US HRC, CRC prices continue to defy gravity

Saturday, 17 October 2020 00:13:03 (GMT+3)   |   San Diego
       

US flat rolled steel prices continue to have nearly unprecedented upward momentum, as today’s pricing is roughly $10 cwt. ($220/mt or $200/nt) higher than price points seen in mid-August.

US HRC prices have climbed once again to an average of $32-$33 cwt. ($705-$728/mt or $640-$660/nt) ex-mill, against $30-$31 cwt. ($661-$683/mt or $600-$620/nt) ex-mill a week ago. Domestic CRC prices have also firmed and are now being heard in the range of $41-$43 cwt. ($904-$948/mt or $820-$860/nt), ex-mill, against $40-$41 cwt. ($882-$904/mt or $800-$820/nt) ex-mill a week ago.

“What we’re seeing now is something that only happens once every few years,” a source said. A second source agreed, noting the last time he saw flat rolled steel prices spike was in early 2018, after the Trump administration announced Section 232 tariffs against imported steel.

“But the problem with this, is that the pendulum always seems to swing too far in either direction,” he said. “With Section 232, we saw [HRC] prices spike to from a low of $29 cwt. ($639/mt or $580/nt) in late 2017, to a high of $45 cwt. ($992/mt or $900/nt) in August 2018.

But by July 2019, he added, HRC spot market prices had fallen to $26 cwt. ($573/mt or $520/nt), ex-mill.

“For the time being, prices are high, the mills are making money, and some of us think this rally could last through the end of the year,” he continued. “With how things are currently going, I don’t think we’ll see the typical year-end-fire-sales that we’ve all grown accustomed do. This year, things could be different.”

Others remain skeptical that the current pricing rally will last that long, adding that Big River Steel will start producing steel at its Arkansas-based plant next month.

“The analogy I’ve been using for this,” another source said, “is that I equate it to a restaurant that's directly outside the front door of a concert venue. It's dead-dead-dead-dead and then BAM- the show lets out and it's all hands on deck. The restaurant is packed, there’s an hour wait to get in, and the servers and kitchen staff are running around like their hair is on fire.

“When I see what’s happening with flats pricing, it seems like the scrambling to fill what they need to fill amidst lower output, which is why lead times have extended out and prices have spiked. But, to use that same analogy, I think the steel buyers are on their last bite of dessert, they're almost done with their coffee, and they're in the process of signaling for the check. I could be wrong, but I think that market fundamentals point to a correction in flat rolled steel pricing.”

For now, however, pricing remains strong and lead times remain extended. The question, however, is how long the current rally will last.

“If history has taught us anything,” a source concluded, “it’s that the correction the market sees after a rally like this, can be harsh. Will this be the one time where it’s different? I guess we’ll all have to stay tuned to find out.”


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