A potential strike in the US automotive industry continued to rattle metals markets Sept. 14 as labor contacts between the United Auto Workers union and the Big Three automakers—Ford, General Motors, and Stellantis—were set to expire at 11:59 pm ET.
UAW President Shawn Fain said Sept. 13 the union would start targeted strikes at an undisclosed number of facilities at each company if new tentative agreements are not in place. A coordinated strike would mark the first simultaneous labor stoppage at the Big Three automakers’ production facilities, with the UAW representing roughly 145,000 members.
If the union moves forward with a strike, the plants that have been selected to strike were to be announced at 10 pm ET Sept. 14, while Fain told members that if their plant is not included, they should remain on the job.
The potential US strike comes as Canada’s autoworkers union, Unifor, is also in negotiations with automakers as its contracts expire Sept. 18.
Steel currently accounts for about 54% of the content of the average vehicle, according to the American Iron and Steel Institute. On average, 900 kg, or just under 1 st, of steel is used per vehicle, according to the World Steel Association.
US mills shipped a net total of 89.5 million st of steel in 2022, with 14% of domestic shipments going to the automotive industry, according to AISI data. The auto sector was the third-largest end market for steel in 2022, behind construction and service centers, which accounted for 30% and 24%, respectively, of total net steel shipments.
Concerns over a potential autoworkers strike already were having an effect on US flat-rolled steel prices and are clouding the demand outlook.
Sentiment for finished steel prices was more bearish for September than August, with market participants expecting prices to either stay flat or face more pressure, an S&P Global Commodity Insights US steel market survey showed Sept. 7.
In the survey of US producers, distributors, traders, and end-users, 100% expected finished steel prices to stay flat or decline further in September, up from 83% in August.
The Platts TSI US hot-rolled coil index, a benchmark for US flat-rolled steel pricing, has fallen $40/st since the start of September and is down $70/st from a month ago. The Platts TSI US HRC index was last assessed at $720/st on an ex-works Indiana basis Sept. 14. This is the lowest US HRC prices have been since early January, according to S&P Global pricing data.
Prices for hot-dipped galvanized sheet, which is used heavily in automotive applications, also have weakened in recent weeks. Platts assessed the TSI US HDG with the hot-rolled substrate at $890/st Sept. 14, down $60/st from the start of September, while the TSI US HDG with the cold-rolled substrate was assessed at $920/st, also $60 lower by the same comparison.
The whole flat-rolled steel market had stepped back from spot buying this week as participants awaited the outcome of the UAW contract negotiations, a trader said. Looking at a potential strike, the source didn’t expect to see any immediate effect on the market, but anticipated impacts on supply if a work stoppage lasted around three weeks or more.
“This is when you will see production being taken out,” the source said based on conversations with a mini-mill.
The source explained that pricing on HRC products was already near the cost of production for the mills, leading him to believe that cuts in supply could add to greater uncertainty in the market.
A separate trader was similarly concerned about potential volatility to flat-rolled finished steel products resulting from work stoppages.
“It really depends on how long it lasts and how mills react,” the source said referring to the potential for production cuts from US producers.
Still, other sources remained bearish, citing the potential for oversupply.
“We could possibly see prices tank with the overabundance of metal that may end up flooding the market,” said one Midwest service center source who was continuing to place spot orders on an as-needed basis.
Other buy-side sources were similarly holding back on placing spot orders, citing uncertainty from the contract negotiations whether directly involved in the automotive sector or not. One source was seeing dampened activity from multiple customers, including those involved in the construction sector.
Steelmakers have long been looking toward the end of the autoworkers’ union contract with concern, and with maintenance outages at four key mini-mills in September, some have foreseen a potential supply overhang in finished steel if the negotiations hit an impasse, a scrap dealer in the Midwest said.
“Prime scrap settled lower by $50/lt for September, but some dealers are instead holding onto their busheling supplies rather than selling,” the dealer said. “The general sentiment is that if the strike gets worked out relatively quickly, there could be an uptick for steel as well as scrap. Auto plants are a key source of busheling, so supply could be tighter at least by the time November scrap price discussions get underway.”
A prolonged autoworker strike would be more clearly bearish for obsolete grades of scrap, which were supported at mostly sideways pricing in September buy-week negotiations by a lack of available supply, another Midwest scrap dealer said.
“An auto strike can be very bad for scrap demand. There are a huge number of scrap buyers making products that flow into the auto industry,” the dealer said.
Author Justine Coyne, Alexandra Szczupak, Greg Holt