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Material Market Update, July 2022
Material Market Update, July 2022
Material Market Update, July 2022
Material Market Update, July 2022

Material Updates

Material Market Update, July 2022

Steel

The spike in most flat steel commodities that came with the Russian invasion of Ukraine combined with the loss of pig iron capacity in the Ukraine is easing. The easing is related to global demand which is cooling and some relaxation of US government imposed tariffs on partner countries in Europe. Prices are still significantly above fourth quarter 2021 levels. The market consensus from earlier this spring that a $1200 per ton floor has been baked into US prices is appearing more and more likely by fourth quarter 2022.

The steel rod market has just recently made a small shift lower after many months of increase. Steel rod continued to climb in price without stopping since September 2020. It now appears that a slight softening trend is developing, although at a much small pace than flat materials.

Supply for common steel products is now stable. Certain items remain sparse to, at times out of stock nonetheless. This includes chrome quality steel for tubing, high carbon steel, and special gage tolerance steel to name a few.

Aluminumm

Aluminum has followed a similar trend line to flat steel. Prices surged following the Russian invasion of Ukraine and have now broke into a descending trend. Midwest prices, while declining, are still well above 2021 Q4 levels.

Stainless Steel

Stainless steel has begun to moderate in price slightly after reaching surcharges of nearly $2.00/lb. on top of base price increases leveled late in 2021. The surcharge still remains about $0.50/lb. higher than 2021 Q4. Lower quality grades such as 200 and 400 series remain difficult, if not impossible to procure domestically. We are presently relying on foreign mills for 400 series stainless which adds cost well beyond surcharge levels.

April 2022 Metal Commodity Update

Steel

The moderating trend in the flat steel market which we were enjoying as we heard through February and into March came to an abrupt end when Russia invaded Ukraine. The invasion was met with steep price increase notices from mills. Factors contributing to this are the Arcelor-Mittal closure of its prime pig iron facility in Ukraine. Little of this pig iron is supplied to US mills, however, it created an immediate 22 – 23 million metric ton annual deficit for European mills. The impact on world markets was immediate. A second factor is input costs to mills led by the energy sector. Finally, in my opinion, the supply of steel is being regulated in an effort to support and reverse the former lower price trend.

US mills are reportedly targeting $1500 to $1600 per ton for May. Some market watchers believe $1200/ton is baked in for the rest of 2022 after a brief short-term spike. I am on the fence with this sentiment due to expected aggressive action by the Fed on interest rates and balance sheet reduction. Slowing economic activity will make it more difficult to maintain a price floor.

The rod market continues to climb led by increasing scrap steel prices. I expect continued increases until the steel scrap market reverses course.

Supply for common steel products is relatively stable. Certain items remain sparse to, at times out of stock. This includes chrome quality steel for tubing, high carbon steel, and special gage tolerance steel to name a few.

Aluminum

Aluminum is expected to continue to climb in price due to the percentage of the market that relies on Russian production. I expect aluminum markets to experience the type of issues the steel market endured in 2021.

Stainless Steel

One-third of the world’s nickel supply comes from Russia. The nickel surcharge trend is expected to rise to upwards of $2.00 per pound in May. This coupled with the fact that we only have two domestic mills producing stainless steel means this market will be difficult for some period of time with escalating prices.