The outlook for steel pricing through 2014 is mostly flat as a combination of the Canadian dollar and sluggish demand combine to keep prices in check.
It’s good news for buyers of construction grade steel products who will be able to project prices with a reasonable expectation of certainty through the end of 2014 and into 2015.
Stainless steel, however, is rising as key component nickel prices soar and maker U.S. Steel struggles with manufacturing issues.
“Part of what U.S. Steel has said is that they are going to lose some of their coated steel business, which is what goes into construction,” said New York steel analyst Chuck Bradford, noting that in turn may prompt manufacturers with products to raise their prices and try to force customers into long term supply contracts.
“The price has gone up a little, but with the Canadian dollar weakening it hasn’t gone crazy,” said John G. Brasil, president and COO of Etobicoke Iron Works.
“If there’s going to be an increase it should be small. There’s still a balance between the supply and the demand. I’m optimistic it will stay stable and we won’t see crazy hikes.”
Last year, there were fears that an oversupply in Asia could see “dumping” of steel in the Canadian market with other concerns that the quality of steel could be compromised leading to safety issues.
With the softening of growth in Asia, however, the supply issue has also waned. For there to be any kind of upward pressure, most analysts say there has to be a more broad based global recovery, which includes Europe and India, China and other parts of Asia as well as the U.S.
Steel plant capacity in North America — almost wholly made up of U.S. operations — is running about 75 per cent capacity, not much higher than last year though giant U.S. steel has announced it is putting the shuttered Nanticoke coke oven battery at the Lake Erie Works back on line Oct. 1.
It will be several months before production has ramped up after the 17-month shutdown resulting from a labour lockout.
Bradford said U.S. Steel has been struggling with new technology at it’s facility in Gary, Ind. and with the harsh winter, which caused ice issues on the Great Lakes slowing freighter traffic.
He said the Gary plant issues have cost the company close to half a billion dollars.
The bottom line, he said, is that there are too many variables with too many uncertainties to really see any kind of clear trend line, though that too could change in the months ahead.
“The key to steel pricing, especially construction grade, is the price of the steel scrap market,” he said.
“Two things determine the price of scrap, the value of the dollar, so weaker dollar means higher scrap prices because it’s inverse. The second thing is demand from Turkey, which is the big buyer of U.S. scrap and that’s a big uncertainty, because the lira has crashed and that makes buying from Europe more viable than buying from the U.S. — who knows if they will be buying from Russia or the Ukraine.”
David Gold, of the family-run Standard Auto Wreckers, one of Ontario’s largest scrap yards with operations in north Scarborough, Ont. and New York State, said early May saw a $10 decline in shredded metal prices.
Auto wreckers strip cars of parts and resell them, separating out other components like copper and plastic for shredding and wholesale.
The remaining steel hulks are crushed and sold as scrap to be shredded and recycled.
“It’s been flat really,” he said.
“The $10 drop isn’t much and there’s no real upward pressure on prices.
“Demand is flat too, though that could be regional in Ontario where there are really only two shredders. I know in the U.S. they’ve been more aggressive in going further to get scrap, but even with the lower dollar the cost of transportation is high.”