Metals industry update Q2 2024

Due to the uncertain economic outlook, continued volatility in steel prices, and an excess of supply over demand, the U.S. metals industry experienced muted business activity in Q2 2024. However, decreasing inflation, along with indications of a potential interest rate cut by the Fed, are expected to improve sector spending and bolster the metals industry overall.

The U.S. Manufacturing PMI, although below February and March levels, rose to 51.3 in May and is anticipated to reach 51.7 in June. The manufacturing expansion, which is a result of growth in new orders, signals an improvement in business conditions.

Federal legislation, including the Infrastructure Bill, IRA, and CHIPS Act, continues to drive construction spending in the U.S., fueling demand-side optimism in the market. Several semiconductor projects initiated under the CHIPS Act have broken ground, with market participants witnessing an influx of new orders. In addition, investments in utility infrastructure and data centers are expected to increase in coming years, generating a strong tailwind for the industry.

Also, the Federal Highway Administration’s proposal to remove the requirement for 100% domestically sourced metal in its projects is likely to have an adverse impact on mills. The proposed reduction in content standards for manufactured highway products could lead to an increase in imports of foreign metals, affecting the demand of products melted and cast in the U.S.

Further, according to the World Steel Association’s recent outlook, steel demand in developed economies is projected to increase by 1.3% in 2024 and 2.7% in 2025.

Finally, Nucor Corporation’s introduction of its weekly Consumer Spot Price (CSP) for hot-rolled coil has resulted in much industry discussion. While Nucor aims to provide transparent pricing communication to its customers, some market participants believe it will contribute to more volatility and speculation in the market.