Final Thoughts

U.S. Steel, UPI and AK Steel each announced a $40 increase in flat rolled steel prices today. The price hike was unexpected by some, who believe it is highly unlikely to stick given the surging virus and questionable steel demand. Others applaud the move. Said one SMU source: “They have nothing to lose. My sense is inventories are righting themselves and the industry is busier than some make it out to be. Imports will disappear in Q4. If the increase fails, some minimills will try next month after scrap bottoms out. In any event, I am optimistic that the bottom has been reached or is within eyesight.”

That seems to be the consensus view. Two-thirds of the respondents to SMU’s market trends questionnaire this week said they believe hot rolled steel prices are at or near the bottom. Here are some comments:

“I expect pricing to bottom out for a while in July/August, but then weaken again in Q4.”

“Asian prices are on the rise and thus less imports from these sources. We are pushing the cost levels of HRC. So, prices are close to a bottom.”

“I think the integrateds are backing away from producing at losses and the minimills are reaching their bottom limits as well.”

“I believe closer to $400/ton is the bottom.”

“Spot will certainly hit $400.”

“I think the JSW shutdown and AM blast furnace issue will be a stabilizing factor.”

Considerable capacity was removed from the market this month when JSW USA opted to temporarily idle operations at its Mingo Junction mill due to the difficult market conditions. The EAF at Mingo Junction has a 1.5 million metric ton capacity. A few days later, ArcelorMittal was forced to take down furnace D at its Burns Harbor mill when an explosion and fire damaged the 2.48-million-ton capacity BF. Normally, taking nearly 4.0 million tons of production out of the market so abruptly would have an impact. But sources point out that Mingo Junction was operating at a limited level and ArcelorMittal says it can continue to meet customers’ needs by shifting production to other facilities. So, the capacity may not be missed, in terms of tightening supplies and helping to firm up steel prices in the short-term.

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Tim Triplett, Executive Editor