Final Thoughts
Final Thoughts
Written by Tim Triplett
June 8, 2020
John Packard is working on another project.
Steel prices have been on an upward trajectory, albeit a gradual one, since bottoming out in late April when the benchmark price of hot rolled hit a low of $460 per ton. The market plunged by $120 per ton in just six weeks from its mid-March high of $580 as the coronavirus shut down much of the economy. Since then, spurred on by two price increases from the mills, the HR price has recovered roughly $55 to the current $515 per ton reported in this issue of Steel Market Update.
Where will steel prices head from here? The market is split. The majority of buyers (55 percent) polled by SMU this week expect prices to stall at current levels, while another 6 percent expect prices to backslide as the economy continues to suffer from the pandemic. The rest, nearly 40 percent, are more optimistic and expect steel prices to continuing rising.
Those on both sides of the debate agree that much depends on how the mills react to improving demand and how soon they bring capacity back online. “Some big decisions have to be made on the idled blast furnaces. Restart them and maybe drag prices down or experience a lengthy shutdown. I don’t envy the mills’ position,” said one buyer. “It all depends on consumer demand versus mill capacity management. Prices will rise only if the mills can discipline themselves,” said another executive.
Most of the experts predicted the mills would hold off until September or the fourth quarter to begin bringing production back. Which made today’s word from U.S. Steel—that it has restarted its No. 1 blast furnace at Edgar Thomson—a bit of a surprise. A company spokesperson said U.S. Steel plans to bring blast furnaces up or down periodically to accommodate changes in its order book. SMU is also hearing of a possible restart of AK Steel’s Dearborn mill by the end of the month. As of this writing the mill has not confirmed, but such a move would correspond with upbeat comments about the automotive market by Cliffs/AK CEO Lourenco Goncalves this morning.
Here’s what a few other respondents to SMU’s questionnaire had to say about current market conditions:
“Prices will strengthen as long as demand returns and supply stays in check.”
“Demand is not that strong and there’s lots of inventory in the marketplace.”
“Rising input costs (scrap and iron ore) put a floor around $460. Capacity utilization and import offers cap the price around $530.”
Given the disruption suffered by the marketplace, steel prices may well be just as uncertain come Aug. 24-26 when Steel Market Update hosts its 2020 SMU Virtual Steel Summit. You’ll want to sit in and see what the experts have to say on prices and many other topics. For information and to register, click on SMU Virtual Steel Summit Conference.
It’s not too late to register for the free SMU Community Chat webinar, which begins at 11 a.m. ET on Wednesday, June 10. Featured speaker is NLMK USA Executive VP James Banker. Click here to register.
Tim Triplett, Executive Editor
Tim Triplett
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