Spot market prices for US domestic HRC and CRC have surged once again, sources note, and some are concerned that the post-COVID steel boom has caused a price bubble that will inevitably pop.
As of today, US HRC prices are trending in an unprecedented range of $73-$75 cwt. ($1,609-$1,654/mt or $1,460-$1,500/nt), FOB mill, whereas CRC prices are trending at approximately $83-$85 cwt. ($1,830-$1,874/mt or $1,660-$1,700/nt), FOB mill. This week’s HRC prices have more than tripled since early-May 2020, when HRC was trending at $22.00-$25.00 cwt. ($485-$551/mt or $440-$500/nt), FOB mill. In that same reporting period, US CRC spot market prices were trending at $32-$34 cwt. ($705-$750/mt or $640-$680/nt), FOB mill.
Numerous economists are “sounding all of the alarms,” adding that what goes up must come down. For example, as stated in our last report a week ago, one market source offered the following: “Historically, once inventory tips from deficit to surplus, prices did not ease. Prices fell sharply as users who had double bought go on strike while they use up their excess tonnage, and sellers run out of space to put the stuff that everyone suddenly isn’t buying.”
This week, Bank of America Merrill Lynch analyst Timna Tanners told CNN Business that she also believes the runup on prices will be short-lived. "We expect this will correct — and often when it corrects, it over-corrects," she said. Another source quoted in the article said he believes the correction will be "intense," adding that "it's just a matter of when and how it happens."
Yet while economists are warning that spot market prices will fall fast and hard, most steel industry veterans polled by SteelOrbis see things differently.
“Timna has been trying to short the market heavily for the past 2 years,” another source added, pointing to March-2019, when Tanners predicted that new sheet steel capacity would lead to a Steelmageddon™ price situation, and that in 2021 and 2022, HRC would settle in an approximate range of $27.50-$30.00 cwt. ($606-$661/mt or $550-$600/nt), FOB mill.
“Although I believe [sheet] prices will correct, I don’t believe prices will correct as hard as some people are predicting,” another source added.
On the other hand, other sources continue to point out that “even if the market corrects to $50 cwt. $1,102/mt or $1,000/nt), that’s still a big loss and anyone who is holding higher-priced inventory will get squeezed.”
In the short term, it’s believed that sheet prices will continue to rise, especially in that US scrap prices settled up by roughly $20/gt during this month’s buy cycle.