Market Update | July 10, 2024

 

LIGHT VEHICLE INVENTORY UP IN JUNE

Inventory, on dealers’ lots, at the end of June increased after seeing a slight decline in May. Light vehicle inventory ended June at 2.820 million units, up 3.4% from May and up a sharp 47.8% from the 1.908 million units at the end of June 2023. Inventories of both cars and light trucks increased from the previous month, climbing 0.5% and 4.0%, respectively. Current light truck inventory is at its highest level since March 2020.

 

PRICE

While domestic pricing declined further this week, the search for a bottom accelerated as the HDG:HRC spread narrowed to its tightest range since early-December.

 

Input Costs

After climbing in the previous three weeks, zinc pricing held steady this week.

  • Zinc pricing remained at $1.33/lb this week, well above the thirty-day average of $1.28/lb.

 

Spot iron ore pricing declined this week, sliding by $4/mt to $113/mt.

  • Iron ore pricing is near its lowest level in more than six weeks on worries over the outlook for Chinese demand.

 

Coking coal pricing declined this week on the back of increased supply, the current coking coal pricing of $250/mt, down slightly from last week and down 1.7% from last month.

 

SUPPLY

U.S. raw steel production declined last week, sliding to its lowest weekly output since the last week of January.

  • U.S. steelmakers produced 1.695 million tons at a 76.3% utilization rate.
    • Production was down 1.5% from the prior week and down 0.1% from the same week last year.
    • YTD production is down 2.7% from the same timeframe last year.

 

This week, the Biden administration announced that they will apply new tariffs to steel and aluminum shipments that are being diverted through Mexico.

  • This new measure will apply a 25% tariff to steel arriving through Mexico that was not melted and poured in that country, the U.S., or Canada.
  • This new tariff is an attempt to prevent China from circumventing existing levies.

 

DEMAND

Inventory, on dealers’ lots, at the end of June increased after seeing a slight decline in May.

  • June light vehicle inventory ended June at 2.820 million units, up 3.4% from May and up a sharp 47.8% from the 1.908 million units at the end of June 2023.
  • Inventories of both cars and light trucks increased from the previous month, climbing 0.5% and 4.0%, respectively.
    • Current light truck inventory is at its highest level since March 2020.
  • ​The current inventory, when combined with June’s sales pace, equates to 55 days of supply, up from 50 days previously.
    • This is the highest days of supply since January 2021.

 

The continued surge in imports and softer export activity could not overcome the weaker domestic mill shipments to push total steel consumption lower in May.

  • Per/day domestic steel consumption slipped after hitting a ten-month high in April.
    • Total carbon steel consumption came in at a 276/2k tons/day rate in May, down from 277.4k tons/day in April but up 1.7% from the 271.5k tons/day rate in May 2023.
  • Carbon flat rolled consumption came in at a 152.7k tons/day rate, down from​155.7k tons/day rate in April but up 2.6% from the 148.9k tons/day rate from last May.
  • This was the fourteenth straight month with a year/year increase.
    • YTD flat rolled consumption is now up 7.3% compared to the same timeframe last year.

 

After seeing strong increases in the previous three months, mostly due to seasonality, shipments of tractors and combines slipped in May.

  • May tractor and combine shipments totaled 27,028 units, down 4.3% from April and down 11.4% from 30,500 units in May 2023.
  • Shipments have now declined​, on a y/y basis, in twelve consecutive months and in twenty-six of the last twenty-seven months.
    • Looking on a y/y basis, to help smooth seasonality, shipments of both tractors and combines declined in May, sliding 11.5% and 4.3%, respectively.
  • With the pullback in May, total shipments are 10.8% below the level from the same timeframe last year.

 

 

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.