June Market Minute 2023

Business Outlook in Texas

Spending on manufacturing and construction (mostly highways and streets) has recently increased across the United States. Some believe this strongly indicates policy support (e.g., the infrastructure bill) across the nation.

But what does that support look like closer to home here in Texas?

According to the Dallas Fed, the manufacturing production index in May, which is a key measure of state manufacturing conditions, moved from 0.9 to -1.3. The near-zero reading suggests little change in output from the prior month. Perceptions of broader business conditions for manufacturing in the state worsened in May. The outlook uncertainty index retreated to 13.4, a reading below average.

Sheet Prices Drop, Plate Prices Remain Resilient

Steel mill capacity utilization rates are back up across the country. According to the American Iron and Steel Institute, the capability utilization rate for the week ending on June 10, 2023, was 77.3%. This is the highest reading since August 2022.

Capacity utilization refers to the production capabilities that are being utilized by steel mills.

It could be one of the contributing factors to steel prices moving downward lately. As of June 15, hot-rolled coil prices were $939/ton, down nearly $200/ton from the month prior. Coated prices are down $260/ton from the month prior ($1,159/ton), while cold-rolled prices were down $229/ton ($1,115/ton).

However, plate prices are still deviating from the pack, with a spread against sheet prices approaching $550/ton.

Lead Times Returning to Normal?

Following a long stretch where mill lead times on steel products were at historic highs, they are inching closer to historical norms. As of June 15:

• Hot-rolled: 4-6 weeks

• Cold-rolled: 6-8 weeks

• Coated: 6-8 weeks

• Plate: Late July

From South Africa to Texas

What does an electricity shortage in South Africa mean to the cost of a project in Texas? Quite a bit if you use stainless steel.

South Africa produces most of the world’s chrome, which is a key ingredient in producing stainless steel. Chrome (or chromium) is what makes this material highly resistant to corrosion.

As electrical shortages, in which homes and businesses go without electricity for up to 10 hours per day, lead to lower production levels, stainless steel surcharges may be impacted. Stainless surcharges are calculated based on the cost of key alloying elements, including molybdenum, nickel, and chrome.