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Steel, aluminum demand to see boost on passage of long-awaited US infrastructure package

The long and winding road to reach a bipartisan deal on US infrastructure spending has finally come to an end, with the domestic steel and aluminum industries expected to see a boost to demand in the coming years as projects take shape.

The Infrastructure Investment and Jobs Act, signed into law by President Joe Biden Nov. 15, marks the largest investment in US infrastructure since the Federal Highway Act of 1956.

The bill allocates $1.2 trillion in infrastructure spending over a period of 10 years, including $550 billion in new spending over five years, to address a range of issues. Among the metals-intensive funding in the legislation is $110 billion for roads, bridges, and major projects, $66 billion for passenger and freight rail, $39 billion for public transit, and $7.5 billion for electric vehicles.

"This day is long-awaited, not just by those of us in the steel industry but by all Americans," Kevin Dempsey, CEO of the American Iron and Steel Institute (AISI), said following the bill's signing. "… We applaud the fact that the new law, and the executive order implementing it, have a strong focus on enhancing US competitiveness and using American-made products – including by using American-made steel."

Investment in bridges, roads to boost steel demand

The US steel industry has long advocated for Congress to pass a large-scale infrastructure bill. Despite widening divisions between US political parties, infrastructure has always had bipartisan support, though getting the two parties to agree on funding has been a persistent roadblock.

The AISI estimates that for every $100 billion of new investment in infrastructure it could increase demand for domestic steel by as much as 5 million st. The Steel Manufacturers Association shared a similar estimate, stating that every $100 billion of new investment can incrementally increase steel demand by 4 million st to 6 million st.

Breaking it down further, the AISI estimates that the bill authorizes funding for about $850 billion in steel-containing infrastructure investment, including the existing Highway Trust Fund and new, additional funding for steel-containing projects. This could translate into as much as 40 million st to 45 million st of steel demand over the life of the projects, according to the AISI. Looking at just new funding, the AISI estimates an increase of as much as 20 million st to 25 million tons of steel over the life of the authorized projects.

"We applaud the bill because it focuses on steel-intensive, traditional infrastructure," Philip Bell, president of the SMA said in a statement.

In terms of when this demand will be felt, steel market sources said they don't expect to see the effects of the infrastructure bill for at least 12 to 18 months.

"I think it could be a strong year next year because of what we had this year, then see strength in the second half of the year with the infrastructure bill," a rebar distributor said.

US steel prices have remained elevated throughout 2021, with rebar prices up roughly 36% since the start of the year and plate prices rising 126% year to date as of Nov. 30, according to S&P Global Platts pricing data. US hot-rolled coil prices, meanwhile, surged 94% from the start of the year to a record high of $1,960.25/st in late September before falling back to $1,760/st as of Nov. 30.

Other sources, representing both long and flat steel products said they're not expecting to see an increase in demand from the funding until into 2023.

"To me, the big question mark is when will the bill come into effect," a steel plate service center source said. "I'm sure there are shovel ready projects out there…It will most definitely help keep plate prices elevated. Definitely think the bill will be a good thing for plate."

Infrastructure spending will boost aluminum demand megatrends

The infrastructure bill should significantly boost surging domestic aluminum consumption that is already accelerating due to industrial megatrends such as lightweighting and electrification.

"In lightweighting, inclusive of the support of the infrastructure bill, pretty much anything that moves is going to be needing more aluminum," Mike Stier, Norsk Hydro's vice president of finance and strategy, said in an interview with Platts.

For example, Stier said more commercial trailer units, which have a high aluminum content, will be needed to transport materials for infrastructure projects. The heavy-duty trucks that haul the trailers will also require more aluminum content to meet lightweighting and fuel economy initiatives, he added.

Aluminum demand will also benefit from infrastructure investments in the nation's electrical grid that will be needed to support growing electrification initiatives, according to the Aluminum Association.

"Aluminum is the most widely used material in the electric transmission grid today," Virginia Gum Hamisevicz, the association's vice president of government relations and international programs, said in a statement to members following the signing of the infrastructure bill.

"However, the nation's aging patchwork system of power generating plants, transmission and distribution lines and substations will need extensive upgrades to meet the growing demands for sustainably produced electricity. The [bill] invests $65 billion in new grid investment."

Hamisevicz said aluminum will also be needed to support investments in sustainable building materials, bridge rehabilitation and electric vehicles.

'Buy American' provisions to limit imported products

With both steel and aluminum markets facing issues brought on by global overcapacity, the Biden administration has included Buy American provisions in the final legislation, with the move praised by both labor and industry groups.

Under a longstanding process, agencies can waive Made in America requirements when a mission-critical product is not made in the United States, is not available at a reasonable cost, or is otherwise not in the public interest.

Following the passage of the bill, the White House announced a move to make Buy American waiver requests public to increase transparency around these decisions. The waivers to Made-in-America laws will be available at MadeInAmerica.gov for the public to view, scrutinize, and assess. Real-time updates will be available on the site from the point a waiver is submitted to when a decision is made, with decisions also to be made publicly available.

The program is being managed by the Made in America Office at the Office of Management and Budget which was established by Biden in January.

"We strongly support these efforts to ensure federal tax dollars are used to buy products made in America, including by increasing the amount of American-made content that must be contained in a product to be considered made in America," the AISI's Dempsey said. "Strong domestic procurement preferences – including provisions to require the use of American steel – are essential to creating and maintaining good-paying US manufacturing jobs and to protecting our national security."

An earlier version of this article appeared in the October 2021 issue of Insight magazine