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Steel industry overshot at end-2021: SDI CEO

25 Jan 2022 22:19 GMT
Steel industry overshot at end-2021: SDI CEO

Houston, 25 January (Argus) — The steel industry overproduced at the end of 2021, leading to price corrections and inventory builds, US steelmaker Steel Dynamics (SDI) chief executive Mark Millett said.

The US steel industry, which suffered from supply shortages for much of 2021 as it recovered from Covid-19-related economic shutdowns in early 2020, finally caught up on back orders in the fourth quarter.

"When you catch up, what happens? Well, our industry is not perfect. In general it overshoots a little bit," Millett said today on SDI's fourth quarter earnings call. "And in November and December, you saw things catching up, and all of a sudden people are getting supply simultaneously from two or three mills."

Service centers across the US saw inventories balloon in November and December, growing formerly tight inventories and reducing mill lead times.

In mid-September, when the Argus US hot-rolled coil (HRC) assessment hit its peak of $1,970/short ton, lead times were at 6-8 weeks. US steel mill capacity utilization rates peaked at 85.3pc in mid-October, according to data from the American Iron and Steel Institute.

The HRC price has since fallen by 29pc to $1,397/st on 25 January, while lead times are at 3-4 weeks. Steel mill utilization rates have remained above 80pc.

At SDI's new 3mn st/yr flat-rolled mill in Sinton, Texas, the ramp up to full production of 250,000 st/month may take until the beginning of the fourth quarter, Millett said.

The mill has room to add another 1mn-1.5mn st/yr of steelmaking capacity, although there are no current plans to do so, Millett said.

At the mill, on-site customers will have a processing capacity of 1.8mn st/yr of steel. Millett confirmed that the site's hot mill is expected to come online in late February, later than the original estimate of mid-2021.

As HRC prices have dropped, demand for electric resistant welded (ERW) pipe has risen, putting pressure on seamless pipe, Millett said. SDI has capacity to make both engineered bar slugs for seamless pipe and to provide flat-rolled steel for ERW pipe.

The fourth quarter capacity utilization rate for SDI's steel mills was at 88pc, up from 84pc in the same period of 2020. Total utilization for the year was 91pc, up from 86pc in 2020.

Fourth quarter HRC and pickled and oiled shipments were 693,000st, down by 7.5pc compared to the prior year. Cold-rolled coil (CRC) shipments were essentially flat at 136,000st, while hot-dipped galvanized (HDG) coil shipments increased by 2.2pc to 994,000st.