This month’s key North American steel forecast highlights:
• On the back of US steelmakers’ $50- to $60-per-ton price hikes in late April, domestic hot-rolled coil prices improved to a monthly average of $493 per ton in May, up from $488 per ton in April. In contrast, both cold-rolled coil and hot-dipped galvanized sheet prices posted further declines over the month, with US CRC prices slipping to $674 per ton in May, down from $692 per ton previously, while domestic HDG prices eased to $768 per ton from $787 per ton in April. Only modest gains in HRC prices and the persistent downtrend in CRC and HDG prices in May indicated a lack of traction with the first price hike, and unsurprisingly prompted a second round of $40- to $50-per-ton mill price increases in late May.
• Although we do not expect to see an imminent acceptance of the full $100 per ton in price hikes announced by mills thus far, the price increases have now helped stem price declines across the sheet products, with sheet prices gaining momentum in early June.
• We maintain the view that US sheet product prices will trend higher in June and into the third quarter of 2020, supported by elevated scrap costs, limited import competition, reduced domestic steel production, relatively steady demand from the construction sector and the return of automotive and other manufacturing capacity to production. Oil prices are also now rising from their April trough, in a positive sign for steel pricing.
• Reflecting these potentially positive factors for pricing, as well as the desire to underpin the first two price hikes, we understand mills are rumored to be considering a third price hike. Recent news of furnace restarts and more stability in recent scrap price settlements apparently diminished some of the mills’ enthusiasm, however.
• Still, risks to prices from late in the third quarter onward remain, largely centered on rising domestic steel output, declining prime scrap prices as manufacturing capacity returns and the risks of a second wave of Covid-19 and the potential for further lockdowns later this year.
• Long product prices failed to follow scrap prices upward in May. Instead, long product prices largely trended stable to lower, with the exception of wire rod, which registered a month-on-month gain. We forecast largely stable long product pricing in the near term.
Click here to view the North American Steel Market Tracker in full. If you are not a subscriber but would like see a free sample report, please click here.