Steel prices have inched up recently, but the US economy is still moving slowly and buyers are holding off, awaiting the outcome of the presidential election, the chairman of Steel Dynamics said.
“If the economy backs up in a significant way, then we haven’t reached the bottom,” Keith Busse said.
“But if the economy is not going to regress by any wider measure, I think we probably have.”
Busse said a ton of hot-rolled, coil steel was selling for $ 580 recently.
“I would tell you prices have started to go in the other direction, by 10-20 dollars.
“It got down to $580. It’s back up, they’re quoting $ 610-$ 620,” he said, adding that since he was no longer Steel Dynamics’ CEO, he was not involved in day-to-day operations.
Busse, who co-founded the Indiana-based steelmaker after previously working at Nucor, was succeeded as CEO on Jan 1 by Mark Millett as part of the company’s succession plan.
According to Dahlman Rose & Co, which monitors metal prices, a ton of hot-rolled coil is currently selling for around $ 600 — up from $ 596 last week but down from $ 740 a year ago.
Asked the state of the US steel industry, which has not fully recovered from the 2008 recession, Busse said:
“The economy is moving along at a snail’s pace right now and we’re only consuming 90 million tons of steel where a couple of years ago it was 120 million.”
He said the auto sector was quite healthy, but the construction business “is a rough and tumble market.
“A lot of people are holding off, they don’t know the direction the country is going. The tax environment is not good, the economy is sagging and the country has a big decision to make — whether to become more socialistic or embrace free enterprise,” he said, referring to the November election.
Busse noted the slump in steel, which has seen manufacturers cut production, had resulted in German producer ThyssenKrupp putting its Mobile, Alabama plant up for sale. Also, RG Steel filed for Chapter 11 bankruptcy protection, putting its Sparrows Point, Maryland and Wheeling, West Virginia plants on the block.
“If we lose Wheeling and we lose RG, if they don’t come back and the economy does regain a head of steam, in the next year or two, and demand goes back up, the US might be steel short.
“Without RG...and if nobody bought Mobile, I’d guarantee we’d be steel short — 105 million tons of capacity for 120 million tons of needs. It would bring prices up.”
Busse said service centers, which buy steel and process it for specific customer needs, had held off to purchase at lower prices. But eventually they have to buy more steel.
“I don’t think that’s a result necessarily of the economy strengthening, but depleted inventories,” he said.