This month’s key North American steel forecast highlights:
• There is no end in sight to the shortfall in flat steel supply that has characterized US markets in early 2021, and we expect record-high US pricing for hot-rolled coil to persist through the second quarter of 2021 and into the second half of the year. We are forecasting the upward trend in prices to continue in the weeks ahead, although the size of the additional pricing gains is now slowing. We have extended our forecast for the pricing peak from April to May, and maintain the view that any subsequent downturn in flat steel product pricing will be modest and gradual, rather than a collapse such as has been seen in previous market cycles.
• Average US mill utilization rates continue to creep higher, but remain below the 80% threshold that typically characterizes a tipping point for domestic steel pricing. We understand that mills are struggling to deliver material on time, and are focusing on supplying minimum contract volumes in order to help work through backlogs and delayed deliveries. Upcoming mill maintenance outages will continue to restrict supply in the near term.
• With supply chain issues continuing to hinder original equipment manufacturers (OEMs), most notably the semiconductor chip shortage and the consequent automotive production outages, we maintain the view that demand for steel from OEMs will remain elevated through 2021 while backlogs of manufactured goods are cleared and inventories ultimately replenished.
• We forecast rising US steel supply in July-December 2021, with increased output from both new electric-arc furnace capacity as well as restarts of idled blast furnaces and rising import penetration. While we forecast that the supply increase will lead to a gradual reduction in flat steel product prices from record highs, we do not expect the increased supply to exceed demand from end-users. Rather, the rising supply will correct the supply-demand balance instead of tipping the market into oversupply in the latter half of 2021.
• Despite the likelihood of lower pricing for obsolete scrap in April, we forecast that US long steel product prices will hold on to their March pricing gains. The outlook for demand from the construction sector is increasingly buoyant given the greater possibility of a long-awaited US infrastructure spending bill.
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