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 TriplettRead more from Tim Triplett
Latest in Final Thoughts
I want to give a big shoutout to the good folks at the Fabricators and Manufacturers Association (FMA) for inviting me to their annual conference this week in Clearwater, Fla. I also want to give a special thanks to the FMA for awarding SMU founder John Packard with a lifetime achievement award – on that also gave me a chance to catch up with my old boss in person.
What are some “Black Swans” to watch out for? With the war in Ukraine entering its third year, your mind might understandably move to conflicts overseas. Here is one closer to home to consider: US trade relations with Mexico taking a turn for the worse. I mention that because the Office of the United States Trade Representative (USTR) dropped a (virtual) bombshell earlier this month.
Domestic prices have been sliding since the beginning of the year, and I don’t see any obvious reasons why the slide might stop this week. But let’s put the timing of a bottom aside for a minute. The question among some of you seems to be whether we’ll see another price spike, or at least a “dead-cat bounce,” before the typical summer doldrums kick in.
I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.
We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?