North American steel producers upbeat on long-term demand after Q2 slump

An optimistic outlook for long-term steel demand growth in North America permeated major producers' second-quarter earnings calls, with executives highlighting the steel requirements of key energy transition sectors.

The upbeat forecasts follow a challenging second quarter in which major steel producers with operations in the region booked earnings declines.

Iron ore prices hit six-month lows during the quarter, before rallying slightly ahead of another drop in early August on the back of lowered expectations about demand growth in China. Steel prices followed a similar path as supply shortages eased and reductions in downstream demand, which had been masked by the shortages, became apparent.

However, those negative macroeconomics are not dampening major steel producers' demand hopes. Instead, executives on earnings calls said they are looking at rapidly growing, steel-intensive energy technology markets such as electric vehicles — particularly in North America — as a sign of things to come.

"Every electric vehicle on the road needs about 150 pounds" of steel, Lourenco Goncalves, chairman, president and CEO of US-based Cleveland-Cliffs Inc. said on a July 28 earnings call. "[And] in recent months, we have seen a massive influx in orders related to solar projects, which are heavy users of our galvanized steel. As a relatively new market for steel, this is by far the largest growth area for us in terms of demand."

The company reported revenues of $5.98 billion in the second quarter, down 5.6% year over year, and steel shipments of 4.2 million net short tons, up 15.4% compared to the second quarter of 2022. Adjusted EBITDA fell 31.5% to $775 million.

Global plug-in passenger electric vehicle sales are expected to grow 117.4% between 2023 and 2027, according to a July 31 report by S&P Global Commodity Insights. US sales of those vehicles over the same period are forecast to increase by 113.1%.

Executives at U.S. Steel Corp., or US Steel, were especially optimistic about demand growth from the domestic electric vehicle production and manufacturing sectors.

"I am bullish on the United States, I am bullish on American steel, and I am very bullish on US Steel," David Burritt, president and CEO, said at the top of the company's second-quarter earnings call.

"In 2022, construction spending related to manufacturing was over $100 billion in the [US] ... You can't have a manufacturing boom without steel," Burritt said, also highlighting the domestic manufacturing incentives included in the US Inflation Reduction Act and the bipartisan infrastructure law of 2021.

"US Steel is poised to supply steel to builders of everything from automobiles to roofing in a brutally-competitive global marketplace," Burritt said. "We're extremely well positioned for what we believe will be the best American steel market in a generation and to capitalize on global trends of deglobalization, decarbonization and digitization."

US Steel reported $477 million in net earnings in the second quarter, down 51.2% year over year. The company's net sales fell 20.4% year over year to approximately $5 billion from $6.29 billion.

Executives at Luxembourg-based Ternium SA, which has steel operations in several countries including Mexico, Argentina and Brazil, highlighted the company's emphasis on value-added steel products in Mexico to support end uses like energy technologies as a source of long-term optimism.

"We are going deeper into new value-added products which will help us better serve our customers in the automotive, renewable energy and home appliance industries, among others," CEO Máximo Vedoya said during an Aug. 2 earnings call. "These projects represent an excellent opportunity for us to continue capturing demand from high-end steel products in Mexico."

Ternium reported $736 million in net income in the second quarter, down 21.4% year over year from $936 million. The company's steel shipments grew 0.9% over the same period to nearly 3 million metric tons, while iron ore shipments increased 3.6% year over year to hit 867,000 metric tons.

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