Steel price rise expected at auto strike end

The US steel market expects prices to increase when the current automotive strike ends.

Steel sellers and buyers expect some level of price increase when the current United Auto Workers (UAW) strike against the Big Three US automakers concludes, citing depleted service center inventories and steel mills hungry to raise prices ahead of contract negotiations for 2024.

The UAW began a less disruptive "stand up" strike tactic this morning where initially only three facilities — one across each of Ford, General Motors (GM) and Stellantis — are on strike. The UAW has the option to expand the number of facilities they are striking. Currently around 13,000 of the UAW's 150,000 members are on strike, with the rest continuing to report to work.

A strike by all UAW auto members could cut US consumption of flat steel by as much as 409,000 short tons (st)/month with an additional 138,200st/month of other steel consumption and 134,300st/month of aluminum consumption, according to an Argus analysis of vehicle composition data. Copper consumption would be curtailed another 13,800st/month.

One large service center and a steelmaker both said a two-week or shorter strike would have little impact on consumption and prices. The buyer added that steel mills would likely react with price increases, while the mill said the squeeze of mill margins puts more pressure on steelmakers to raise prices. Any increase would then be whittled away later in the year with normal seasonality. The buyer added that a longer strike would require mills to make tough decisions about production. Others think it will take a month for the market to start feeling the auto slowdown.

Another buyer noted that with 1mn st of steel production coming off line for planned maintenance in September and October, the outages could help blunt the extra supply on the market from lower automotive production.

Steel producers have been battling declining prices most of the year, with the Argus US hot-rolled coil (HRC) Midwest and southern assessments down by 43pc from the peak in April to $690/short ton (st) on 12 September.

Service centers were already reducing their inventories before a strike was threatened in response to the fall in prices, and the potential for a strike only exacerbated concerns over holding onto tonnage. Large discounts were reported for a range of potential tonnages from 2,000-20,000st, with the lowest reported prices in the $610/st range. Some believe steel mills were trying to fill their books ahead of the strike, which could cut demand across all steelmakers, particularly the auto-heavy integrated mills at Cleveland-Cliffs and US Steel.

By Rye Druzin