Global Steel Prices and Their Impact on Economic Recovery

Current trends in global steel prices

Current trends in global steel prices show a significant upward trajectory, with companies reporting increases in average selling prices of 9.9% to 12% and robust demand driving higher shipments. Despite some moderation, prices remain above pre-pandemic levels, indicating a strong recovery in the steel market.

"by +13.8% to $3.3 billion, as compared to $2.9 billion in 4Q 2023 primarily on account of higher average steel selling prices +9.9% and +8.0% increase in steel shipments, driven primarily by improved demand for flat products." --- (MT, press release, 2024/05/02)

"First quarter 2024 total steel segment average selling prices increased 12%, or $128 per ton, compared to first quarter of 2023." --- (STLD, sec filing, 2024/Q1)

"For steel products, realized prices continue to moderate. However, prices have held consistently above pre-pandemic levels and will continue to generate robust returns." --- (NUE, earning call, 2024/Q1)

"Now that the distributors and service centers have come off the sidelines and steel pricing is on an upward trend, we expect to again exceed the 4 million tonne shipment level in the second quarter." --- (CLF, earning call, 2024/Q1)

"Analysis of results for 1Q 2024 versus 4Q 2023 Sales in 1Q 2024 were +11.9% higher at $16.3 billion as compared to $14.6 billion in 4Q 2023, reflecting higher average steel selling prices (+4.8%) and higher steel shipment volumes (+1.4%)." --- (MT, press release, 2024/05/02)

Economic impact of steel prices on key sectors

Steel prices significantly impact key sectors like construction and homebuilding. Caterpillar anticipates lower sales volumes and mixed price realizations affecting profits, while PulteGroup reports increased average sales prices, influenced by steel costs. Overall, fluctuating steel prices create challenges and opportunities across these industries.

"Within Construction Industries and Resource Industries in the second quarter of 2024 as compared to the second quarter of 2023, we expect favorable price realization to be offset by the profit impact of lower sales volume." --- (CAT, sec filing, 2024/Q1)

"The increase in revenues for the period was driven by an 8% increase in closings to 8,097 homes, in combination with a 2% increase in our average sales price to $549,000. On a year-over-year basis, the increase in our ASP reflects modest price increases in our first-time and active adult communities, while prices in our move-up communities were consistent with last year. The increase in our average sales prices for the quarter also reflects the impact of mix, as we recorded higher closings within our move-up business, which at $650,000 carried much higher prices than our first-time and active adult business." --- (PHM, earning call, 2024/Q2)

"The decrease was mainly due to the profit impact of lower sales volume of $217 million and unfavorable other segment items of $24 million, partially offset by favorable price realization of $173 million and favorable manufacturing costs of $38 million." --- (CAT, sec filing, 2024/Q1)

"Trends and Economic Conditions Outlook for Key End Markets In Construction Industries, sales of equipment to end users in the second half of 2024 are expected to decline slightly as compared to the second half of 2023." --- (CAT, sec filing, 2024/Q2)

"Within Construction Industries, we expect an unfavorable profit impact from lower sales volume and slightly unfavorable price realization, partially offset by favorable manufacturing costs." --- (CAT, sec filing, 2024/Q2)

Global supply chain dynamics affecting steel prices

Global supply chain dynamics are heavily influenced by macroeconomic factors such as inflation, geopolitical tensions, and logistical challenges. Companies like FedEx and CSX emphasize the importance of efficient supply chains as competitive advantages, while fluctuations in volumes can directly impact pricing strategies, including those for steel.

"The uncertainty of a slowing global economy, global inflation, geopolitical challenges including the ongoing conflicts between Russia and Ukraine and in the Middle East, and the effect these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for 2025 inherently less certain. See “Item 1A. Risk Factors” for more information." --- (FDX, sec filing, 2024/Q4)

"Overview Macroeconomic factors, including inflation, increased interest rates, significant capital market and supply chain volatility, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify." --- (AMZN, sec filing, 2024/Q2)

"And we talked about this before, but a supply -- their supply chains are being viewed as competitive advantages and being closer to your end consumer, which we have the most valuable consumers in our network in the world, it's becoming a priority, and we're seeing those investments take place to really happen." --- (CSX, earning call, 2024/Q1)

"Revenue from other businesses within Supply Chain Solutions decreased, driven by a reduction of $69 million from lower volumes under contracts with the USPS." --- (UPS, sec filing, 2024/Q1)

"How is FedEx positioned in the marketplace to capitalize on that or uniquely benefit from the increasing volatility that seems to be affecting the global supply chain?" --- (FDX, conference, 2024/05/29)

Regional variations in steel prices

Regional steel prices are experiencing significant variations, with U.S. Steel Europe benefiting from higher average selling prices, while Nucor reports a decrease in sales prices. Cleveland-Cliffs highlights trade complexities affecting pricing, and Steel Dynamics notes declining ferrous metal spreads, indicating diverse regional market dynamics.

"The U. S. Steel Europe segment results were favorably impacted primarily by higher average selling prices compared to the fourth quarter 2023." --- (X, sec filing, 2024/Q1)

"Net sales for the steel mills segment decreased 5% in the first six months of 2024 from the first six months of 2023, due primarily to a 2% decrease in the average sales price per ton, from $1,101 to $1,079, and a 3% decrease in tons sold to external customers." --- (NUE, sec filing, 2024/Q2)

"For example, yesterday, I announced that I'm no longer selling steel to Volkswagen in Mexico because there is no point in selling steel from the United States to Mexico, just to have Volkswagen then sending back cars to the United States just to pay cheaper wages to workers in Mexico." --- (CLF, earning call, 2024/Q1)

"Ferrous metal spreads (which we define as the difference between average selling prices and the cost of purchased scrap) decreased 9% during the first quarter of 2024 compared to the same period in 2023, and nonferrous metal spreads decreased 3%." --- (STLD, sec filing, 2024/Q1)

"Adjusted EBITDA guidance of $425 million is at the lower end of our prior second quarter outlook and reflects stable domestic flat-rolled steel end-use demand despite a dynamic spot steel pricing environment." --- (X, press release, 2024/06/17)

Future outlook for global steel prices

The future outlook for global steel prices appears stable, driven by significant capital investments and sustainability efforts from major players like U.S. Steel and Steel Dynamics. Predictive statements from these companies indicate a focus on market conditions that could support price resilience moving forward.

"We look forward to the completion of approximately $4 billion of capital investments designed to generate stakeholder value by providing the sustainable steels our customers demand, and the beginning of a more resilient and higher free cash flow generative future at U. S. Steel." --- (X, press release, 2024/09/19)

"This press release contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel, aluminum, and recycled metals market places, our revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities and decarbonization goals and sustainability efforts." --- (STLD, press release, 2024/09/05)

"And then given the visibility you have, I'm just trying to understand if we're looking at more of a stable outlook in the second half of the year for the division, the steel product division?" --- (NUE, earning call, 2024/01/19)

"This press release contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel, aluminum, and recycled metals market places, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities." --- (STLD, press release, 2024/07/17)

"This report contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel, aluminum, and recycled metals market places, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities." --- (STLD, sec filing, 2024/Q1)

Policy implications for steel pricing and recovery

Policy implications for steel pricing and recovery highlight the need for effective regulations to stabilize the market and support local economies. Pricing risks and cautious purchasing behaviors underscore the importance of strategic policies to mitigate negative impacts on steel towns and promote economic recovery.

"PRICING RISKS In the ordinary course of business, we are exposed to market risk and price fluctuations related to the sale of our products, which are impacted primarily by market prices for HRC and other related spot pricing indices, and the purchase of energy and raw materials used in our operations, which are impacted by market prices for natural gas, electricity, ferrous and stainless steel scrap, chrome, metallurgical coal, coke, zinc, chrome, nickel and other alloys." --- (CLF, sec filing, 2024/Q2)

"In our view, this was an important first step to stop the surge of steel imports from Mexico and address the problem of circumvention. However, more stringent efforts are needed and any exceptions to this new requirement, including through the exclusion process, will largely negate the benefits of the agreement." --- (NUE, earning call, 2024/Q2)

"Thus far, those regulations do not directly impact U. S. Steel because the Company does not knowingly introduce PFAS in its manufacturing processes, but U. S. Steel continues to review new regulations related to PFAS and their potential impact to the Company." --- (X, sec filing, 2024/02/23)

"So Dickie, thank you. Everyone, everyone here knows all too well how bad policy has hurt steel towns across Ohio and the businesses and workers to build our economy.My wife and I live maybe 2.5 miles from here and I know what steel job growth means in a community." --- (CLF, event transcript, 2024/06/26)

"This pressure on pricing has led our distribution customers to take a pretty cautious approach to purchasing, as they try to right-size their inventories. All that said, we do see some bright spots." --- (NUE, earning call, 2024/Q2)

Comparison of steel prices across major economies

Steel prices are expected to decline in Q3 compared to Q2, indicating a trend of stability or slight decreases across major economies. Companies like MT and CLF are maintaining capacity, suggesting confidence in future demand despite current price fluctuations.

"So yes, we will see lower spot prices in Q3 relative to Q2 volumes. There'll be stable to marginally lower, quarter-on-quarter." --- (MT, earning call, 2024/Q2)

"We are not taking down capacity. We are not and by the way, taking down capacity happens when the economy is in disarray, prices are low and you have a footprint that's bigger than you need. Number 1, we are buying this asset because we feel like this asset is needed. So there is no taking down capacity on that regard. And second, keep in" --- (CLF, event transcript, 2024/07/15)