A week ago today, Steel Market Update Steel Summit conference speakers John Anton (IHS Markit), Timna Tanners (Wolfe Research), and Josh Spores (CRU) laid out their predictions for the US sheet steel market, and while their predictions differed slightly, the predominant opinion was that a higher long-term HRC pricing floor would be established.
And while Tanners noted that there are several potential upsides to the market heading into 2023, such as infrastructure projects, recovery within the automotive sector, issues with freight and logistics markets (which could create more barriers to imports), Anton said he believed the price-slide wasn’t over just yet. He believes prices will continue to fall until HRC settles at +/- $36.50 cwt. ($800/mt or $726/nt), FOB mill.
(Going into the conference, US sheet steel prices had recorded declines for 17 straight weeks, falling from roughly $74.50 cwt. ($1,642/mt or $1,490/nt), FOB mill, in late-April, to roughly $38.50 cwt. ($849/mt or $770/nt), FOB mill, in mid-August.)
Also speaking at the conference was Stelco CEO Alan Kestenbaum, who said he believed that prices were at or near the bottom.
On the final day of the event, US sheet steel prices seemed to take a turn for the positive, when prices for both hot and cold rolled coil ticked up by about $1.00 cwt. After the uptick, HRC prices were trending at roughly +/-$39 cwt. ($860/mt or $780/nt), FOB mill, and CRC prices were trending at approximately +/- $58.50 ($1,290/mt or $1,170/nt), FOB mill.
Over the course of the next 48 hours, two US domestic mills, including Cleveland-Cliffs and NLMK, announced immediate $3.75 cwt. ($83/mt or $75/nt), across-the-board price increases.
Many, however, were skeptical that the increases were viable, considering that lead times were still short and that service centers have been skittish about restocking their inventories.
This week, however, HRC and CRC prices have slid back down, with the most commonly heard hot rolled price now trending at slightly below $39 cwt. ($860/mt or $780/nt), and the most commonly heard cold rolled price hovering at slightly below $58 cwt. ($1,279/mt or $1,160/nt), both FOB mill (keeping in mind that price ranges for both products may be higher or lower depending on the customer and the amount of steel that’s being booked.)
Sources polled on last weeks’ pricing blip offered the following thoughts:
“What I think, is that the big boys have been out there buying steel below the average ranges and those deals were eventually going to be reflected in the market at some point,” a Midwest-based source said, adding that he believes that $40 cwt. ($882/mt or $800/nt) will be the “absolute price ceiling” moving forward. Demand is good, but not phenomenal, he added, noting that current and still-pending new capacity is going to oversupply the market.
On the other hand, higher energy and transportation costs, and expected higher scrap prices (due to the increased demand for scrap from the new EAF capacity), will prevent prices from sliding too far.
Another source said that he believes the market blipped due to a fear of the unknown.
“Fear of inventory devaluation is paramount, and right now, after all of the wild swings we’ve seen in pricing for the past 2 years, no one has any faith in anything,” he said. “I think if a guy needs to restock 20k tons of steel, maybe he only stocks 7,500 tons. I think there was likely some restocking that took place and that’s why we got that cat bounce.”’
Also worth mentioning, is that US scrap prices are expected to hold sideways during the September buy-cycle. Not only will the lack of an upswing in raw materials prices (coupled with still-short lead times) likely prevent mills from collecting their price increase, sideways pricing could potentially give steel buyers less leverage in trying to negotiate deals.
For now, the market is expected to hold at mostly steady, with overall HRC transactions expected to trend somewhere between $37-$40 cwt. ($816-$882/mt or $720-$800/nt), FOB mill, for the next several weeks.