RESEARCH: Key takeaways from the latest North American Steel Market Tracker

This month’s key North American steel forecast highlights:

• Upward momentum in US domestic sheet steel prices came to a halt in the second half of June, wiping out earlier gains. Although the prices of hot-rolled coil (HRC), cold-rolled coil (CRC) and hot-dipped galvanized coil (HDG) increased on a monthly average basis, the daily HRC index fell by $50 per ton between June 10 and June 30.
• Short lead times at some mills suggested thin order books, with significant discounts available for buyers placing large orders. In addition, activity in the spot market was negatively affected by a rise in the numbers of Covid-19 cases, and fears that some states will have to go into lockdown again, with market participants moving to the sidelines and opting to draw material from their inventories.
• US steelmakers started to restart operations at facilities that were idled earlier. According to our estimates, around 5.5 million short tons per year of production capacity has been marked for restarts in June and July. Increased output rates outpaced a recovery in demand, prompting renewed pressure on prices.
• As a consequence, we have revised our steel sheet price forecasts downward, expecting that the downtrend will continue through this month. We believe that July will represent the lowest point in steel sheet pricing in 2020, with prices rising in August when buyers return to top-up their inventories. But the price recovery is likely to be uneven through the second half of the year. Steel plate prices are expected to remain under pressure because demand from the energy sector and heavy machinery producers will continue to be limited.
• Even with all of the uncertainty in the marketplace, and with ferrous scrap prices correcting more than we had expected, US long steel product prices have been broadly unchanged because the relative resilience of the construction sector, combined with uncompetitive import prices, enabled mills to maintain their price levels. We expect that prices will remain fairly steady in the near term as long as imports remain unattractive.
• We expect that most US domestic scrap prices will gradually increase through the year while demand slowly picks up. But rising automotive output and subsequently improved prime scrap supply should see premiums for prime over obsolete scrap shrink gradually in the coming months, removing the cost-push support for flat steel prices.

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