August 2024 Issue

Distributor sales are down 35% year over year but import bookings for January 2025 are picking up. Container costs from Asia have jumped from $1,800 to $10,000, and the Loonie at 1.35 is a level Canadian buyers should not let pass without locking.

Matthew Barazin

Managing Director, Intermetalink · August 14, 2024 · 2 min read

Demand

YoY monthly sales from major distributors are reportedly down by as much as 35% on a dollar basis not considering deflation. Comparing units sold YoY should be the focus metric to accurately see current demand.
Increased quote activity after July vacation period.
End of August import orders will deliver January 2025, Q1 forecasting should be explored at this time from procurement managers.

Every basis point represents close to 1.5% of your quoted future steel price.

Supply

As buyers hold off purchasing due to low demand and falling pricing. We anticipate spot shortages to arise into the end of 2024 on sizes. Lower than normal October and November landing orders will power this low inventory landscape regionally.
Chinese steel industry subsidy set to stop, coupled with low Chinese domestic demand for steel will have more Chinese steel mills closing. Impacting global supply of steel products.
North American steel mills have been reported to be lower shifts and also have group planned maintenance for Q3-Q4.

Geopolitics

President Trump assassination attempt further fuels our fragile political landscape environment.
Middle East conflict escalates as Iran communicates stronger rhetoric and sabre rattling.
Germany announces halting funding toward the Ukraine-Russia conflict.
All geopolitical events are a wild card at this time to the steel industry.

Raw Material

North American hot rolled coil has increased since our last steel report by +60/ST (~ +8%) increase.
Iron ore, scrap and coking coal are still trending sideways.

Freights

Ocean freight rates remain high. Keep your eye on US stock market volatility may impact consumer spending, therefore forcing shipping lines to reduce ocean freight rates to increase trade in someway. We don’t believe these increases are “real” and expect prices to come back down in the short term.
Containers from SE Asia to West Coast ports have gone from $1800/container to $10000/container. This represents an increase of US 300/ST or CND 400/ST in costs.
The Suez Canal “closure” has also impacted steel shipments from the Gulf in lead time and costing landing in ports across NA impacting price and potentially supply in certain markets.

Final thoughts

Canadian market:

Steel prices for a 4-5 month delivery in Canadian dollars are very competitive. Todays USDCAD is at 1.35, this moves quickly with US stock market decreases. Every basis point represents close to 1-1.5% of your quoted future steel price.

If you can lock in steel prices in $C for Q4 at rates that are close to or a little lower then domestic prices this is no lose situation for Canadian steel procurement professionals.

I believe this is a unique opportunity to invest in steel inventory.

US market:

Although there cannot be one “thought” on the US, due to its large regional differences and markets. Our view remains the same for the US as Canada.

Secure costs into Q4 for your steel needs, there is not much more room for domestic steel mills to move downward from here.

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