Slew of US mill outages to have mixed impacts

Upcoming US steel mill outages — primarily at electric arc furnace mill (EAFs) — through the year-end are expected to be more pronounced on the scrap market, as sagging flat and long products demand is expected to help mute any direct impacts on the steel market.

Argus tracked a total of 35 flat and long product mill outages planned for between August-November, which are estimated to result in a loss of about 1.5mn short tons (st) of steel production — 87pc of which is EAF-produced.

Flat mill outages are estimated to be at a minimum of 923,725 between September and November, with the bulk of the maintenance outages — 50pc — in October. Of the total figure, an estimated 87,100st are at plate mills. Nearly 600,000st of long product production — including rebar, wire rod, merchant bar and special bar quality steel — are expected to be off line between August and November.

There are numerous other outages heard at specialty steel or ductile pipe mills which were not included in Argus' current analysis.

Shutdowns to curb scrap demand

Demand for ferrous scrap in the US market may be dented in the coming months by the cumulative impact of the downtime.

The outages are expected to greatly reduce mills' scrap buying programs and could weigh on prices, even as flat-rolled steelmakers attempt to establish a price floor on hot-rolled coil (HRC) markets. Impacts from scheduled shutdowns could also be compounded by recent weakness in the ferrous scrap export market.

Market participants' opinions remained mixed on September scrap pricing, but many have noted sentiment has begun to sway, with prices likely now more exposed to more downside than initially anticipated following the August trade.

Collection rates will be key in determining whether scrap prices retreat, as inbound flows through the summer have been spotty and supply-side factors have been one of the primary drivers behind price recent stability.

US domestic scrap prices have largely been stagnant the last two months following a steady decline in prices during the early part of the year. Argus-assessed national average #1 busheling prices delivered consumer stood at $373/gross ton (gt) in August, the lowest figure since January 2023.

Average prime scrap prices fell by $43/gt month in September 2023 on the month, before rebounding in November during a similar period of mass mill outages.

Tepid demand keeping steel impacts at bay

The upcoming outages at flat and long steel mills in the US and Canada are expected to have less of an impact on the spot market this year than in 2023 amid sluggish demand in steel-consuming sectors year to date.

The fourth-quarter total flat-rolled outages will be less than the 1.04-1.09mn st of estimated outages recorded in the same three-month period of 2023, of which 80,300st were plate. These outages — combined with tight inventories — eventually raised lead times and prices.

Many flat steel service centers this year have reported reduced customer consumption forecasts for the rest of 2024, with some down by 10pc or more.

Construction — a primary consumer of rebar — has remained relatively stagnant in the US since January. While some projects funded by the Infrastructure Investment and Jobs Act (IIJA) and CHIPS Act entering construction phases have been reflected in spending, high interest rates and uncertainty around November's general election have kept the wave of demand originally expected — as well as seasonal demand — largely at bay.

About $2.15bn in total construction spend was reported in June by the US Census Bureau, up from $2.12bn in January and $2bn in June 2023. Non-residential construction spend rose slightly to $1.208bn from $1.206bn in January and rose from $1.15bn in June 2023.

Long steelmaker CMC in its quarterly earnings reported lowered rebar shipments of 520,000st in the quarter ended 31 May, from 539,000st in the prior-year quarter. Steelmaker Nucor reported shipping 2mn st of bars in the second quarter, down from 2.1mn st in the same quarter last year.

The heavy equipment industry has also reported worsening steel demand. Manufacturer CNH Industrial cut second-half 2024 agricultural equipment production by 25pc compared to the same period last year, while cutting production of its construction equipment by 20pc.

By Rye Druzin, Brad MacAulay, James Marshall and Marialuisa Rincon