Steel Products

Steel Mills Announce Another $40 Increase for Flat Rolled

May 21, 2020

While it seems counterintuitive given the difficult market conditions and weak demand due to the coronavirus, domestic steelmakers have raised flat rolled prices for the second time this month. U.S. Steel, USS-POSCO Industries (UPI) and NLMK USA informed customers today that prices for spot orders of hot rolled, cold rolled and coated products have increased by $40 per ton ($2.00/cwt), effective immediately on nonconfirmed orders. Pricing extras continue to apply as published. ArcelorMittal USA announced a minimum base price of $540 per ton for hot rolled and $740 per ton for cold rolled and coated. The latest increases follow on price hikes ranging from $40 to $60 per ton on April 30/May 1.

Steel Market Update checks of the market put the current benchmark price for hot rolled at $480 per ton, up from $460 at the end of April, but well below the $580 in mid-March before the coronavirus shutdowns.

How to explain the timing of the mills’ announcements? Domestic steelmakers have idled roughly half of their capacity due to the coronavirus. They are expected to bring some of the idled furnaces back online by July as the economy opens back up and demand improves. Therefore, they are hoping to set a floor on prices and accumulate some orders in advance of increasing production, sources tell Steel Market Update.

“The idea is to wait as long as possible to bring capacity back to create an extended backlog for greater visibility and to neutralize the leverage some contract accounts had on price negotiations,” said one executive, who believes the mills will succeed in collecting at least a portion of the increase. “I am a super bull for the short term on pricing and believe consumption will be much higher than expected. I hear the furnaces will stay down a bit longer. So, if the minis are serious, it will be collected. Inventories are not too high.”

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Commented another SMU source: “I’m more bullish than many of my peers. I believe that with scrap prices headed higher in June, along with pretty much guaranteed increased demand from companies returning from lockdowns, the mills should be able to get prices over $500 per ton, and they should stick. I’d say $500-520 per ton near-term (four weeks) is a realistic level.

“We’re going to see a bounce off of the bottom from the automotive sector, which will seem quite strong coming off of zero for two months. It’s important to keep in mind that a large portion of the auto steel contracts are tied up with USS, AM and AK, so they have to buy from them. Once the pull for new material begins from those integrated mills, we could see a swift jump in lead times and price strength before they decide to restart blast furnaces,” he added.

Others are more skeptical about prices strengthening as the economy continues to struggle with the virus. “If the new price target is $540, that is a high hurdle at May demand levels,” said one service center executive. “Prices should rise short term until more capacity comes on or raw materials retreat. But there doesn’t seem to be much volume trading at $490+. So, $500 is a big test of demand. Personally, I don’t see demand strong enough in the next couple months for $540,” which is the suggested base price in ArcelorMittal’s price announcement.

Prior to this month, the last price increase announcement by the mills was on Feb. 27 when they advised their spot customers of base price levels of $620 per ton on hot rolled, and $820 for cold rolled and coated.

Steel Market Update’s Price Momentum Indicator remains at Neutral until the market establishes a clear direction.