The theme surrounding the domestic market can be summed up in one word: confusing. While raw material prices show strength and supply continues to decline, a slowing of demand is causing buyers to hold off.
Despite the sharp decline in scrap pricing over the last two months, raw material pricing, as a whole, remains relatively firm. Iron ore pricing pushed back over $100/mt last week on the back of continued worry about further disruptions from the Vale mines in Brazil. Coking coal pricing has seen a boost as well of late, holding around $200/mt.
While scrap pricing is searching for a bottom, zinc pricing has seen a steady decline of late as well. Uncertainty surrounding trade and future demand prospects from China have negatively affected zinc pricing of late. However, the continued weak inventory environment should keep zinc pricing from sliding much further.
On the supply side, domestic steel production, while still up strong on a year-over-year basis, slipped slightly last week. Despite the slight week-over-week decline, domestic utilization rates remain above the key 80% barometer that the Secretary of Commerce Wilbur Ross set as a goal.
Imports continued to be down sharply, on a year-over-year basis, as a combination of trade legislation and weakening domestic pricing helped to stave off foreign material. Even with the recent elimination of the 25% Section 232 tariff on Canada and Mexico, carbon steel imports are poised to remain in check through the summer.
There is little expectation throughout the market of Canada and Mexico turning the faucet on and flooding the US market with material.
The two largest demand sectors for the steel industry continued to show weaker data last week. While light vehicle production slipped slightly from March, existing home sales were weak again.
Many point to the weather as being the reason for the slow start to the construction market in 2019, whether this is the case or not, steam has definitely been taken out of the construction market sales.
Despite the slowing construction and automotive demand, both remain in the decent to strong category and would need a more severe decline to negatively impact pricing in the coming months.
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