Steel Prices Keep Dropping, US Mills Bank On AHSS For Auto Industry

Steel prices keep dropping across the globe in 2012, from the US steel market to the Chinese steel market and everywhere in between. Steel producers’ profits, consequently, have been ailing.

If you’re a steel investor, you’re shaking your head right about now. If you’re a steel buyer, however, you may be sitting pretty.

And, if you’re a steel buyer in the automotive industry, you may be well positioned to take advantage of the lower steel prices, considered by many to continue through 2012.

MetalMiner’s Automotive MMI®, a metals price index specifically designed to track the prices of metals used in the auto industry, thereby gauging the health of the industrial sector, increased in August — one of only two indexes to increase, out of a total of 10 MMIs.

This came from a number of factors, including increasing auto sales in July overall, and specifically an increase in HDG prices.

“We saw steel prices trough a few weeks ago, and though they have not increased significantly, we can see a floor to prices and that provided the greatest support to the Automotive MMI®,” said Lisa Reisman, executive editor of MetalMiner, upon release of the report. “We do, however, remain cautious as we continue to monitor consumer demand trends.”

US steel mills, however, continue to push their wares — and their benefits — on the auto industry.

According to a report by Steel Business Briefing via the American Iron and Steel Institute, mills want car companies to realize that lightweighting can be, to a certain extent, achieved with advanced high-strength steels (AHSS) — compared to aluminum.

The green benefits of using AHSS over aluminum, according to mill spokespeople quoted in the article, should be considered from beginning to end of the entire supply chain, as opposed to the final product affecting increased fuel efficiency in individual vehicles.

Severstal, AK Steel and Nucor are all hopeful. According to the article, Severstal’s auto customers project a five-fold increase in AHSS demand. AK Steel — a producer of electrical steels as well — is also banking on AHSS, plopping its money into AHSS R&D, and Nucor has invested roughly $1 billion in its industry-leading recycled steel initiatives that hope to prove how much greener steel production is than aluminum production.

As much as steel producers are playing up AHSS demand as part of their strategy, analysts’ views on the US steel industry and steel prices are still a bit dark — with the effect of China’s steel production moves on US mills’ recovery, things may not get too much better for US producers in 2012.

Overall, though, steel buyers — and especially those sourcing steel for the auto industry — should check out their existing contracts, keep up on their steel price indexes, and keep an eye out on the next few months.

You never know: if consumer sentiment picks up and sales continue looking healthy, the automotive sector could see sustained growth — and with it, higher prices of steel.

By Taras Berezowsky