The thought of a possible steel shortage gained new ground this past week as news of spreading coronavirus infections at ArcelorMittal Burns Harbor, the breakout at the No. 2 caster at Dofasco, the slow return of production at Stelco due to a hack of their computer systems, and the continued strike at the NLMK USA plant in Farrell, Pa., has impacted tens of thousands of tons of production that was expected to be available by now. Service centers tell us they are seeing late shipments that range from two weeks to as much as six weeks late.
The late tons are affecting shipments to automotive and there are signs we could see some unplanned outages.
Nucor Tubular announced a new round of price increases on all new orders of HSS, pipe, mechanical and piling products. The increase of $75 per ton is a harbinger for what steel buyers should be expecting out of the flat rolled mills as January order books open.
We heard from one of our sources that hot rolled coil was being offered for January production by one domestic mill at $840 per ton…. If this information is correct, this would represent +$110 per ton higher than the $730 per ton average SMU posted this past week.
The last time HRC prices were above $800 per ton was in October 2018 when they were on their way down after peaking at $915 per ton. HRC prices have breached $800 per ton only twice since January 2009.
The first time was in late January and into early February 2011 and prices remained above $800 per ton until mid-May (3.5 months).
The second time was in late February/early March 2018 and prices remained above $800 per ton until mid-November (8.5 months).
Steel buyers are hoping history does not repeat itself taking HRC prices above $800 per ton in the next few weeks. Buyers are counting on tonnage coming out of Big River Steel, new production from the furnace coming back online at Gary Works, an end to the NLMK strike, the release of Brazilian slabs in early January, the restart of JSW Mingo Junction and the repair of issues at Dofasco, Stelco and ArcelorMittal.
It is tough to plan purchases with your fingers crossed.
In just above every conversation I have had with steel buyers over the past few weeks, they move out the peak of market pricing further and further. It was just a few weeks ago that steel buyers were predicting prices were already peaking at $650-$680 per ton. We have blown through that number. A couple of weeks ago, buyers were thinking the peak of the market would be February or March lead times. Now, well, we will have to wait and see, but I imagine steel buyers this week will be looking into the second quarter….
I was with one of our scrap data providers on Friday and he believes we could see a massive move in scrap prices between now and January. A couple of weeks ago he thought the number would be up $50. On Friday, he was predicting up $80 by January settlement.
Our SMU Price Momentum Indicator is pointing toward higher prices over the next 30 to 60 days. Right now we just don’t see anything that will turn momentum around. We are instead seeing things like the Dofasco breakout and the issues at AMUSA, NLMK and Stelco that are problematic for steel buyers.
This is Thanksgiving week here in the United States. My family has cancelled travel, as I am sure many of your families have as well. The pandemic continues to be a factor in our lives. Please don’t take chances with your health or the health of other family members and friends.
SMU will publish on Tuesday, Nov. 24, and then we will not publish again until Tuesday, Dec. 1. My team has been working non-stop for many months and they need some time off.
Besides, nothing is going to happen in the industry over the Thanksgiving Holiday (this is where we cross our fingers and hope).
The 2021 SMU Steel Summit Conference will be held in person (fingers crossed once again) on Aug. 23-25, 2021, at the Georgia International Convention Center next to the Atlanta International Airport. Mark your calendars as we hope this will be the first opportunity the industry will have to be at a major in-person conference (assuming we all get inoculated against COVID-19 by then).
We will be conducting one of our flat rolled and plate steel market trends surveys this week. Please look for your invitation to participate in your inbox at 8 a.m. ET on Monday.
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO
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