- Today on the Metal Roofing Channel, we are talking about a steel
market update for Q3 of 2022 with special guests from US Steel. (upbeat music) What's up guys, welcome to
the Metal Roofing Channel. Welcome to Q&A Mondays. I'm Thad Barnette from Sheffield Metals. And today we are talking
about the metal markets, the steel market specifically,
and we're talking about you know, how that's changed over Q2, going into Q3 here in 2022, what numbers we're seeing,
what trends we're seeing. And I've got some really great
guests with me here today. I have Brett from Sheffield Metals. He's the Director of Supply Chain, and I have Ben from US
Steel, Director of Sales. Thank you both for being here. - Thank you.
- Our pleasure. - Thanks for having us. - Absolutely. So let's jump in. Let's talk about, you know, to this point, what have we seen happen with steel in Q2? And let's kind of recap, you
know, up until this point. - The second quarter has been a different, obviously a change since
you did your last video for the first quarter. It's been quite a roller coaster ride over the course of 2022. First of course, steel
prices going into February timeframe were coming down. Steel inventories were a little
bit of a de-stocking period. In the second quarter we
saw a restocking period, prices moved up, obviously very swiftly after the war broke out in Ukraine. The past six weeks that
has softened a bit. Inventories have been
brought down a little bit to kind of align with the market. So that's what we've
seen up to this point. Currently we're seeing service
center shipments starting to pick up versus where
inventory levels are. So we'll have to watch that
trend as time continues. - Okay. And you know what I
love about these conversations is we can talk about where we are, and then how it applies
to people's businesses, you know, and their everyday lives. And we'll get to that a little
bit later in this video, but first let's talk about
what numbers we have right now. Here we are just at the end of July 2022. So what kind of market
numbers are we seeing with steel right now? - So today, published
numbers that we've seen in the last week of July
840 to 870 on hot roll. We're seeing 1220 to 1240
on coated and cold roll as of today's number. Again, those are published numbers. We've seen volatility in
those with kind of a peak of the market in the May time
frame to where we are today. - So what do those numbers mean for steel consumers right now? - It's important to watch the trends of pricing, I would say. Again, what we are an
advocate of is always buying what you need instead of
necessarily worrying about what the number is, what
the next number's gonna be. The big thing that we see
overall is that demand is good overall in most of
the sectors that we sell into. So we're again, we're an advocate of not necessarily worrying
about tomorrow's number and trying to determine if
you need to buy based on that. We're an advocate of buying what you need to support your customers. - Yeah, I mean, so if you're
buying a ton of inventory because you're expecting
the price to go up and then it doesn't, you
might be putting yourself in some trouble there. - Yes, we think that's important to reduce risk in the supply chain. - Have you seen, as you said, you're talking about shipments picking up where people might think
that we're close to a bottom? What do you look at that might determine how close we are to, you
know, the bottom of things? - Yeah, there's a lot of
signals that we look at. We definitely look at shipment pace. We look at, you know, inquiry activity. We look at a lot of different
market indicators, again, MSCI's service center data is something that we look closely at
to see how shipment paces are performing, so a lot of the same thing a lot of our customers are looking for to try to sense where
market pricing is going. - And you mentioned demand before. Are we, what kind of demand
are we seeing in construction and steel in the market overall? - Overall, I mean, again, we
see it very strong from a lot of the industries we sell into, a lot of published reports we've read. Really the only sector
that is currently down overall is automotive. We understand that with
the supply chain challenges that they've had. Energy has been very good,
which we really haven't had the past couple years,
which has been improving. Construction demand,
everything we've heard from our customers is it's
pretty good, it's okay. The challenge is kind
of the forward thinking. It's difficult to see weeks,
months, quarters ahead, as it may have been in the past. Having said that overall, you know, housing numbers are good. That the backlog indicators,
a lot of the forward looking indicators for
construction are good. In terms of Dodge momentum, the
architectural billing index, all very positive signs looking
forward into the future. - And what can we expect from
the market going into Q3? Let's focus here on Q3. Like I said, we're at the end of July, about to enter August. So what can we expect
with steel going into Q3? - I mean, this is, again, I
wanna focus this conversation on construction, but it
really is important to understand the whole whole sector. And as I mentioned, really
automotive being the only sector that's really down at this point, energy improving, construction
being pretty good. You know, we see a potential turn on the service center front. I think that's all gonna really help from a steel perspective. That's my opinion, and
really on the auto side, as we see some of these
supply chain issues start to improve, I think that's gonna be, that's pent up demand that's
out there for us in the future. So I think we have some
positivity as we enter the latter part of the year. You know, when I'm, we're
talking about Q3, but, you know from a order book perspective,
you know, we're kind of already starting to move
towards Q4 here very soon. So we're in the latter part
of the year at this point. - You know, there have been, in addition to those positive feelings, some potential fear in the
market, talks of recession coming or being in one, in the
early stages, you know, how does that affect, you know, something like the steel market,
construction overall, you know, what can a business owner
think about, you know, when he hears, or when they
hear about talk like that? - Yeah. It's important to
stay close to your customers, stay close to your suppliers, you know, making sure you have all the
information as best you can. Don't worry too much about necessarily, like we were talking
about, taking a position as opposed to buying and
selling what you need. You know, making sure you
have that line of sight for what it is that you need to do. So you're taking that risk
out of the supply chain. - And Brett, can you
talk about how important it is to align yourself
with a manufacturer who is, has good relationships
with steel mills, who can get product
when customers need it? Can you talk about that? - Well, I'll reference, you know, a relationship with US Steel. They've been a fantastic vendor for us. We've had a great relationship
with them for many years. We like consistency as do our customers. You know, we don't wanna
step into the market when prices are down and
try and build up inventory and play games. It's every month we want similar tons. And again, you know, when times
are good or times are bad, you need a vendor, a
customer that is with you. So it's been a great relationship. - Absolutely, now I know we've talked about steel and construction,
but are there any, is there any information about aluminum 'cause that's something that our customers like to know about as well? - Yeah, I don't think
they're neck and neck similar commodities,
they're different markets, but ultimately everything
is driven on a macro level. So, you know, when the economy
is going like gangbusters, those commodities go up in
price, they're harder to get. I think we're, I would say in a good spot. We've found some type of equilibrium. Prices have come down from their highs, both on steel and aluminum,
so obviously the expenditures that we're putting out
there, the amount of money we have in inventory is better, more positive.
- Sure. Yep. - And I, you know, looking
at Q3, I think these are good times to, you know,
maintain the momentum we've built up, and I really don't see any huge hurdles going forward. I think the Q3 Q4, the end of the year, is gonna be good for us. - Okay, now discussing
the future, you know, we wanna talk about trends as well. So what kind of trends,
you know, have you seen with US Steel, maybe you've
seen with Sheffield metals, throughout the industries
and in construction overall? - Yeah, I mean, in terms
of steel overall and into construction, sustainability is the number one trend that we're seeing. Going back a year ago,
there really weren't as many active conversations really
with our construction customers on the sustainability front. I would say that that has
launched rapidly this year. You know, to offset this, US
Steel has launched a brand our brand Verdex, which
reduces your carbon intensity by up to 70 to 80%, versus a traditional integrated steel making product. We're very proud of that,
we've also are proud of joining Responsible Steel as a member. And then we received the coveted site certification for Big River Steel. That's been critical to
us to kind of align with where our customers are
going, really particularly in construction and other industries. Responsible Steel is, it's
there's 12 pillars to it, based on all different
things that are ESG related. So there's the environmental aspect, but then there's also
everything else with the ESG. - Sure, what types of trends have you seen with Sheffield Metals and
talking to our customers and hearing from sales people? - Yeah, I think so far sales
have been strong this year. We don't see any significant downturn on the foreseeable future. Obviously there's always, you
know, headwinds when you talk about inflation and interest rates rising. We are keeping an eye on
that, but for the most part, we are forecasting a good 2022. - And what about the
difference between, you know, maybe the residential construction market versus commercial market? You know, have you heard
anything in regards to that? - I heard a stat the other
day where cancellations on new home builds were
at historic levels. So on the residential side, I
think there is some slowing. On the commercial side, we really haven't seen that,
you know, sales have been robust.
- Sure. - Yeah, I would agree that
the non residential side has been, continues to
be a strength, for sure. - So Ben, I'm really glad we have you here because you can speak to what
US Steel is doing, you know, going into the future and
then helping us prepare for the future of steel. - No, I appreciate that. And again, I really appreciate the time and the opportunity to
have this conversation. It's been fantastic. Yeah, US Steel's got a
lot of stuff going on for the steel industry. Also, particularly, you know, within the construction sector. I really do want everybody
to understand that we are a company that has a
product in domestically that is mine melted and
manufactured in the USA. That's important to us. We continue to invest in the
US, we have just announced, just this past year, an expansion
of our Big River facility, which will be a $3
billion expansion with two additional EAFs in Osseo, Arkansas, very proud of that. As part of that, we're gonna
have, what's unique to the US, the only US facility that
has an endless casting and rolling operation that again, continues to move us down
that sustainability journey for our customers. We've also announced a new
coating line that will be at Big River Steel. That's really a lot of heavily focused on the construction market. About 75% of that unit
will be selling Galvalume. So again, we're proud of that,
- Wow. - we're happy to invest
in construction in the US, and that's where we're headed, so I appreciate it.
- Awesome. So we've talked about trends,
we've talked about numbers, you know, what does someone
as a consumer of steel maybe buying steel for their business, what do they do with this information? - So in my opinion, I think
it's really important to talk to your suppliers, you know,
to try to have conversations around how you go to market, you know, what you're looking to
obtain, buy what you need, like I talked about,
talk to your customer, talk to your suppliers
about what they're seeing, talk to your customers, and
have that open communication. I think that's really
great for the supply chain to be open to have those
good conversations. - Great point, what about
Sheffield Metals customers? - Yeah. You know, we try and
maintain as much transparency as possible, you know,
freight issues, freight costs. Freight costs this year
up 30% year over year, so those are important things. So while we see the bare
substrate pricing falling over the last few months,
other costs have basically made up for that downward trend and, you know, prices overall probably
are not as down as much as the substrate is down
because of these other, you know, labor freight and such, so.
- Yeah, you really have to pay attention to the full picture. You know, when someone's
purchasing coated steel, you know, paint is another huge one - Sure.
- that people have to pay attention to, so understanding
that whole circle of product is really
important for their business. - And delays, you know,
labor shortages cause delays, which translates to
freight labor shortages, so, lead times are critical
- Yep, yep. - for us, for our customers, and again, having that open dialogue
so that you can prepare for those things and work through them. I got into the steel business
30 years ago, and, you know, back then things were much
more regional, you know, what was LTV doing at the
time, or what was Timken, or US Steel, you know,
Braddock and, you know, - Yeah.
- Everything was again regionalized.
- Interesting. - Now it's a global, you know, environment where something going on in
Ukraine has an effect here, maybe not directly, but you know, - Yeah.
- That butterfly effect. - Ben, Brett, thank you so much, I really appreciate the time today. And remember, Metal Roofing
Channel, Shefield Metals, and US Steel is committed
to bringing you the most up to date information
about the steel market, aluminum market, and the
construction industry overall. Comment down below, if
you have any questions, subscribe here to the
Metal Roofing Channel, and as always on Thad Barnett, and we'll catch you next time. (upbeat music)
