RESEARCH: US HRC prices forecast to maintain momentum into Q1 2021

This month’s key North American steel forecast highlights:

• Flat steel product prices in the United States moved largely in line with our expectations in October, although the increases slightly outpaced our projections. US hot-rolled coil prices averaged $655 per ton in October, exceeding our forecast price of $640 per ton, with mills successfully pushing for higher prices and supply remaining tight in the domestic market.

• We have significantly increased our US flat product price forecasts for the remainder of the year and into early 2021, reflecting a shortage of domestic supply against buoyant demand from key end-user sectors. We no longer expect to see a pause in pricing momentum in November, with higher prime scrap pricing and maintained demand from customers seeing HRC prices exceed $700 per ton in early November.

• Mill lead times are lengthening, and mills are enjoying pricing power that we expect to persist into the first quarter of 2021. Mill margins are widening, returning to levels last seen in 2018. As in the 2018 scenario, where US Section 232 trade protection prompted supply concerns, the slow return of domestic mills to full production has created a supply shortage, pushing prices above levels warranted by underlying raw materials costs.

• Although high domestic prices will eventually bring increased import flows, for now, domestic mills will be the primary beneficiaries of the impressive gains in US steel prices. Uncertainties remain regarding the development of the Covid-19 pandemic over the winter months, but prices are likely to maintain their momentum in the near term.

• We believe that the long steel products market is at an inflection point and could see price improvement in the final weeks of 2020.

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