Earlier this week, SteelOrbis reported that domestic HDG and Galvalume coil prices had jumped markedly, due to increased demand and order activity, strength within the automotive sector, and higher scrap prices. Not surprisingly, hot and cold rolled coil prices have jumped as well.
This week, domestic HRC prices have spiked to an average of $28-$30 cwt. ($617-$661/mt or $560-$600/nt), ex-mill, against $24.50-$26.50 cwt. ($540-$584/mt or $490-$530/nt) a week ago. CRC prices are now trending at $36.50-$40.00 cwt. ($804-$881/mt or $730-$800/nt), ex-mill, against $34-$36 cwt. ($750-$794/mt or $680-$720/nt) a week ago.
“Sheet is up sharply. Did I think that was going to happen? No,” a source said.
A second source agreed. “I don’t think any of us thought prices would come up as high as they have, but this is all tied to the classic summer supply squeeze,” he said. “Demand recovered quicker than supply. Inventories had been cut to low, there was the outage at Big River Steel, and when everyone felt confident that prices had bottomed, everyone rushed out to buy. Lead times have been pushed out, prices are up, and the mills are going to do their best to keep things where they are for as long as they can.”
However, as SteelOrbis noted in last week’s analysis, although prices are expected to remain firm through October, cracks in the market are projected to emerge in the last two months of the year.
“I want to start with fundamentals. Overall market fundamentals aren’t great, although the automotive sector is an exception,” another source said. “But automotive alone cannot carry the [flat rolled steel] market. Other end-use markets, such as energy and non-residential construction, are still mostly terrible.”
As SteelOrbis noted yesterday, domestic scrap prices are expected to trend sideways to up $20/gt during the October buy cycle, which is expected to support higher flat rolled steel prices in the short-term. However, once buyers receive their orders, and the “mad rush to restock” has concluded, service centers are expected to step back from the market.
“Inventory restocking, after all, is transitory,” a source concluded. “When everyone gets their steel, the service centers will return to buying only as-needed.”