Analysis: Strong demand for steel pushes railcar loads above pre-pandemic levels
CHARLESTON, West Virginia – Industrial manufacturing is on the rise and demand for U.S. steel is pushing steel prices and railcar loads above pre-pandemic levels, but don’t expect it that the American steelmakers open operations in slow motion.
According to the Association of American Railroads’ Weekly Rail Traffic Report, shipments of ores and metallic metals reached 22,369 cars for the week ending October 9, 2021, a 28% increase over the same period. in 2020. For the year, this The product group has up to more than 908,000 carloads, an increase of about 27% from the figures for 2020 to date. This double-digit growth is not unexpected given the widespread uncertainty surrounding COVID-19 this time around a year ago.
But when you analyze the pre-pandemic equivalents, metal shipments by rail are up 18% for the week, with the railways processing just under 18,900 cars in the same week ending October 5, 2019. – a positive difference of approximately 3,400 wagons. Comparisons since the start of the year between 2019 and 2021 show that US railways have processed about 3% more volume, indicating that demand for steel is strong and is benefiting the railways. Metal ore shipments by rail consist of ores, coke, metal products, and scrap and scrap.
According to the American Iron and Steel Institute, US steelmakers produced 8.4 million tonnes in August, up 28% from 6.5 million tonnes in 2020. Steel production since the start of the year he year in the first eight months of 2021 is still lower than the pre-pandemic figures. of 2019 of about 11 million tonnes. This is likely due in part to the fact that US steelmakers idled higher cost facilities before and during the onset of COVID-19 that did not reopen, which further increased demand and prices in a context of limited supply.
The Wall Street Journal reported in June, citing industry consultants, that domestic producers US Steel Corp. and Cleveland-Cliffs, Inc. had approximately 7 million tonnes of decommissioned production capacity. This included older factories and blast furnaces which producers said are more expensive to operate.
In December 2019, three months before the pandemic ended the economy, US Steel announced plans to indefinitely idle most of its Great Lakes Works operations in Ecorse, Michigan. And in March 2020, US Steel idled two blast furnaces in Granite City, Ill. ., mill, but restarted a blast furnace at a later date.
Demand is high, but the economics of reopening inactive factories and blast furnaces still come at a high cost and are unlikely to occur. Instead, steelmakers are likely to continue producing near-capacity quantities in existing facilities and channel future investments in lower-cost electric furnaces. In September, US Steel announced that it was looking for a site to build a state-of-the-art mini steel mill for an estimated investment of $ 3 billion. It is expected to begin production in 2024, although a final location has not been announced.
Today’s steel prices are hovering around $ 1,600 per tonne, up from $ 540 per tonne at the onset of COVID-19 and compared to an average of around $ 1,000 per tonne before the pandemic, according to the American Steel Index.
Continued demand and record prices indicate that steelmakers and railways, which transport both incoming raw materials and outgoing finished products, are expected to perform well for the foreseeable future as the industry gradually shifts to operations. newer and less expensive over time.