Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

ArcelorMittal idled another blast furnace on Sunday at its leading sheet mill operations in Burns Harbor, Indiana, according to sources. 


The company’s blast furnace “C” was taken offline because of dwindling steel orders, market participants told Davis Index. The furnace will remain hot-idled for at least two weeks and keep five hot metal cars warm until resumption, which is contingent upon renewed economic activity.


This is the steelmaker’s fifth blast furnace output reduction in North America since November 2019, when blast furnace No. 3 was idled in East Chicago. Burns Harbor’s blast furnace “C” is the company’s largest single furnace to idle, shipping over 2mn nt of steel with an output capacity of 2.5mn nt crude steel production per annum.


ArcelorMittal has taken several measures since March 20 to balance steel production with declining customer demand following COVID-19’s disastrous effects on the economy and steel industry. Blast furnace No. 4 in East Chicago and blast furnace No. 3 at Dofasco were both idled in late March, followed by the company’s announcement in early April of its plans to idle blast furnace No. 6 in Cleveland.


Last week, the steelmaker notified employees by letter that it was reducing its workforce beyond probationary union employees, as announced April 9. Non-represented employees will be informed of layoffs on April 23, per the letter, the durations of which are unknown because the economic outlook is uncertain. 


Integrated mills have greatly suffered from declining steel orders, with costlier equipment shutdowns and over 50pc of business coming from the automotive industry. Electronic arc furnaces have also lowered production because, as demand has fallen from industries shutting down, orders have decreased.


Recent cuts to steel sheet supply of about 25-35pc matches the latest demand levels. The American Iron and Steel Institute’s latest data showed steel mill utilization levels at 57pc, equivalent to 70pc of Q1 2020, and averages just above 80pc. Levels are expected to further drop in the near term as more furnaces are idled.


Steel mill utilization rates are projected to start rebounding in late Q2 2020 or by early Q3, when the economy begins recovering and fewer industries shutdown to contain the pandemic.


Hot rolled coil (HRC) pricing in the US is around $470-490/nt and could possibly go below $450/nt during the next two weeks amid declining volumes, before prices and demand recover heading into H2 2020.


Domestic HRC pricing is projected to hit a floor in late Q2 2020, which will be proportionate to dwindling steel inventory in China. 


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