US flat rolled steel prices have been climbing since the last week of August, when mills began rolling out a series of price increase announcements. And while many believe that the current tightness in supply is still tied to widespread restocking (which has historically lead to a buyers’ strike once the steel is delivered), others believe that current high prices are the result of a “perfect storm of market conditions.”
“On one hand, you have increased demand which has driven out lead times. There have been limited spot [market] tons available and mills aren’t yet offering spot material for January, which is causing some frustration in the market and that’s helping drive prices up,” a source said. “There’s also been some new restrictions on Brazilian slabs and the strike at NLMK, and that needs to be factored in. So that’s the ‘perfect storm’ that’s brought us to where we are today, but the question is how long all of this will last.”
On the flip side of the coin, another source added, we still don’t know if today’s flat rolled steel demand will stay level.
“The big question is whether this is pent up demand due to restoking or whether it’s actual true demand,” the source noted. “We also have Big River Steel which is about to come online, Brazil will start shipping slabs again in Q1, and we’re going to see more import offers in January because pricing will allow it.”
Other market fundamentals still point to flats pricing being out-of-pace with other economic factors. New COVID-19 cases have already begun to peak, and some parts of the country have already begun to lock back down. More than 750,000 people filed new unemployment insurance claims last week. All of this, a third source adds, is likely to result in continued caution, and higher levels of precautionary saving, from businesses and households.
Demand for HRC out of the energy sector remains depressed, a trend which is likely to continue until air travel resumes normal operations. And while residential home sales are strong, commercial construction projects are unlikely to recover for several years.
“Trying to figure out which direction the market is headed seems to be a bit of a fools’ errand,” a final source added. “You can look at this thing from three different angles, and make three different arguments as to what’s going to happen, and all of them seem logical. I’m taking everything I hear, and read, with a grain of salt. Especially with the election coming up next week.”
For now, prices remain at the same levels heard a week ago. Current HRC pricing remains in the range of $31-$34 cwt. ($683-$750/mt or $620-$680/nt), whereas CRC prices are still being heard in the range of $41-$44 cwt. ($904-$970/mt or $820-$880/nt), ex-mill.
Lead times, sources note, remain strong.