Final Thoughts

It looked like we were on our way to hot band at a grand this time last year, when anticipation of stricter Section 232 tariffs sent the market into a frenzy. (“Liberation Day” cooled things down shortly thereafter.)

What explains it this time around?

Good luck finding spot tons

Allocation is too strong a word for it. But availability is a concern.

To be clear, most people SMU has contacted recently tell us they’re having no issues getting their contracted tons, even if deliveries are running late. And they’re leaning into their contract maximums. (There are some exceptions. Some buyers tell us even their contract tons are being restricted.)

It’s the spot market that’s being squeezed. Let’s say the going price for HR is around $1,000/st. Want to place a 1,000-ton spot order at that price? Good luck. It probably won’t be easy. Yes, some mills still have availability. But that’s more the exception than the rule.

Certain integrated mills have been running very late (we’re talking months) even on contract tons. And some EAFs known for shipping on time or early are running later than usual. Meanwhile, lead times are into spring outage season.

Theories that didn’t pan out

Rewind to last fall, and there had been concerns that the restart of the ‘B’ furnace at U.S. Steel’s Granite City Works near St. Louis might contribute to an oversupplied market. U.S. Steel in December said it had decided to restart the furnace. And Nippon Steel, U.S. Steel’s parent company, said last month that ‘B’ would restart in the second quarter. When in Q2 isn’t exactly clear. But that theory of a Granite City glut? It didn’t pan out.

Another theory that didn’t pan out. The idea that President Trump would be irked if US mills pushed HR prices over $1,000/st. Nucor nudged its weekly list price for HR to above $1,000/st for the first time since it introduced the mechanism.

Or maybe nudged isn’t exactly the right word. Nucor held its list price, also known as its consumer spot price (CSP), mostly flat to begin the year. (Pro tip: You can follow along with our price announcement calendar here.) Then we had a month of Nucor increasing CSP by $5/st per week. Last week that doubled to $10/st. And this week we got… $15/st!

The result? Nucor started the year at $950/st and in just a little over two months quietly lifted prices by $55/st. That might not seem like a lot by the standards of recent years, when $100/st price hikes haven’t been uncommon. The difference? Unlike those headline-grabbing price hikes, Nucor’s steady weekly hikes – think more boa constrictors than shock and awe – have stuck.

Coated demand perking up?

Another thing that has become almost axiomatic is that galvanized prices will remain weaker because of sharply higher domestic coating capacity and so-so demand. The capacity might not be quite as high as usual because of outages underway or upcoming.

And some sources tell us demand has received a shot in the arm recently from solar. That business can be lumpy. “They don’t need steel. They don’t need steel. And then all of a sudden they all need it overnight,” one service center executive told SMU.

Now appears to be one of those times when solar needs all the steel now. As best as we can tell, the rush might be because a 40% tax credit for businesses planning to install solar projects in 2027 requires construction to begin on July 4. (You can read more about the credit here.)

Imports will come back

Will this uptrend last forever? As I noted in Final Thoughts last week, the consensus seems to be HR can’t move too much past $1,050-1,100/st. And part of the reason is that the sources we talk to think imports will come back into play if prices get much higher.

Our survey results paint a mixed picture there. Most steel buyers tell us they don’t find imports competitive. Yet most traders tell us that some of those same buyers are showing more interest in imports.

We’ve spoken to some steel buyers – even people in the Midwest who don’t typically buy imports – who are buying foreign steel for delivery in spring/early summer.

“I bought my foreign. Either I am the smartest guy in the world, or everyone else is lying – and I don’t think it’s the first one,” a second service center source joked.

SMU’s HR price averaged $943/st in January, according to our interactive pricing tool. Let’s say foreign HR at the time was roughly in the mid-$800s delivered to the US. That’s probably not an attractive enough spread on its own to make an import buy.

But let’s say you read the tea leaves correctly and figured HR would go above $1,000/st. And let’s also say you realized domestic lead times would kick out to be (at least at some mills) almost as long as import lead times. Well, then the decision wasn’t so difficult.

That doesn’t mean cheap spot tons are coming to a domestic mill near you anytime soon. But it’s worth thinking about what this summer could look like.

What happens this summer?

What happens once Granite City has restarted? Also, our understanding is that the No. 14 furnace at Gary Works had been operating significantly less than its rated capacity. What happens when the reline and repairs are complete and it’s churning out more metal? Finally, what happens if imports are playing a more significant role in the market at the same time?

Questions like these seem to have created a consensus that prices will peak later than expected. But few seem to expect the kind of runaway pricing we’ve seen in past upswings.

That’s not to say something unexpected couldn’t happen along the way. When we met at Tampa Steel in February 2022, a potential war between Russia and Ukraine was one of the themes on the stage and along the sidelines of the event, even if the (incorrect) consensus was that Putin wouldn’t actually do it.

I don’t have a word cloud for questions asked at Tampa Steel this year. But I think it’s fair to say that, if we had one, Iran wouldn’t have been on there. On one level, that makes sense, people had to be thinking about Russia and Ukraine because the two countries used to account for two-thirds of our pig iron supply.

The big wildcard: the Iran conflict

As a very good article from CRU (our parent company) notes, other commodities will be more acutely impacted by rising energy prices – notably aluminum. The impact on steel will be more limited and more indirect to the extent that everyone will be hit by higher energy prices.

Still, while the US does not trade with Iran, Iran is a significant supplier of slabs (and billets) to other regions of the world (notably Asia), one industry source noted. Iran is also a major supplier of direct-reduced iron (DRI) to the global market – even if none of that goes to the US.

Do such regional impacts eventually hit the US market? That probably depends on how long the conflict lasts and how severe it becomes. And those questions, my friends, are above my pay grade.