Final Thoughts

Final thoughts

Written by Michael Cowden

Unless you’ve been under a rock, you know by now that Nucor’s published HR price for this week is $760 per short ton (st), down $65/st from the company’s $825/st a week ago.

I could use more colorful words. But I think it’s safe to say that most of the market was not expecting this.

For starters, US sheet mills never announce price decreases. (OK, not never. It has come to my attention that Severstal North America rescinded a price increase back on Feb. 14, 2012. And it caused quite the ruckus.)

Increases, in contrast, are always public affairs. Press releases in the case of Cleveland-Cliffs (continuing in the footsteps of AK Steel). Customer letters that are widely shared among non-customers for others.

That’s not to say that the market hasn’t seen its share of shocks. We all got used to the idea that mills could announce price increases of as much as $50-100/st on an almost weekly basis. (Check out February 2023 in our price announcement calendar.)

But if you were to go by mill price announcements alone, you might come to the conclusion US HR is worth more than gold. Because, again, decreases happen. But never out in the open.

How disruptive was a big, published HR decrease? Take a look at CME Group HR futures.

Here is where things stood on Friday afternoon. (Click on the images below to enlarge them.)

Here is where they stood on Monday afternoon, after Nucor’s announcement.

Look familiar? We saw something very similar on Monday, April 8, when Nucor rolled out its first spot price. Recall that Nucor at the time posted $830/ton. The market had been expected something closer to the $900/ton Cliffs had posted in late March.

If the goal was transparency, Nucor isn’t just paying lip service. The company seems to be delivering it with some street cred. It gets that cred in part by very publicly acknowledging that steel prices not only rise but also fall.

But if the goal was to reduce volatility, I’m not sure that’s being achieved, at least not in the short term. Nucor’s HR price has been arguably the primary driver of volatility this week.

And it’s been more than a little disruptive to business as usual too. Let’s say you were a mill trying to close out some business in the mid/low $800s or high $700s – a reasonable expectation as recently as Friday. That might be trickier now. Because your customers’ expectations about pricing might have shifted now that $760/st is plastered across social media and in every trade publication.

Also, folks with “CRU minus” contracts might now be paying more than someone without such a contract. At the very least, their discount is a lot less than it was just a few days ago. What does that mean for the market? It will be interesting to see how this plays not only in the physical spot market but also on the futures market and in contract negotiations.

At risk of stating the obvious, Nucor is $90/st below Cleveland-Cliffs‘ target price of $850/st for HR. So much for mill discipline, eh? Does this pressure Cliffs to make another price announcement – one closer to Nucor’s price?

And will a lower price encourage more buying? I’m not sure. Some consumers bought heavy in March and/or are seeing slightly weaker demand. Are they going to jump back into the market for $760/st if they’ve got enough to tide them over for the next month or two?

What comes next? My guess is that we’ll see companies move to the sidelines. Nucor kept prices relatively stable in April – ranging from $825-835. Will Nucor’s price in May hold around $760/st give or take $10/st?
In other words, should we expect stability from week to week but big changes from month to month? I wish I knew. Like many of you, right now I have more questions than answers.

SMU Steel Summit

Nearly 550 people from more than 350 companies have already registered for SMU Steel Summit. The event will be on Aug. 26-28 at the Georgia International Convention Center in Atlanta.

We’re expecting well over 1,000 people again this year. So don’t delay, register today to catch up with a few hundred of your best friends in steel!

Michael Cowden

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Final thoughts

What's the tea in the steel industry this week? Here's the latest SMU gossip column! Just kidding... kind of. Yes, some of the comments we receive in our weekly flat-rolled market steel buyers' survey are honestly too much to put into print. Some make us laugh. Some make us cringe. Some are cryptic. Most are serious. We appreciate them all. Below are some highlights from our survey results this week. Some of the comments that we can share with you are also included, in italics, in the buyers' own words, with minimal editing on our part.