Final Thoughts
Final Thoughts
Written by Michael Cowden
September 8, 2022
It’s time to forecast 2023, and I’d like to throw out one radical possibility – or at least one worth thinking about. What if there are no black swans?
I know, that possibility is so remote that it’s almost laughable. We haven’t had many normal years since 2018.
That year gave us the shock of Section 232. Then 2020 brought us the pandemic and HRC prices falling into the $400s per ton, only to rebound to nearly $2,000 per ton in 2021 when demand unexpectedly snapped back.
And this year, Russian forces invaded Ukraine just when it seemed like things were getting back to something resembling normal – sending prices soaring and then crashing yet again.
I suggest considering normal because it strikes me that I keep asking myself whether the market will inflect up or down – and it hasn’t for the last month. It’s bobbed around ~$750-850/ton, practically flat compared to the volatility we’ve grown used to.
What if something like that is our “new normal” range? Is it possible that we could mostly bounce around between $700-900/ton in 2023 just like we used to bounce around between roughly $400-600/ton in past cycles?
Again, one to think about.
As for the current cycle, it strikes me that we had a price increase delivered by Cleveland-Cliffs via press release. Remember when AK Steel used to that? And that it happened immediately after the end of Steel Summit. NLMK USA followed it. And both moves followed increases earlier in August from Nucor and ArcelorMittal Dofasco.
There are two ways to look at those increases. Either that they didn’t work. Or that they succeeded in putting in a floor under prices coming out of an extremely bearish July.
The scuttlebutt along the sidelines of Steel Summit – and continuing to this day to some extent – is that several larger service centers placed very big orders at prices beginning with a six before the last round of price hikes was announced. (The company names and tons vary depending on who you talk to.)
That’s one straight from the old mill play book. Take in big orders at low prices immediately before (and maybe immediately after) a price hike. That fills the mills and pushes out lead times so you have a better shot at enforcing those increases. It might also result in prices temporarily nosediving – but it’s arguably worth it in the long run.
What seems to be a little bit different this time around is that service centers might have accounted for many of those low-priced tons. A cheap sale to a welded pipe producer will go into the ground. You won’t see that low price in the market again. Someone making steel studs will put it behind drywall. That low price won’t be out in the market again either.
But a big, low-priced sale to a service center? That price will hang around in the market for a while, maybe until the end of the year if the volumes on some of these rumored deals are accurate.
So mills might have succeeded in putting a floor under prices. Did they also put a roof above them in the process?
By Michael Cowden, Michael@SteelMarketUpdate.com
Michael Cowden
Read more from Michael CowdenLatest in Final Thoughts
Final thoughts
Unless you've been under a rock, you know by know that Nucor's published HR price for this week is $760 per short ton, down $65/st from the company’s $825/st a week ago. I could use more colorful words. But I think it’s safe to say that most of the market was not expecting this. For starters, US sheet mills never announce price decreases. (OK, not never. It has come to my attention that Severstal North America rescinded a price increase back on Feb. 14, 2012. And it caused quite the ruckus.)
Final thoughts
Is it just me, or does it seem like the summer doldrums might have arrived a little early? I could be wrong there. It’s possible we could see a jump in prices should buyers need to step back into the market to restock. I’ll be curious to see what service center inventories are when we update those figures on May 15. In the meantime, just about everyone we survey thinks HR prices have peaked or soon will. (See slide 17 in the April 26 survey.) Lead times have flattened out. And some of you tell me that you’re starting to see signs of them pulling back. (We’ll know more when we update our lead time data on Thursday.)
Final thoughts
Everybody has a plan… until they’ve dealt with volatility in the HRC market. While Mike Tyson’s original quote was about getting punched in the mouth, it’s unlikely the ex-champ has gone many pricing rounds with hot-rolled coil.
Final thoughts
Hold-rolled (HR) prices held roughly steady this week after slipping for much of April. I don’t have any spicy quotes to offer about mostly flat prices. Besides, a lot of the questions I’ve gotten recently have been about demand. Some of you tell me that it’s still stable or improving. Others tell me that it’s suddenly dried up.
Final thoughts
What a difference a month makes. In late March, it seemed like the US hot-rolled (HR) coil market was poised to cycle upward. Large buyers had re-entered the market and placed big orders earlier in the month. Several outages were underway or upcoming. And expectations were that lead times would continue to extend. Cliffs said […]