Today there was an explosion at the “D” furnace at ArcelorMittal Burns Harbor. Will there be some impact on the market? Will it be enough to put a bottom to the slide in prices? It’s too early to tell, but we will be watching developments closely in the coming days and weeks.
Steel shipments between steel producers and distributors, and between distributors and steel users, are closely tracked. But there is a significant and growing amount of intermarket trade between big distributors and smaller ones that does not get the same scrutiny. Service center sources tell Steel Market Update they have seen a bump in orders from other service centers that have trimmed their inventories due to the coronavirus and are looking to fill some holes, as they aren’t yet ready to buy in mill quantities. Still, commented one service center exec, even with the extra orders from peers/competitors, volume is not yet back to pre-COVID levels.
Most of the service center and manufacturing executives responding to SMU’s questionnaire this week expect steel prices to slide a bit further before finding a bottom. SMU’s latest check of the market has the benchmark price for hot rolled steel slipping to an average of $460 per ton. That’s down by $120 since March just before the virus hit.
Here are some of their comments:
“I believe prices will be on a downward ride until further notice. There’s little to no indication that EAF mills are yet willing to reduce output enough to alter the landscape, despite short 2-3 week lead-times for HR. With the outlook for scrap prices to be lower over the next two months, there will not be cost pressure on the EAF mills to raise prices. In fact, lower scrap prices will allow EAF mills to lower steel prices and maintain margins. So, I see prices continuing to weaken unless and until they get to a point where the mills cry ‘uncle.’ I think that level is $400-420/ton, and I believe we’ll get to those levels in the next 6-8 weeks. If a surge of the virus ends up overwhelming the medical capacities in some regions, more widespread shutdowns may get put in place.”
“I think we are very close to a bottom for steel prices. A resurgence of the virus will slow the recovery down and we will plateau for a longer period than expected.”
“I believe prices will slide a bit more. Quantity will dictate the base. The impact of a surge will be great, but not to the level of the first occurrence. Let’s hope we are better prepared if there is a second go around.”
“We feel prices will continue to slide modestly over the next 60 days. We are concerned about a surge. Our July shipments are down 30 percent MTD over June’s pace.”
“The bottom for HR is $450. Mingo Junction’s shutdown will immediately impact pricing [to the upside].”
“We are seeing demand rather sluggish right now and very little quoting activity. We are being very careful with our inventory at our southern plants based on new outbreaks of the coronavirus. We are now seeing cases in our facilities in the South over the past two weeks.”
“We are near or at a bottom. A surge will definitely temper the progress, but I don’t believe, and pray, we don’t get widespread shutdowns again.”
“I believe prices will slide another $20/ton or more based on scrap and low demand levels.”
“We are assuming the slight downward trend will continue for a bit, but are hopeful HR will not go much lower. A resurgence is definitely a concern.”“We expect prices to slide a bit more, then pick back up to the $500 range. We cannot shut down again.”
“We’re not buying anything. Everything is hinged on COVID-19 resurging across the country and possibly disrupting our business again. Until we have a cure or a proven vaccine, the answers will continue to be negative.”
SMU’s own John Packard will be the featured speaker during next Wednesday’s SMU Community Chat. The webinar, which is free to all in the industry, will begin at 11 a.m. ET on July 22. John will discuss the results of our latest flat rolled and plate market trends survey, our price indices and service center inventories/shipment data. Click here to register.
If I know John, he will also toss in a plug for the 2020 SMU Virtual Steel Summit Conference Registrations for this our first “virtual” summit are coming in at a strong pace. He’s working incredibly hard to make it a unique experience. For more information, visit www.SteelMarketUpdate.com and click on the SMU Virtual Steel Summit link. Or to register, click here.
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
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Latest in Final Thoughts
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?
Everyone knows the old saying that “a picture is worth a thousand words.” Just because it’s a cliché doesn’t mean that it’s wrong. A lot of inked has been spilled trying to figure out why prices are falling now. I thought it might be as simple as this: Market dynamics in the fourth quarter (UAW strike, companies buying ahead of an anticipated post-strike price spike, etc.) pulled forward restocking activity that typically happens in the first quarter.
What a difference a month makes. There are a few full bulls left in the room, but their numbers are dwindling. We’ll release results of our full steel market survey tomorrow afternoon. I took a sneak peak at the data on Thursday. And more people than I expected think that US hot-rolled (HR) coil prices will be in the $700s per short ton (st) two months from now. Vanishingly few think prices will be above $1,000/st in mid-April.