US steel prices continue to climb, with those for hot rolled coil now exceeding US$1700 per short ton. This unprecedented level is matched by strong activity in most end-user sectors. The upward momentum in prices is expected to persist, in the near term.
US steel mill capacity utilisation recently surpassed the level of eighty percent. However, demand still outstrips supply. Consumption of long products continues to be strong, particularly for use in the construction sector.
Although production in the automotive industry has been disrupted, due to the shortage in supply of semiconductors, steel demand from vehicle manufacturers remains strong. Activity in other sectors, such as construction, mining and agricultural, continues to be buoyant.
The US Senate has struck a deal for a US$1.2 trillion infrastructure package. President Joe Biden announced this bipartisan agreement on June 24. It is an eight-year plan, incorporating the funding of roads, bridges, transport, and energy and internet infrastructure.
Positive Canadian outlook
Canadian economic sentiment remains stable and strong. The IHS Markit Manufacturing Purchasing Managers’ Index showed little change from April to May – falling by just 0.2 to a figure of 57.0. Factory output and new orders increased, albeit at a slower rate than in the previous month. Material shortages and backlogs resulted in delays in shipments.
The outlook for the third quarter is still good. All major Canadian steel-consuming sectors report healthy activity, with the energy segment predicting further growth as Covid-19 restrictions ease. As steel producers optimise their capacity utilisation, the mining sector, particularly iron ore, is set to show substantial growth.
Prices for all steel products increased again, in June, supported by the continuing imbalance between demand and supply. This is exerting upward pressure on inflation, which is now reaching 3.4 percent. Order backlogs for flat products persist, at the local mills, but they have improved over the past quarter.