A Sheet Storm Is Still Coming: Tanners

All figures are well above SMU’s current price for hot-rolled coil, which stands at $625 per ton. 

Right now, it looks like prices have hit bottom and are creeping back up following $60-per-ton price increases announced by mills in the US and in Canada. But it could be a gradual climb back to $700/ton, Tanners said.

“As we’ve seen before, they announce a price hike, some of it sticks, not all of it, and then they announce another one to get the first one to stick,” she said.

What might support higher prices? Service centers have been destocking and getting inventories more aligned with demand. Once that destocking is complete, the steel market could benefit from restocking in 2023, Tanners said.

As for 2023 demand, Tanners is predicting a strong first half, followed by a weaker second half. Case in point: Higher prices should be supported by restocking ahead of construction season, especially given strong backlogs and infrastructure work. But construction backlogs will be worked through by the second half of the year. And without new work in the pipeline, demand could weaken, she said.

Also, new capacity will increasingly make its presence felt in the market later in 2023. That new capacity will come not only in the form of more HRC from EAF sheet mills but also from a host of galvanized expansions. The result: current wide spreads between HRC and galvanized base prices are likely to compress to more historic norms.

“We do think, indeed, the sheet storm is coming,” said Tanners. And that could fundamentally change how mills approach the market.

In fact, it has already. “One thing I think is different for sure … is mill discipline. Value over volume is gone, volume over value is here to stay,” stated Tanners.

Check out our Community Chat webpage if you’d like to see a recording of the webinar. You can also download a copy of the slide deck.

And join us next month for a chat with Tom Derry, CEO of the Institute for Supply Chain Management. You can register here.

By Becca Moczygemba, Becca@SteelMarketUpdate.com