CONSTRUCTION DEMAND GROWING AS MANUFACTURING SLOWS

Zinc pricing continues to hold firm after its sharp increase to start the year. While pacific basin met coal pricing climbs to a new all-time high, up 237% year-over-year. Rising prices and the recent wave of the pandemic have slowed Consumer Confidence in January. This is the first decrease in confidence in three months. Signaling moderate growth during Q1 2022.

 

INPUT COSTS

Zinc pricing remained firm this week after a sharp increase to start the new year.

– Zinc pricing remained above $1.60/lb this week; holding at that level since the week before Christmas.
– However, longer-term forecasts expect pricing to return to the recent $1.40/lb.-$1.45/lb. average.

Spot iron ore pricing was virtually flat this week, holding at $137.80/dmt.

– While spot iron ore pricing is virtually flat w/w, pricing is still up 17.0% m/m.

Pacific basin met coal pricing continued to climb this week, hitting a fresh all-time high.

– Met coal pricing climbed to $444/mt, up 8.6% from last week.
– Pricing is also up 29.6% m/m and up 237% y/y.

After the sharp drop in January, early indications from the market is for scrap pricing to have a quiet buy week in February.

– Initial estimations are for flat pricing from January as export activity has picked up and an increase in winter weather has affected collections.

 

SUPPLY

After climbing the previous two weeks, domestic raw steel production slipped last week.

– U.S. steelmakers produced 1.803 million tons at an 81.9% utilization rate.
– Year-to-date production is 3.9% above the total from the same period last year.

Global steel production averaged 5.121 million tons/day, up 7.4% from November but still down 2.2% from an average of 5.239 million tons/day in December 2020.

– Global production has now declined on a year-over-year basis for five consecutive months.
– The increase in month-over-month production mainly came from China, which climbed 20.3% from November to an average​ of 2.780 million tons/day.
– The rest of the world averaged 2.340 million tons/day, down 4.8% from November and the first month-over-month decline since August.

Based on preliminary import license data, the daily average of imports for January (25 days) is down 16.6% compared to the pace through the same timeframe in December.

– Excluding Brazilian slabs, the daily average in January is down 17.2% from December.

SDI revised 2022 annual output from the new Sinton location is down once again.

– The new expected output of 2.0 million tons is down from the most recent estimate of 2.2 million tons and below the 3.0 million ton rated capacity.

After taking a 25-day outage between Thanksgiving and Christmas to add in the expanded production, the Nucor Gallatin facility continues to slowly come back online.

– The original 1.6 million tons/year mill is operating at low levels, with the new 1.4 million tons/year expansion expected to start up in March.

 

DEMAND

Sales of new homes increased for the second consecutive month in December, climbing to its highest seasonally adjusted rate since March.

– New home sales came in at a 811,000 unit rate in December, up 11.9% from November but down 14.0% from the 943,000 unit rate in December 2020.
– While sales increased, the number of new homes for sale continued to climb as well, increasing to 408,000 units at the end of December.
– The current inventory, when combined with December’s shipment rate, equates to 7.2 months of supply; the highest level since December 2018.
– For 2021, actual new home sales totaled 763,000 units, down 7.1% from the 821,000 units sold in 2020.​

 

ECONOMIC

This past weekend, the new US. border vaccine mandate went into effect and will have an impact on transportation.

– The mandate will be imposed on foreign national drivers (not U.S. drivers) crossing the border into the U.S. at land ports of entry.

Record high prices, combined with the uncertainty over the recent wave in the pandemic, slowed confidence in January after three consecutive monthly increases.

– According to The Conference Board, Consumer Confidence slipped slightly in January, coming in at 113.8.
– The Present Situation Index improved, suggesting the economy entered the new year on solid footing.
– However, expectations about short-term growth prospects weakened, pointing to a likely moderation in growth during Q1 2022.
– Nevertheless, the proportion of consumers planning to purchase homes, automobiles, and major appliances over the next six months all increased.

 

 

This material, information and analyses (the “Content”) may include certain statements, estimates and projections prepared with respect to, among other things, historical data and anticipated performance.  Content may reflect various assumptions by Majestic Steel USA, Inc. concerning anticipated results that are inherently subject to significant economic, competitive and other uncertainties and contingencies and have been included for illustrative purposes.  Content is provided AS-IS.