Posted on 21 Nov 2022
Stelco expects weaker demand trends in the North American steel market to persist through the end of the year, but an upturn could occur as early as the first quarter next year, CEO Alan Kestenbaum said Nov. 16.
"The macroeconomic statistics definitely show that there would be weakening demand," Kestenbaum told analysts during Stelco's third quarter earnings call. "We definitely see a scenario where demand gets weakened as construction goes down further, and maybe it hits the automotive market, so we're ready for that, but we know the upturn will come."
Kestenbaum said the demand rebound could happen in Q1, but Stelco was "totally prepared to be wrong about that prediction" and will work to keep its costs down and remain profitable with healthy margins.
Despite wider economic headwinds, Stelco has still seen mostly normal activity among its regular customers and has maintained its order book, he added.
In considering bullish factors, Kestenbaum noted the North American steel market could be supported by tighter scrap flows in 2023, similar to trends that occurred following the onset of the coronavirus pandemic in 2020.
"Scrap is not tight now by any measure, and scrap [prices are] continuing to decline, but we're starting to see the early seeds of the types of things that generally do create scrap tightening," he said. "Lower [scrap] prices result in lower collection, and a slowdown in housing starts means less demolition, and, therefore, less steel to come back into the steel scrap supply chain."
"The other thing that we're starting to see is a depreciation finally is the US dollar, and that brings back [scrap] exports," Kestenbaum added.
Ferrous scrap prices in North America have softened since reaching record highs of over $600/lt in March and April. The Platts TSI US Midwest shredded scrap index was assessed at $365/lt on a delivered basis Nov. 15, according to data from S&P Global Commodity Insights.
The Hamilton, Ontario-based steelmaker posted profits of C$158 million ($118.5 million) on sales of C$846 million in Q3, compared with an income of C$614 million on sales of C$1.35 billion in the year-ago quarter, according to its earnings statement released late Nov. 15.
In Q3, Stelco said its shipments fell to 686,000 st at an average selling price of C$1,162/st from 710,000 st of shipments in Q3 2021 at an average selling price of C$1,808/st.
Source:Platts
