In a 2021 SMU Steel Summit Conference Wrap-Up, SMU President John Packard congratulated both staff and delegates, "We rode the bull, and we succeeded."
In the face of tough circumstances, the SMU and CRU teams proved once again that we could conduct a safe, energetic, entertaining and informative Steel Summit conference. The hybrid event was meticulously planned to deliver the first-class live conference while offering flexibility to join virtually.
Steel prices were a key theme as current rates are at historic highs with much speculation as to when and how drastically prices will drop. The SMU Steel Summit Audience Price Forecast, the annual poll allowing delegates to weigh in on the steel price forecast, had the majority predicting prices above 1,000 USD per ton (1,000- 1,500 per ton) by the next summit on Aug. 22, 2022. During the highly anticipated market outlook session, renowned steel analysts cautioned the audience that signs point to a significant correction sooner rather than later - as observed already in other parts of the world.
The dynamic agenda featured presentations from CRU analysts, fireside chats with industry CEOs, and live Q&As with attendees. Key takeaways from the conference are detailed below:
Health, safety, and flexibility in a not-quite post-pandemic world
Given the ongoing threat of Covid-19 amid the summer Delta variant spike in the United States, health and safety was at the forefront of planning for the SMU Steel Summit. CRU and SMU worked in close collaboration, meticulously planning an event that could flexibly accommodate quick changes in attendance from in-person to virtual. For those attending live in Atlanta, detailed measures were put in place, spanning numerous hand sanitizer stations, mask requirements for all attendees, and a color-coded wrist band system to indicate social distancing preferences. Despite the convention centre itself experiencing a power outage during the first day of speeches, the SMU team was well-prepared to adapt to challenges, and presenters were able to carry on with speeches recorded for those watching virtually to catch the following day. More than 850 participants attended the event live, with over 200 additional participants attending virtually. We The hybrid experience led to 780 people accessing the virtual platform, giving flexibility to in-person attendees and allowing for instant presentation downloads and virtual networking.
Decarbonisation, new facilities, and the months ahead
Throughout the summit, steel mill CEOs had the opportunity to discuss the state of the industry during fireside chats with SMU's Packard. On the topic of decarbonisation, Cleveland Cliffs CEO Lourenco Goncalves argued that US steelmakers already lead the world in clean steelmaking, which came from internal investment rather than government subsidies seen in other regions. While the industry has seen a domestic shift to electric arc furnaces, he doesn’t see Cleveland Cliffs abandoning its blast furnaces any time soon. Goncalves added that Cleveland Cliff’s pellet-based operations at its Cleveland blast furnaces can still maintain a Yosemite-like regional air quality, while comparable Chinese blast furnaces cannot compete environmentally. As other regions contend with decarbonisation, Goncalves believes US steelmakers are already well-positioned to lead the world in the coming decade.
Steel Dynamics’ CEO Mark Millet was asked about his outlook on steel prices through the end of 2021 and beyond. Millet noted that he is very bullish on the future, and despite predictions for prices to fall in the near term, SDI is booked through December with prices at current levels. He noted that mill maintenance outages in the coming months are likely to keep supply tight throughout the industry. While SDI has been working from behind in 2021, along with virtually every other steelmaker in the United States, he predicted meaningful gains in backlog and shipments by the end of the year.
As for steel supply, Ternium CEO Cesar Jimenez proudly detailed the opening of his company’s new Pesqueria Industrial Centre hot strip mill in May of this year. The facility can produce an annual capacity of 4.4 Mt of steel, and Jimenez predicts that it will be operating at 90% capacity by the summer of 2022. Nucor CEO Leon Topolian also shared excitement for his company’s new plate mill under construction in Brandenburg, KY, an ideal location in the plate industry.
The future of scrap metals
Scrap becoming a “precious metal of the future” was a theme debated by participants throughout the conference, and CRU Senior Analyst Ryan McKinley presented on this topic in detail. While not quite predicting a full blown “scrapmageddon,” in the future, McKinley does forecast an increasingly tight global market for scrap metals during this decade. The main driver for this is simply the rapid growth in EAF steelmaking throughout the world. In the US market, 10-12 Mt of new EAF production will come online by between 2017 and 2025. However, looking at the global picture, the projected new capacity from EAF steelmaking will rise by 120-130 Mt in the same time frame, with 38% of that volume occurring in China alone. While McKinley does not believe that scrap metals will experience scarcity conditions in the future, he does see future tightness on the horizon that will bring elevated prices and reduced margins at mills.
Steel sheet prices and the "post-lockdown bell curve"
The question likely on everyone’s mind at the event: when will steel sheet prices begin to fall? CRU Principal Analyst Josh Spoores discussed the company’s latest forecasts on when prices will finally peak. Spoores detailed how lockdowns in 2020 Q2 created the conditions for a supply and demand imbalance. As demand quickly rebounded in 2020 Q3, steel production lagged behind and has not caught up through most of 2021. This created what Spoores calls the “post-lockdown bell curve,” where prices spike and then quickly decline, which has been seen in other commodity markets in 2021 such as iron ore and lumber. As domestic steel production has recovered back to 2019 levels and service centre inventories have found a balance with outbound shipments, Spoores sees a turn in pricing on the horizon. New supply coming online is a big part of this equation too. With Ternium’s new hot strip mill in operation plus Nucor, Steel Dynamics, and North Star Bluescope all starting new EAFs in the coming months, Spoores forecasts approximately 5 Mt of annualized capacity added to the US market by 2022 Q1. While CRU has modeled several scenarios, Spoores expects that sheet prices will soon peak in the North American market.
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