Financial Associated Press, November 16 (Editor Maran) - The American Auto Workers Federation's strike against Detroit's top three automakers has not completely ended. This week, union members will vote on new labor contracts. Up to now, the voting results show that the risk of another strike is rising.

However, the mulberry elm was lost, and it was collected in the eastern part of the country. According to data from commodity research firm CRU, US steel companies are expected to achieve higher profits in the first quarter of 2024. The main reason is that after the automobile industry strike was suspended, automakers are scrambling to replenish stocks, thus driving up steel prices.

Currently, hot-rolled coil is the most actively traded finished steel product. Its spot price has risen from US$734 per short tonne in September to around US$950.

This is inextricably linked to the suspension of the Detroit Auto Service Center, which generally plays a key role in supplying finished steel products to automobile manufacturers. In September, the car service center closed its doors due to a strike and the purchase was terminated. Steel prices in the US also bottomed out in September.

However, after car operators began to resume operations, low inventories forced service centers to purchase steel quickly and in large quantities.

CRU senior analyst Ryan McKinley said that after automakers realized that the price of steel had bottomed out during the strike, they began ordering large quantities of steel from steel mills according to demand, causing steel prices to resume an upward trajectory.

Higher costs

The US automobile industry accounts for about 25% of total US demand for steel, while 65% of the automobile industry's steel consumption occurs in the factories of the three major manufacturers in Detroit.

The rapid recovery in demand has caused major steel suppliers to raise prices. Nucor has raised the price of hot-rolled coils to $950 per short tonne, while US Steel recently announced a price increase of $100 per tonne of steel.

J.P. Morgan also confirmed in a report that as more car service centers re-enter the market to refill inventory, the upward trend in pricing will continue.

And if the upward price trend continues for longer, automakers will have to face higher costs for key raw materials. Gordon Lee Johnson, founder of research firm GLJ Research, notes that the cost won't be immediately apparent, but if prices continue to rise, automakers will feel it.

On the other hand, supply problems have also occurred at US steel mills, and the average delivery time of many factories has been extended to 2024. And this is related to the utilization rate of steel production capacity. Historical experience shows that as steel producers reduce production capacity, tight supply causes factories to extend delivery times.

The combined impact of both supply and demand will support US steel prices in the short term, but due to concerns about the economic downturn, weak manufacturing may hurt further profits in the US steel industry.