some sectors. So far, we aren’t seeing any signals from our customers that support this, with many customers still reporting backlog of construction projects that extend for several months. 

Original source article: Central States Manufacturing, Inc.