January Market Minute 2024

A Cautious Outlook

As we embark on 2024, steel buyers throughout the state of Texas are confronted with a multitude of challenges. Among the chief concerns of respondents to the most recent Texas Manufacturing Survey from the Dallas Fed include:

Call for Federal Reserve Interest Rate Cuts: There is a call for The Federal Reserve to announce interest rate cuts for the next 12 months. Respondents from the capital equipment industry cited significant concern on this front, believing that such measures are crucial to alleviate the current economic strain.

Uncertain Credit: Some respondents expressed concerns about credit renewal. For some, it is an uncertainty surrounding renewal, while for others, it comes down to an increasing cost of credit.

Changing Customer Relationships: There is a notable trend of customers looking for alternative suppliers and, in some cases, changing long-standing relationships. This is seen as an opportunity rather than a challenge, focusing on providing better value in terms of pricing and service.

Pause for Election: Some respondents point to the upcoming presidential election as a cause for uncertainty. Customer hesitation is observed, leading to potential order delays or cancellations. For some, the expectation surrounds a temporary reduction in spending, depending on the outcome, which would directly impact their business.

Steel Prices: Can We Get Some Relief?

Following a substantial $450/ton surge in steel prices in recent months, mills seem to be capitalizing on the elevated pricing by ramping up their capacity utilization. Moreover, there has been a slight dip in scrap and iron ore prices, contributing to moderate momentum of Hot Rolled Coil (HRC) pricing.

Cleveland Cliffs, a prominent steel mill, initiated the new year with a noteworthy $50/ton price increase, establishing a new base for HRC at $57.50. However, this increase has not yet been widely adopted in the market, as no other mills have followed suit as of late January.

As for steel plate, one noteworthy development comes from Nucor. The plate producer opened its February order book, opting to keep prices unchanged, adhering to its previously announced increased pricing strategy.

A Nickel for Your Thoughts on Stainless

Are you in the market for stainless steel? A surplus in nickel and the associated lower stainless surcharges offer some relief, while the ongoing challenges with chrome and molybdenum production necessitate a strategic approach to address potential price hikes. Let’s take a closer look:

• Current nickel prices hover near 52-week lows at approximately $7.30 per pound. This surplus could contribute to a continuation of lower stainless surcharges

• Production issues in South America are affecting both chrome and molybdenum, leading to temporary shortages and subsequent price hikes

• Recent indicators suggest a stabilization in chrome prices, with forecasts pointing towards a modest decrease of around 4-5% on a quarterly basis