SMU/Steel Reality Fair Value HRC Model Falls Below Par
The SMU/Steel Reality Fair Value HRC model recognized spot HRC and scrap prices falling again last week moving fair value back into negative territory (Fair Value was calculated prior to our price adjustments made today – we will provide Fair Value based on the latest steel and scrap numbers on Sunday evening). With the SMU average spot HRC price decreasing $5/ton last week and scrap inputs decreasing as well, the model widened the gap between spot HRC pricing and fair value to -$14/ton. As the market absorbs the mill price increase announcements, SMU will be watching to see if spot pricing has momentum to rise over fair value or stay below in the coming weeks.
As a reminder, the Fair Value HRC model below came from the SMU acquisition of Steel Reality. The graph below demonstrates the relationship between scraps inputs creating an estimated “fair value” for HRC versus the actual spot price.