Final Thoughts: Next stop, HR at $1,100/ton?

Why? SMU’s price for HR stands at $1,060/st on average. Mills have a strong influence over prices in a rising market. Nucor tends to raise prices $5-10/st a week. (Other mills have been following.) Let’s say $7.5/st on average. That gets us to $1,100 in about 5-6 weeks. Sooner if Nucor starts to lean more toward $10/st per week.

And looping back to the matter of availability, where does one find the elusive June spot ton? Maybe in July. Case in point: Cleveland-Cliffs’ lead times for HR across all its mills are into July, according to a lead time sheet effective on Monday. And the story is no different for contract buyers.

“Cliffs is not open for June HR orders. Please note that when Cliffs opens June HR contract orders, those orders will be confirmed in July,” the company said in a note to customers this week. “Cliffs is also not accepting July CR and HD July contract orders at this time.”

Sound familiar? Cliffs sent out similar notices in May and in June as well. I’m not trying to pick on Cliffs. I’ve heard an EAF producer is effectively into August for HR. And it seems like production issues and delays are more the norm than not among domestic mills these days.

Why bother mentioning it again? Because the consensus just a month or so ago was this: Prices would plateau and drift lower as lead times got beyond spring outages, as mills caught up with late orders, and as lead times stretched into the typically slower summer months. But what we’re seeing instead is that mills are still struggling to catch up.

What’s to stop producers from seeking $1,200+ for HR? I’m not sure at this point – except it would start to bump into prices for cold-rolled and coated products.

Speaking of coated products, remember when the consensus was that galv was the weakest of the sheet products? I don’t know whether that’s still the case.

Look at the spread between the highs and lows for coated prices. The high-low spread for HR has been tight for a while now. There had been a significantly wider range for coated. The big gap on galv base reflected higher prices for light-gauge material while heavy-gauge sold at a significant discount. Does the narrowing gap reflect better demand, prices gravitating toward the limited number of mills with true spot tons available, or both?

That’s not to say there is no limit on how high US mills can go with prices. Some buyers feel uncomfortable placing orders at high prices now. Especially since they won’t be selling their products into the market until the second half of the year. And 2H is harder to predict than usual given all the uncertainty around the duration and impact of the Iran war.

But I also hear from mills that sales volumes are still good and from some buyers that demand is better than expected. So continued cautious buying might serve to drive inventories lower still this month. (We’ll release April service center inventory data to our premium subscribers on or around May 15.)

Speaking of the second half, there was also a consensus imports would become more of a factor over the summer – limiting the upside to domestic prices.

SMU has noted before that import offers from certain foreign steel suppliers have been canceled, withdrawn, or delayed. But, broadly speaking, I wouldn’t be surprised to see the current supply squeeze ease a little bit in the summer as imports inch up from historic lows.

After all, import volumes are already ticking up. And nearly 90% of trading companies responding to our surveys tell us they’re seeing increased interest from North American buyers.

Here’s the catch. It’s not just domestic mills that are running late. So are imports. We all know that what happens in the Strait of Hormuz impacts oil and aluminum prices in a big way. It’s also contributing to congestion on the Panama Canal. Bloomberg, for example, reports that traffic on the canal is the worst since a drought in 2023-24.

The culprit? You guessed it. The Iran war and the Strait of Hormuz. With the Strait closed, more Asian nations that had relied on oil and liquified natural gas (LNG) supplies from the Middle East are turning to the US instead. And US shipments transit through the Panama Canal.

That’s not to say seasonality isn’t a powerful factor. Or that mills won’t eventually catch up. Or that imports won’t get here eventually arrive in significant volumes. But maybe the usual summer dip will be shorter and shallower than what we’ve seen in past summers?

Also, looking a little further out, what will fall maintenance outage season look like? I ask because I’ve heard from some of you that certain mills canceled or scaled back spring outages to take advantage of current high prices – and so fall outages might be more widespread than usual.

What are you hearing out there? Let me know in the comments or in person at the SMU-CRU VIP Briefing on Thursday!

SMU-CRU VIP Briefing

We’ll hold the SMU-CRU VIP Briefing – “Scouting the Market So You Don’t Have To” – on April 23 at the Swissotel in Chicago.

The event will start at 8:30 a.m. and wrap up at 12:30 p.m. We think you’ll come away with some “actionable” intelligence. And you’ll have plenty of time to meet with colleagues for a drink or three before the Metals Industry Scout Dinner in the evening.

Joining me will be CRU Research Principal Josh Spoores, Flack Global Metals Founder and CEO Jeremy Flack, Browns Gibbons Lang Managing Director Vince Pappalardo, BMO Managing Director Andrew Pappas, and SMU’s David Schollaert.

You can find out more and register here.