A series of planned outages at US steel mills, primarily electric arc furnace (EAF) mills, are set to have mixed effects on the market as they approach year-end. The outages, which are expected to significantly affect the scrap market, coincide with declining demand for flat and long steel products, potentially softening any direct repercussions on the steel market itself.
According to Argus, a total of 35 mill outages for flat and long products are scheduled between August and November, which could lead to a loss of approximately 1.5 million short tons of steel production, with 87% of this production being EAF-generated. Flat mill outages alone are projected to account for at least 923,725 short tons during this period, with October seeing the highest concentration of maintenance activities.
The outages will likely diminish mills' scrap purchasing programs, which could further depress scrap prices, despite efforts by flat-rolled steelmakers to stabilize prices in the hot-rolled coil (HRC) market. Market sentiment regarding September scrap pricing remains mixed, with many participants suggesting that prices are more vulnerable to declines than previously expected.US domestic scrap prices have remained largely stagnant over the past two months, following a decline earlier in the year. In August, the national average for #1 busheling prices was assessed at $373 per gross ton, the lowest since January 2023. The upcoming mill outages, coupled with a weaker ferrous scrap export market, are anticipated to weigh heavily on scrap demand.
Despite the outages, the impact on the spot market for steel is expected to be less severe than in previous years due to sluggish demand from steel-consuming sectors. The fourth-quarter outages are projected to be lower than those recorded in the same period last year, which could mitigate price increases that typically arise from reduced supply.
Construction activity, a major consumer of rebar, has remained stagnant, with significant projects funded by recent legislation yet to fully materialize. Reports indicate a slight increase in total construction spending, but high interest rates and uncertainty surrounding upcoming elections have dampened the anticipated demand.
Overall, while the outages may disrupt scrap supply and pricing, the prevailing weak demand in the steel sector is likely to temper their impact on the broader market.
