Final Thoughts

Final Thoughts

Written by Michael Cowden

Sheet prices are down yet again, with our hot-rolled coil price now at its lowest point since late October 2020.

The question two years ago was how far prices might rise as demand snapped back from the pandemic faster than supply could be brought online to meet it.

The question now is when and where prices will bottom. That question has gained urgency as the rate of steel price declines accelerates in a way that we haven’t seen since May/June.


First a quick recap: We saw hot-rolled coil prices bounce around between $770 and 785 per ton from late August into early October. The relative stability was encouraged by a wave of mill price hikes.

Since then, prices have fallen $18 per ton per week on average. That’s less than the declines of $50-90 per ton we were seeing in late spring and early summer. But it’s still significant given that hot-rolled prices now are less than half what they were back in early May.

Cold rolled and coated price declines are even more pronounced.

You could get into a doom loop and start wondering whether HRC prices will crash into the $500s per ton – something that would have been almost unthinkable a year ago. But I think it’s equally important to remember that the trend we’re on now won’t continue indefinitely.

In fact, prices might not fall for much more than a month if typical seasonality has anything to say about the matter.

We haven’t seen a normal year in steel since at least 2019. But it’s informative to rewind a little to get an idea of how persistent seasonality is barring market shocks like the pandemic, Section 232, or the late 2014/15 energy price collapse.

Steel prices were $480 per ton in early November of 2019, according to SMU’s pricing archives. But they rose steadily from there until the end of the year and had hit $610 per ton – considered a healthy level for steel prices at the time – by mid-January 2020.

And we see this pattern again and again. Let’s skip 2018, because the shock implementation of Section 232 overwhelmed typical seasonal factors that year. Let’s instead look at 2017. Steel prices dropped to $580 per ton in mid-October before rising to $640 per ton in mid/late December.

It was a similar story in 2016. HRC prices had fallen to $470 per ton in late October before rising to $610 per ton by the end of the year.

You get the picture. Steel prices often fall into the fourth quarter and don’t rebound until lead times stretch close to or into Q1 of the following year. It also doesn’t hurt that scrap prices typically rise over the winter months.

That’s the pattern I’d expect going into 2023, a drop into December followed by a rebound or at least a dead-cat bounce. Usual caveat: barring an unexpected collapse in demand or yet another black swan.

If seasonality does its thing, I think the next question becomes whether we revert to the “minicycles” that characterized pre-pandemic steel prices. Or does the volatility of the last two years become a more permanent feature of the market?

The cautionary tale is 2014/15, when steel prices tumbled on the heels of an oil and gas price crash. HRC prices were at a relatively healthy $630 per ton in late October 2014. They had fallen to $600 per ton at the outset of 2015. Not a good omen, that. By October 2015, HRC prices were at $390 per ton – and they continued to fall from there until the end of the year.

There are few things that make the steel market grumpier than a full year of prices grinding steadily lower. I’m not going to join the doom camp unless we see steel prices still falling in January. In the meantime, I look forward to the gloom fading as we get closer to the New Year.

By Michael Cowden,

Michael Cowden

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