HRC Prices: Is It Really Boom Or Bust?

The following report was done by David Schollaert, the new analyst at Steel Market Update. He was asked to take a look at past market trends and to lay out scenarios for future trends. Obviously, there are black swan events (such as the Section 232 tariffs) which can push a market in one direction much more dramatically than anticipated. We are seeing supply side issues that are pushing the markets higher, but supply is expected to balance out in the months ahead. The question for steel buyers right now is how much higher prices can go, and will the peak lead to stability (with minor gyrations), a gradual decline in prices or a bust (Steelmageddon) where prices drop sharply like they did in 2008/2009 (see Figure 1 below)? Here is David’s analysis:

The current price rally has brought about much conversation of boom and bust cycles in HRC prices. Overall market sentiment seems to agree that the run-up in price will soon come to an end, but the question is whether the turn will be sharp or will there be a steady correction? Others caution there will likely be a plateau before prices edge back down. With varying degrees of sentiment and opinion, SMU has taken a closer look at historical HRC pricing data (Figure 1) to see if there are any patterns or tell-tale signs to the prices’ ebb-and-flow.