Final Thoughts

Final thoughts

Written by Michael Cowden

We’ve used the word “unprecedented” a lot over the last four years to describe steel price volatility. Over the last two months – despite earlier predictions of a price surge – we’ve seen unprecedented stability.

I’m not saying Nucor’s new, weekly HR price alone is the reason for that stability – although it has been stable. Because it’s not just US prices that have been roughly stable. Sheet prices abroad have been too.

This is what stability looks like

Also, this recent stability preceded Nucor publishing weekly HR prices. Nucor posted its first weekly HR price on April 8. And since early March, SMU’s HRC price has ranged from $795-845 per short ton (st) on average – a spread of only $50/st. (You can keep score with our pricing tool.)

Compare that to January-February. HR prices then fell from $1,045/st to $830/st on average – a difference of $215/st. That was mild versus Q4’22. That’s when prices rose from $645/st to $1,040/st – a difference of $395/ton.

And it’s not just in HR that we saw that trend.

Since March, galvanized base prices have ranged from $1,100-1,145/st on average, a spread of $45/ton. In the first two months of the year, in contrast, they fell from $1,295/st to $1,100/st – a difference of nearly $200/st. And in Q4’22, galv prices rose $865/st to $1,295/st – a difference of more than $400/st.

What comes next?

But, as some of you have reminded me, steel prices are rarely stable for this long. Where do things go over the next one or two months? Down on stable demand, new capacity, and increased supply? (And by supply, I mean not only domestic production, imports, and inventories but also material on order.) Or is there a catalyst to keep prices stable or higher even as lead times inch toward the typically slower summer months?

As for right now, more than a few of you have told me that the market is quiet. But not eerily so. As we’ve noted for a while now in our surveys, demand has been mostly stable. Steel-consumer buying patterns, however, have been lumpy.

One service center executive put it well when I spoke to him earlier today: “It’s crickets. But I wouldn’t interpret that as a lack of demand,” he said. “The same number of trucks go out my door every day. But it’s never the same number of trucks coming in my door.”

When will trucks full of coil start coming back in the door, I asked. “In October, we all bought at a $h!t load of steel. A month ago, we bought half a $h!t load,” he said. That October buy carried service centers through Q4 and into Q1. The smaller March buy should tide them over until roughly Q3, he estimated.

Another service center executive agreed with that assessment. “While demand in general is good, the people who can wait are waiting because they think they will be able to buy cheaper in the future than today,” he said.

It’s not as if mills are hurting in the meantime. Some HR lead times are into June. And there are still upcoming outages at certain mills. But newer capacity could make it difficult for mills to hold the line if it resumes cutting prices, the second service center executive said.

The question might then become how much prices go down.

Recent price trends

SMU’s hot-rolled (HR) coil price slipped to $815/st this week, down $20/st from $835/st last week. The lower end of our range drifted into the high $700s/st – a price level available primarily to larger buyers. (Think thousands of tons rather than hundreds of tons.)

Canvassing some of you, I’ve heard that material from Canada is available in the mid/high $700s/st. Product from South America for August delivery might be available in roughly the same range. But that’s apparently getting few takers with North American lead times so much shorter. HR from South Korea, however, is reportedly in the low $700s per ton – and appears to be gaining some traction.

Does that mean that domestic HR prices fall into the mid/low $700s/st sometime between now and lead times stretching into Q3, when bigger buyers might need to get off the sidelines again? Do prices fall into the $600s/st on average, as they did briefly ahead of the UAW strike last year? Or is there some factor I’m missing that might keep things stable for longer?

Let me know your thoughts!

Recycled Metals Update

The May scrap settlement will have an impact on which way sheet and plate prices go. Check out our new sister publication, Recycled Metals Update (RMU), if you’d like some good intel on scrap, pig iron, and other recycled materials.

PS – Some of you have asked me whether the current wide spread between HR prices and those for CR/coated products is sustainable. I’ll share some thoughts on that in a future Final Thoughts.

Michael Cowden

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