SMU Data and Models

Mills Hike Flat Roll by $40; SMU Price Momentum Indicator at Neutral

February 27, 2020

Steel Market Update raised its Flat Rolled Price Momentum Indicator to Neutral yesterday from Lower in anticipation of a price hike believed imminent from the mills. As expected, Nucor and U.S. Steel both announced increases today of $40 per net ton on all new spot orders of hot rolled, cold rolled and galvanized steel, effective immediately. USS-POSCO Industries (UPI) followed suit with its own $40 increase on HR, CR and galv. ArcelorMittal USA also announced new base prices for spot orders of its flat rolled products. Effective immediately, its hot rolled base is $620 per ton, while cold rolled and coated products have a base of $820 per ton.

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This becomes the sixth price increase from domestic steelmakers since last October, when the benchmark price of hot rolled steel hit a 2019 low of $470 per ton, down from more than $700 per ton at the beginning of the year. With the support of distributors, the first five rounds of price hikes, totaling $190 per ton, managed to reverse the downtrend, raising the HR price to $610 per ton by mid-January. Since then the market has taken back some of those gains. Steel Market Update pegs the current price of hot rolled at $560 per ton. The mills obviously are hoping this latest increase is embraced by service centers and stops the erosion of flat rolled spot prices once again.

When steel prices are in transition, SMU prefers to remain Neutral, so as not to influence the price direction one way or the other. At least one manufacturing executive believes the market is tight enough to justify higher prices. Here’s what he told SMU yesterday before the latest announcement:

“I feel like a price increase is imminent and the market will turn higher. Demand is really improving in the South. Scrap will go up, and a number of mills are coming up on planned outages. Border wall is under way and Nucor Tubular has most of that business. Speaking of Nucor, their business is strong and they feel like a price increase will be supported, but they know back-to-back increases in quick succession won’t look positive to their customers. Most of their mills are in the third week of April now on HR lead time. Planned outages: Nucor Decatur six days in March, Nucor Berkeley six days in late March. In hot rolled, BRS lead time just pushed out to second week of April, I was told. SDI Butler is into May HR lead time due to an outage. SDI Columbus just went into the third week of April, I’m told as well. Galvanized orders books are really strong across all mills in the South; all are quoting May lead time now. It seems like the mills are in a pretty good spot and, with scrap set to go up in March, an increase should be supported. My two cents.”

Not every industry is reporting strong demand. A few service centers in the Midwest have reported “disappointing” shipments in February with demand slower than January. So, the market is in a gray area and SMU’s Price Momentum Indicator set on Neutral reflects that uncertainty.