As we move through the dog days of summer, a historically calmer period of activity in construction, we continue to wrestle with the different signals we are receiving from supply chain, customers, and the overall economy.
When I wrote the last update in May, we had anticipated that prices were going to trend downward. After the spring peak in demand, we did see prices move downwards rapidly, that continued until late June when the mills announced price increases which seem to have slowed, if not fully arrested the fall.
Total steel output from the mills has continued an upward trajectory. AHMSA has still not restarted production; with continued problems and uncertainty over the deal to acquire the operations and exit their bankruptcy, the path to restart is not at all clear. Last week, SDI Sinton announced several weeks of unplanned stoppage for repair to the shear in the hot mill. The cold mill will continue to operate so we will have to see how this impacts the available supply. Mills are still operating well below the levels that they would like so there is still, in my opinion, room for some more downward movement in coming months, the mills are probably going to continue to talk about price increase while still being open to negotiate.
Lead times have remained at what we would consider, historically normal levels, which would suggest that there is currently a good balance of supply/demand. Automotive demand has remained strong, but there are some significant union negotiations about to get going; judging by the posturing between the OEMs and the Union negotiators, everyone is ready for a fight. The unions have built significant strike funds to prepare for the negotiation, meanwhile, this is not the OEM’s first rodeo, so they have no doubt been preparing for this by producing ahead to lessen the impact of any strike action. The potential for a softening of auto demand for steel is very real from my perspective, how long and how deep is the unknown at this point.
The inflation rate is finally approaching the Federal Reserve’s target level, employment data is showing signs of softening, but consumer spending has remained high. There remains much uncertainty about the future of the Feds decisions on base interest, though it seems likely that we will still see more increases over coming months and that, in turn, is likely to have some downward pressure on the overall health of the construction industry spending.
Steel futures are relatively flat out through the rest of the year, many economists are predicting the back half of 2023 will see a softening of demand in some sectors. So far, we aren’t seeing any signals from our customers that support this, with many customers still reporting backlog of construction projects that extend for several months.
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Storage Structures, a division of Central States, announced today the rebranding of the business to Elevate Structures.
Our new logo embodies the ‘we’ at Central States as employee-owners. We are committed to customers and delivering value, innovation, quality, and reliability to them in all areas of our business.
Central States broke ground on it’s 12th plant in Nov. 2023, to be located in Tooele, UT. Learn more about the town and it’s great history.
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