US sheet mills launched a coordinated push to increase sheet prices for the first time since June.
Yes, just about everyone followed the price hike by Cleveland-Cliffs last month. But few major sheet mills did so publicly. And even in June, they didn’t pile in all at once.
There had been some speculation that US mills would wait for some sign of a deal between the UAW and the “Big Three” automakers before making such a move. I was not aware of one when this article was filed.
A Recent History of Price Hikes
U.S. Steel led the pack in June, going up $50 per ton on Wednesday, June 14. Nucor followed on Friday, June 16. And Cliffs on Tuesday, June 20. (Pro tip: SMU’s price increase calendar is useful for keeping score here.)
In other words, the June price hikes were spread over the course of a week. Some of you might recall that there was some question at the time whether anyone would follow the USS increase, especially heading into what is typically the “summer doldrums.”
When was the last time major domestic sheet mills announced price hikes all at once in a single day?
You’d have to go back to Feb. 21, when Nucor, Cliffs, and U.S. Steel all announced $100-per-ton sheet price hikes. (Another pro tip: SDI is a major domestic mill. But they don’t publicly announce price hikes.)
So, let’s compare these examples and consider whether the latest increase will stick.
By the Numbers
Recall that Q1 saw a combination of low imports, maintenance outages, and AHMSA unexpectedly stopping production. Also, domestic mills announced price hikes almost once a week throughout February.
The result: HRC prices jumped from $875 per ton on Feb. 21 to $1,140 per ton on March 21, a gain of $265 per ton – or more than 30%. (To keep score here, look at our interactive pricing tool.) That increase succeeded.
HRC prices stood at $930 per ton when U.S. Steel announced its price hike on June 14. A month later, HRC was at $890 per ton – a decrease of $40, or -4.3%. That increase might have stabilized the market or slowed declines. But it didn’t succeed in increasing prices.
The Cliffs increase last month happened on Sept. 27. HRC prices were at $645 per ton at the time. They now stand at $725 per ton – a gain of $80 per ton, or 12%.
Which will it be this time around? A spike, more steady gains, or prices consolidating roughly where they are now. I leave that for you to decide.
Three Things To Watch
First, a lot hinges on the UAW strike. I’ve noted before that prices had been supported by fall maintenance outages outweighing the impact of the UAW strike.
The reverse might now be the case. The UAW strike has expanded, and maintenance outages are wrapping up. We’ve seen mounting layoffs because of the strike. And some of you have told me that the impact of the strike is now starting to impact service centers.
If there is a deal, we could see prices surge on pent-up demand. If there is no deal, it’s hard to see how prices have serious upward momentum.
Second, construction accounts for almost as much sheet demand as automotive. There are some warning signs there. The Architectural Billings Index (ABI), a leading indicator for construction demand, stood at 44.8 in September, its lowest reading since December 2020, according to AIA/Deltek. Backlogs are also down.
Third, service center inventories. True, September service center inventories are lower. But material on order – a figure we only release to data providers – is the highest it’s been since September 2021.
That’s probably because we saw a lot of people enter the market and buy, in some cases, huge quantities in mid/late September. Spot business has by no means dried up. But the bigger orders – 10,000 tons or more – aren’t there to the same extent as a month ago.
Remember what happened to steel prices in late 2021 and early 2022? I’m not saying supply will catch up with demand and then overshoot it. That’s what we saw then.
But it’s also not clear to me that this one is a slam dunk. Unless the UAW says that a deal with the “Big Three” is in sight. In which case, the price increases are probably only just getting started.
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Michael CowdenRead more from Michael Cowden
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