Final Thoughts

Final Thoughts

Written by Michael Cowden

Sheet prices are coming down now. The question isn’t one about market direction anymore.

Instead, the question is whether the declines will be “managed” by a more consolidated group of sheet mills or whether it will be more precipitous, akin to what we saw last fall.

gearsWe won’t release full results of our steel market survey until Friday. But already one thing stands out from the preliminary figures: More than 75% of survey respondents say that prices have already peaked, up from 30% in our last check of the market in mid-April.

That’s a big shift! Don’t get me wrong. It’s hardly all bad. Demand has been solid. Many companies had a very strong March and a solid April. The questions are more about May and the summer months.

Also, buyers across the supply chain have quite literally bought into higher prices. Steel purchased at the highest levels we’ve seen since the price spike following the Ukraine war last spring is arriving now or on its way. So it’s not like service centers are itching to see prices come down hard.

There are, in addition, some hopes that the new floor, whatever it is, will be higher than in the past because prime scrap prices should be structurally higher given how much new EAF capacity there is in the market now. That’s a valid point. Still, the consensus – according to our preliminary survey results – is that prime scrap will be flat or down next month.

Finally, the industry’s track record of managing price declines is spotty. We’ll see whether this time is different. I’m not going to predict where prices might fall to. But we can already see some rough guideposts as to where things might be headed.

I’ve been told that Asian hot-rolled coil is available for August delivery to US ports in the range of roughly $850-900 per ton. Does that mean US prices will fall to that level? No. Does it mean the days of $1,200+ per ton HRC are over? Probably. (OK, unless you’re on the West Coast. But I digress.)

That’s anecdotal. But the fact of increased imports is hard to avoid. The US imported 798,561 metric tons of flat-rolled steel last month, according to preliminary data from the Commerce Department. That’s up 21.5% from 657,164 tons in February. April figures aren’t complete yet. Will import volumes remain elevated, or might they taper off on concerns that offshore material ordered now might be below domestic prices once it arrives?

What about the domestic spot market? Will buyers sit on their hands? I’m curious to see our full survey results on Friday. Because I wouldn’t be shocked if we saw a big increase in the number of people sitting on the sidelines. Why risk making any big, speculative buys now if it’s not year clear whether prices will drift lower or plunge?

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By Michael Cowden,

Michael Cowden

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