RESEARCH: Key takeaways from the latest North American Steel market tracker

This month’s key North American steel forecast highlights:

• US domestic prices for hot-rolled coil moved down in line with our expectations, averaging $461 per ton in July versus our forecast price of $460 per ton. Although domestic HRC prices slipped to less than $450 per ton in late July/early August, we maintain the view that July will prove to be the pricing floor for the current cycle.
• While we are forecasting HRC price increases in August, we have downwardly revised our price expectations. Although steelmakers are reporting improving demand from the automotive sector in particular, the rapid return of previously idled capacity in recent weeks, together with a lack of support from several major mills, will prevent acceptance of recently announced mill price rises of $40 per ton.
• Despite rising domestic output and subdued demand in key end-use sectors including oil and gas, we would not be surprised to see an industry-wide coil price increase during August, following July’s largely unsuccessful announcement. Improving demand from the automotive, manufacturing and construction sectors, spurred in part by the need to replenish inventories in the post Covid-19-lockdown period, together with limited import competition in coil markets, will help mills to impose a pricing floor and push for modestly higher prices late in the third quarter of 2020.
• US long steel products continue to be fairly resilient, despite the pressure from lower scrap prices in July and the negative effects of the Covid-19 pandemic. While rebar and wire rod have shown month-on-month price declines, other long steel product prices have held steady. We believe that long steel product prices have bottomed out and should show some modest price increases this autumn, especially if construction spending continues to hold up.
• We expect that scrap prices in the US will rise slightly in the coming month when mill operating rates pick up, driving up demand. One downside risk is that prime consumers may attempt to push prices down amid tight real-time producer margins, while prime output is likely to continue to improve.

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