US, Mexico steel trade dynamics seen unchanged in near term: SDI

A recent move(opens in a new tab) by the US and Mexico to reduce the transshipment of unfairly traded steel and aluminum from third-party countries is not seen as disruptive to US steelmakers' ability to sell products over the southern border in the near term, executives of US-based Steel Dynamics Inc. said July 18.

"There's certainly some noise and perhaps short-term aggravations going back and forth but longer term...the steel demand growth within Mexico is going to continue to be considerable," CEO Mark Millett said during the company's second quarter conference call.

Along with a strong outlook for longer-term steel demand from Mexico, SDI does not see trade dynamics changing in the short term, president and COO Barry Schneider said.

"We anticipate that the products that we're currently moving into Mexico will continue to move that way," he said. "There is a shortage in the Mexican market because of other outages...so we'll continue to take advantage of opportunities where it makes sense."

Production at ArcelorMittal Mexico's principal steel mill in Lazaro Cardenas, Michoacan, has been disrupted since late May due to an ongoing labor strike.

While US hot-rolled coil prices have faced pressure, dropping by about 41% since the start of 2024, according to S&P Global Commodity Insights data, SDI executives said the company continues to see strong demand from its newest flat-rolled steel mill in Sinton, Texas.

"We do see the market being receptive to having a regional supplier," Schneider said.

The Mexican market in particular is expected to see demand outpace domestic supply.

"They're going to need our products," Millett said. "In particular, they're going to need our coated and downstream products, perhaps a little more so than hot band, but they're going to be still short. In the big picture, I don't see a material problem now."

Q2 results

SDI reported total steel shipments of 3.2 million st in Q2, down slightly from 3.27 million mt in the year-ago quarter. The company's average selling price for steel products fell to $1,138/st, down from $1,251/st a year ago.

Underlying steel demand was steady in Q2 but customers remained hesitant to place orders due to the continuing decline of scrap prices, as well as higher impot levels that pressured supply dynamics, Schneider said.

Following a sharp drop in March and further declines in May and June, US shredded scrap prices traded sideways during the July buy-week and were last assessed at $375/lt on a Midwest delivered basis July 17.

Steel market order activity has increased over the last month, especially within the last several weeks, stabilizing lead times, Schneider said.

The average mill lead time for HRC extended to 4.9 weeks from 4.8, according to Commodity Insights data July 17, while Platts assessed the daily TSI US HRC index at $650/st, flat on the day but down $5/st on the week.

"We believe this is the bottom range for pricing with positive moves in the future," Schneider said.

Overall, SDI reported Q2 net income of $428 million on sales of $4.63 billion. This is down from net income of $812.1 million on sales of $5.08 billion a year ago.

Platts is part of S&P Global Commodity Insights.