Any predictions that new sheet supply would shrink coil tags by this summer lost a linchpin when Steel Dynamics Inc (SDI) announced that its new meltshop in Sinton, Texas, will not start up until the fourth quarter. No burgeoning of imports from Mexico is expected in the near term, either from Ternium’s new hot-rolling mill or from ArcelorMittal Mexico’s hot strip mill, which will not begin production until near the end of the year.

While at least 7 million tons of new capacity is still under construction, Amy Bennett, principal consultant for Fastmarkets MB, said the projects have been beset by postponements. The timing of the arrival of those volumes is very much in question, and it may be another year or longer before the additional tonnage makes a dent in pricing.

“The long-anticipated addition of US steelmaking capacity continues to be delayed, with steel mills facing numerous disruptions to their original plans,” Bennett said on Monday August 2. “Supply chain, distribution and sourcing and labor issues triggered by the pandemic have wide-reaching implications, and the construction and start-up of new steelmaking capacity has not been immune to these challenges.”

The largest of the projects is SDI’s Sinton mill, which was previously scheduled to begin melting this summer. Thus far it has managed to start up only its paint line. Coating lines are now slated to begin running in August. And last month, the company adjusted its scheduled meltshop startup for the fourth quarter.

“We expect to see other producers facing similar project delays, with the addition of new US steel capacity unlikely to have a notable impact on prices until [the second half of] 2022,” Bennett said. “Even then, the market is unlikely to tip into severe oversupply, and we forecast prices to remain well above long-term average prices next year.”

Coil-capacity expansions are also in the works for 2021-23 at Nucor Gallatin in Kentucky, North Star BlueScope in Ohio, ArcelorMittal’s and Nippon Steel’s Calvert joint venture in Alabama, and then later potentially at US Steel’s Big River Steel division.

Two new Mexico projects are no longer thought to have an immediate impact on the US coil market. Ternium began producing some coils at its new hot-rolling mill in Pesquería, Nuevo Léon state, in May. The ArcelorMittal Mexico project at its Lázaro Cárdenas site in Michoacán may start up around November. Those two facilities eventually could supplement other coil supplies to the US between Texas and the West Coast, and Ternium is already offering a bit of material at Houston, according to market participants.

“Ternium is certainly taking advantage of the high prices here, but I don’t get the impression there are lots of tons coming,” a southern distributor said. “What they have offered has been very limited.”

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $93.92 per hundredweight ($1,878.40 per short ton) on August 2. The price started 2021 at $51.50 per cwt, hit the $60 mark in February, $70 in April, $80 in May and $90 in early July.

Idlings during the initial shock of the Covid-19 pandemic and other mill closures tightened the supply of coil at a time when demand exceeded expectations. While some analysts said perhaps one of the idled blast furnaces or strip mills could return to production, some steel executives prefer the more profitable equation of constrained supply and higher return on investment.

“Any new capacity coming online will be a 2022 story,” an Ohio Valley distributor said. “I am not sure how much of a story it will be, either, because the new volume still does not compare with the capacity that US Steel or Cleveland-Cliffs could shut down to keep supply under demand.”

That distributor also predicted that much of the new capacity will be devoted to in-house production of value-added cold-rolled and galvanized goods - “so, still less HRC tons available for spot or contract.”

Still, just because the coming additional North American coil capacity is not as influential as expected this year, that does not mean that pricing will not retreat before 2022. A pullback may still occur, but for different reasons.

In their North American Steel Market Tracker, the analysts at Fastmarkets MB Research noted that utilization rates at existing US mills are increasing and stated that sheet prices “are close to their peak level.” Additionally, ”flat-steel imports have also been steadily increasing amid favorable price differentials [and] should remain strong in the coming months.”

Maintenance outages will be necessary soon, however, and service center inventories are near all-time lows.

“Demand from the automotive sector remains strong,” the Fastmarkets analysts wrote. “As the global semiconductor shortage abates, pent-up demand from the industry could take volumes from the spot market, propping up prices, with upside risks to our forecasts.”