US flat rolled steel prices have continued to firm since our last report a week ago, although some sources close to SteelOrbis think the market is at or close to a price ceiling.
Sources have confirmed that week’s HRC prices have firmed by $1.00 cwt. ($22/mt or $20/nt) on the top end, and are now trending in the range of $54-$60 cwt. ($1,191-$1,323/mt or $1,080-$1,200/nt), FOB mill.
US CRC spot market prices, which were previously trending in the range of $61-$65 cwt. ($1,345-$1,433/mt or $1,220-$1,300/nt), FOB mill, are now being heard at $65-$70 cwt. ($1,433-$1,543/mt or $1,300-$1,400/nt), FOB mill.
“The price gap between the bottom and top end of spot market price ranges for hot and cold rolled coil is easily $5 cwt. ($110/mt or $100/nt), if not more,” a source said. “But there just aren’t spot market tons available, so it’s all malarky. It’s a nonsense number. I think the market has peaked. There are small, small spot market tons available if people are willing to pay the nonsense price. But at some point, people are going to start saying no. We give it another four weeks.”
Continued price strength within the market is linked to factors beyond higher raw materials costs. For example, although contract customers are still getting their tons, mill-direct spot market tons have been delayed.
“The average spot market order is running between 20 and 60 days late due to COVID-19 outbreaks, and a lot of the mills are still delivering orders that were due in November and December," a source said. "The mills are just incredibly late. But at some point, they’ll catch up.”
Also of note is mills’ rising capacity utilization rate. On Monday, AISI reported that for week ending Jan. 16, 2021, the domestic capacity utilization rate was recorded at 76.7%. In contrast, the capacity utilization rate for the same reporting period in 2020 was recorded at 82.4%.
“Mills’ production rates are almost at pre-pandemic levels, and once they catch up and all of the scheduled new capacity comes online, if demand doesn’t grow with it, prices will need to correct.”