US flat rolled steel prices have held neutral since our last report a week ago, although questions remain as to how long current price points will last. HRC prices continue to hold in the range of $28-$30 cwt. ($617-$661/mt or $560-$600/nt), ex-mill, whereas CRC prices remain at $38-$40 cwt. ($838-$882/mt or $760-$800/nt), ex-mill. And while 2 major flats mills announced a third round of price increases this week, many are skeptical that the market can support higher prices amidst mills’ current capacity utilization rate of 66.1%.
For example, signs that US scrap prices may soon slip have begun to emerge. Earlier this week, it was heard that mills in the South/Southeast were offering to buy scrap at down $10/gt ($10/mt) from September settled levels, although scrap market sources say they believe they’ll be able to negotiate at sideways. Also of note is recent downticks in Turkish import scrap pricing. On Thursday, SteelOrbis reported that some believed it was possible that quotations closer to $280/mt CFR would emerge in the coming round of scrap deals, which, if true, would reflect a $25/mt CFR drop from the highest price seen in September. “If the exporters drop their dock price, the domestic yards are likely to drop prices as well,” a source said.
US manufacturing and jobs numbers must also be considered. Yesterday, it was reported that the US manufacturing index has retracted slightly month-over-month, from 56 in August to 55.4 in September; however, anything above 50 indicates growth. Last week, the US Department of Commerce reported that domestic orders for big-ticket manufactured goods increased by a mere 0.4% in August, against an 11.7% surge in July.
The nation is also preparing for an uptick in first-time unemployment insurance claim filings next week. Earlier this week, it was reported that Disney was laying off 28,000 employees, whereas the US airline industry would be furloughing between 30,000 and 40,000 employees. Payroll Protection Program funding also ran out on Sept. 30, which means that small businesses that received 6-months’ worth of funding, with the stipulation that they would need to keep staff on for 6 months, may lack revenue to maintain their full staff.
“Coronavirus infections are on the rise in many parts of the US, and with the winter coming, it’s only expected to get worse. There’s also the recent surge in layoffs. Both of these things have the potential to impact the [steel] industry, especially if people stop spending because they’re concerned about their income,” another source added.
A final wildcard includes this week’s news that President Donald Trump (and other members of the administration) have tested positive for COVID-19. As many in the US have been reluctant to wear masks and engage in social distancing, due to beliefs that the virus is a hoax, the news that Trump must now quarantine for 14 days could scare consumers out of bars, restaurants and retail centers, and back into their homes.
"There are a lot of things that could tip the scales for the [the flat rolled steel] market in the next few weeks, including the results of the Presidential election," a source concluded. "For the next few weeks it's going to be a lot of wait-and-see."