Fifth US flat-rolled steel hike driven by higher spot demand, scrap prices: sources

Flat-rolled steel producers in the United States increased spot prices for the fifth time in less than three months on Monday February 13, led by an uptick in spot demand and higher scrap prices, according to market participants; the latest hikes bring the total increases to $260 per short ton

Cleveland-Cliffs and Nucor Sheet Mill Group raised prices for hot-rolled, cold-rolled and coated products by $50 per ton ($2.50 per hundredweight), effective immediately, the steelmakers announced in separate letters to customers. The hike sets a new floor for HRC at $900 per ton, they said.

Cliffs announced an identical increase more than a week ago in an attempt to set hot band prices at $850 per ton.

A distributor said the hikes could be driven by an uptick in spot demand, specifically from the automotive industry, though he was unsure if the increase would be accepted by the market.

[The mills] are seeing demand; if not, they would not increase [prices],” he said. “How long that demand stays there, that’s the question. I don’t think it will stay there past the second quarter. There’s been a lot of pent-up automotive demand and backlogs from US car manufacturers, and with Fed rates going up, you’ll probably see some demand for commercial fleets. Individual consumers are not going to buy with interest rates where they are and inflation causing everything to cost more. I don’t see auto consumers going to buy a car.”

An uptick in domestic ferrous scrap prices was another factor that likely contributed to the latest round of price hikes, he added.

A second distributor agreed, saying: “We know scrap prices are going up, so that’s supporting the increase. With scrap prices being what they are, short of a black swan, they’ll hold prices for the next increase.”

“I’m not discounting what I’m seeing [with higher mill offer prices],” a third distributor said. “[Major steel mills] are saying deliveries are pushed out, and they have maintenance scheduled and other things [that may reduce supply].”

Spread between HRC and scrap widens

The US Midwest ferrous scrap market extended gains in February, led by a robust export market, firm order books and low scrap inventories. This marks the third consecutive month of higher ferrous scrap prices.

Meanwhile, the hot band market has firmed in the first two weeks of February and could continue gaining momentum due to scheduled maintenance and production issues hampering output, sources said.

Fastmarkets’ steel scrap No1 busheling index, delivered Midwest mill was calculated at $475.25 per gross ton ($424.33 per short ton) on Friday February 10, up 5.83% from $449.06 per gross ton ($400.95 per short ton) the month before. Fastmarkets’ daily steel hot-rolled coil index, fob mill US Midwest was calculated at $41.13 per cwt ($822.60 per short ton) on the same day, up by 11.28% compared with $36.96 per cwt ($739.20 per short ton) on January 10.

As a result, the spread between the pair widened to $398.27 per short ton on February 10, compared with $338.25 per ton a month earlier.

Five rounds of hikes

  • Round one:
    • Week to December 2: Cleveland-Cliffs increased base prices for all carbon hot-rolled, cold-rolled and coated steel products by $60 per ton on November 28. Nucor announced the same move two days later.
  • Round two:
    • Week to December 16: Cleveland-Cliffs announced a $50-per-ton increase on December 13.
    • Week to January 13: Nucor increased by the same amount on January 9.
  • Round three:
    • Week to January 20 – Cleveland-Cliffs announced a $50-per-ton increase on January 17, setting the minimum hot-rolled coil price at $800 per ton ($40 per cwt). Nucor made the same move a day later.
  • Round four:
    • Week to February 3: Cleveland-Cliffs announced a $50-per-ton increase on February 2, setting the minimum hot-rolled coil price to $850 per short ton ($42.50 per cwt). Nucor made the same move a day later.
  • Round five:
    • Week to February 17: Cleveland-Cliffs announced a $50-per-ton increase on February 13, setting the minimum hot-rolled coil price to $900 per short ton ($45 per cwt). Nucor announced a similar move on the same day.

As of February 13, the day of the fifth increase announcement, Fastmarkets’ Midwest hot-rolled coil index stood at $805.60 per short ton. That price is up by $160 per ton from $645.60 per short ton on November 28, the day of the first hike, indicating that domestic mills have achieved nearly two thirds of the $260 per ton in increases they have announced since late November.

Robert England in New York contributed to this report.

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