Market Update | February 1, 2023

 

TOTAL CONSTRUCTION SPENDING ENDED THE YEAR ON A SOFT NOTE

Total construction spending ended the year on a soft note, sliding slightly in December. Total spending came in at a $1.810 trillion rate, down 0.4% from November but up 7.7% from last December. Despite the continued year-over- year increase in spending, this was the lowest year-over-year growth since February 2021.

 

Input Costs

As the recent up and down movement for zinc continues, pricing held relatively steady this week.

• • Zinc pricing came in at $1.54/lb this week, down slightly from $1.55/lb previously and remains near its highest level in five-plus months.

 

Spot iron ore pricing pushed slightly higher ahead of the Chinese New Year this week, climbing slightly to $124.95/mt.

• • This is up 0.5% from the end of last week and is up 11.3% on a m/m basis.

  • Exports of iron ore out of India are set to remain low as the producer reserves more of the commodity for its domestic use.
  • Some experts expect this to push pricing higher as Chinese demand picks up throughout the year, with the high-end expectations to as high as a 20% increase.

 

Met coal pricing pushed higher as well this week, ending the week at $335.00/mt.

• • This is up nearly 14% over the last month on the back of increased expectations for improving Chinese demand.

  • A train derailment in Australia, causing at least a five-day delay, has also helped keep upward pressure on pricing.

 

 

Supply

U.S. raw steel production climbed once again last week, now up for the third consecutive week.

• • U.S. steelmakers produced 1.620 million tons at an 73.1% utilization rate.
  • This was the highest weekly output since mid-November.
  • Despite the recent bump higher, YTD production is down 7.0% compared to last year.

 

After sliding the previous two months, global raw steel production rebounded slightly in December.

• • December global steel production totaled 140.8 million metric tons, up 1.4% from November but still down 10.7% from 157.6 million metric tons in December 2021.
  • Excluding China, global production totaled 62.9 million metric tons, down 2.3% from November and down 11.8% from 71.3 million metric tons in December 2021.
  • Global steel production totaled 1.828 billion metric tons for 2022, the lowest annual total since 2018.
  • Chinese production rebounded in December after sliding the previous two months.
  • Chinese production increased 4.6% from November to 77.9 million metric tons.
  • For the full year, Chinese production totaled 1.011 billion metric tons, down 2.1% total from 2021.

 

Based on preliminary import license data, January imports are up after seeing sharp declines throughout the fourth quarter.

• • Carbon flat rolled import licenses in January are are up 5.3% from the rate in December.

 

Four Illinois dams that connect Lake Michigan with the Mississippi River will be closed between June 1 to September 30 for necessary maintenance.

• • This 120-day closure will disrupt barge shipments and potentially have an impact on scrap and finished steel products from Canada to Texas and will likely put more stress on rail capacity.

 

 

DEMAND

After climbing for 28 consecutive months, economic activity from the manufacturing sector has now declined for three straight months.

• • The January ISM Manufacturing Index came in at 47.4, down from 48.4 in December and is at its lowest level since peak-pandemic lockdowns.

  • Any reading below 50 denotes contraction, while any reading above 50.0 shows expansion.

  • Both the New Order and Production components declined at a slightly faster rate in January, sliding to 42.5 and 48.0, respectively.
  • The backlog of orders contracted at a slower rate however, improving from 41.4 to 43.4 in January.

 

Total construction spending ended the year on a soft note, sliding slightly in December.

• • Total spending came in at a $1.810 trillion rate, down 0.4% from November but up 7.7% from last December.

  • Despite the continued year-over-year increase in spending, this was the lowest year-over-year growth since February 2021.
  • Both residential and non-residential construction spending declined in December, sliding 0.3% and 0.5%, respectively.
  • This was the first month-over-month decline in non-residential projects since May.

 

 

ECONOMIC

After climbing in December, confidence from consumers declined in January.

• • The Conference Board’s Consumer Confidence Index came in at 107.1, down from 109.0 in December.

  • The Present Situation Index increased however, climbing to 150.9.
  • This is up from 147.4 in December and marks the second consecutive increase.
  • The Expectations Index fell, sliding to 77.8 from 83.4 in December.
  • Historically, a reading below 80 signals a possibly recession in the next 12 months.
  • With the Expectation Index, short-term outlook, consumers noted purchasing plans for autos and appliances held steady, but fewer plan on buying a how, new or existing.

 

 

 

 

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.