Market Update | May 15, 2024

 

SHIPMENTS OF HVAC EQUIPMENT CONTINUED TO PUSH HIGHER IN MARCH

On the back of strong seasonal momentum, HVAC equipment shipments totaled 1.952 million units in March, up 13.0% from February but were down 2.7% from March 2023. This was the first year-over-year decline in shipments since December. Looking on a year-over-year basis, to help smooth seasonality, the decline in A/C & heat pumps and furnaces overcame the slight increase in water heater shipments. For Q1, total HVAC equipment shipments were up 1.0% from the total in Q1 2023 but were down nearly 10% from the Q1 total in 2022.

 

Input Costs

Zinc pricing continued to push higher this week, now up for the seventh consecutive week.

• • Zinc pricing came in at $1.36/lb this week, up from $1.34/lb previously and is at its highest level in over a year.

 

Spot iron ore pricing slipped this week, sliding nearly $3/mt to $119/mt.

• • Rising inventories and low steel mill profitability in China, combined with weaker steel demand in 2024, have negatively impacted iron ore pricing.

 

Coking coal pricing was flat this week on the back of stagnant demand.

• • The current coking coal pricing of $241/mt, down 0.8% from last week but up 7.6% from this time last month.

 

Word of negative sentiment impacting the May scrap trade turned out to be inaccurate as the May trade finalized flat from April.

• • Prime scrap pricing in all regions held steady in May, more specifically NE Arkansas held at $410/gt and Chicago at $420/gt.
  • Shredded prices did fall however, sliding between $10-$15/gt depending on the region.
    • Shredded prices in Chicago were down $10/gt to $400/gt, while shredded in the NE Arkansas region was down $15/gt to $385/gt.

 

 

SUPPLY

U.S. raw steel production rebounded slightly last week, now up in back-to-back weeks.

• • U.S. steelmakers produced 1.715 million tons at a 77.2% utilization rate.
    • Production was up 0.4% from the prior week but down 2.2% from the same week last year.
    • YTD production is down 2.8% from the same timeframe last year.

 

Continued market uncertainty, which has helped limit order activity, helped to push the average coated lead time lower this week.

• • The average coated lead time slipped to 6.8 weeks, the lowest level since February 2023.
  • The asserted effort by the mini-mills to keep lead times low for HRC products has drifted into coated products (6.0 weeks) and is impacting the overall average.

 
 

DEMAND

Shipments of HVAC equipment continued to push higher in March on the back of strong seasonal momentum.

• • HVAC equipment shipments totaled 1.952 million units in March, up 13.0% from February but were down 2.7% from March 2023.

• • • This was the first year-over-year decline in shipments since December.
  • Looking on a year-over-year basis, to help smooth seasonality, the decline in A/C & heat pumps and furnaces overcame the slight increase in water heater shipments.
  • For Q1, total HVAC equipment shipments were up 1.0% from the total in Q1 2023 but were down nearly 10% from the Q1 total in 2022.

 

Business activity in the New York region continued to decline in May.

• • The May Empire Manufacturing Index came in at -15.6, down from -14.3 in April.
    • The two-month average came in at -15.0, a slight improvement from the -17.6 reading last month.
  • The new order component declined sharply, sliding to -16.5, while shipments improved sharply, climbing over 13.0 points to -1.2.
    • The unfilled orders component improved slightly, climbing to -8.1 from -10.1, previously.
  • The index for future business conditions slipped to 14.5, down 2.0 from April, with about 25% of respondents expecting conditions to be worse in six months.

 

After being optimistic the previous two months, U.S. homebuilders’ outlook turned negative in May.

• • This was the first time the index slipped since the Fed first started talking about rate cuts back in November.
  • The May Housing Market Index came in at 45, down from 51 in April and down from 50 in May 2023.
    • This was the first year-over-year decline since September.
  • Both the present situation and the next six months components slower in May but both remained in optimistic territory.
    • The present situation and next six months component both came in at 51.
  • The traffic component continues to have the biggest drop on the overall outlook by sliding to 30 in May.

 

 

ECONOMIC

Prices paid by consumers continued to push higher, on a seasonally adjusted basis, in April.

• • Prices for all goods increased 0.3% in April after climbing 0.4% in March.
    • On a year-over-year basis, prices increased 3.4% after seeing an annual increase of 3.5% in March.
  • Prices for all goods, excluding food and energy, increased as well, climbing 0.3% from March and 3.6% from April 2023.
    • Over the past 12 months, prices increased the most for shelter (5.5%), motor insurance (22.6%), medical care (2.6%) and personal care (3.7%).
    • These increases more than overcame a slight pullback in prices for both new and used vehicles.

 

 

After climbing in March, retail sales in April were virtually flat compared to March, coming in at $705.2 billion.

• • While prices were virtually flat from March, sales were up 3.0% from $684.4 billion in April 2023.
    • This is down from the 3.8% y/y increase seen in March
  • Excluding the volatile transportation component, sales were up 0.2% compared to March and up 3.6% compared to April 2023.
  • The largest increases in April came from gas stations, clothing stores, electronic stores, and building material & garden stores.
    • These increases were nearly completely offset by declines from motor vehicle dealers, sporting goods stores, and online retailers.

 

 

 

 

 

 

 

 

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.