RESEARCH: Record-high US HRC prices forecast to extend well into Q2 2021

This month’s key North American steel forecast highlights:

• US hot-rolled coil prices continued to move in line with our forecasts in February, although actual prices again modestly exceeded our forecasts. Domestic HRC prices averaged $1,194 per ton in February, exceeding our forecast price of $1,150 per ton for the month. Upward momentum has persisted into early March, and we expect US HRC prices to maintain momentum through March and into the second quarter of 2021.
• We have revised our flat product price forecasts this month to extend the upward momentum in pricing into the second quarter, based on persistently tight spot market supply, lengthy lead times, and the likelihood that buoyant demand from manufacturers will extend well into the second half of 2021 reflecting supply chain issues, including the semiconductor chip shortage that has prompted outages at automakers.
• Difficulties facing manufacturers will prolong the restocking cycle at original equipment manufacturers (OEMs), with manufacturers replenishing inventories even if consumer demand slows with the Covid-19 vaccination rollout and spending shifts away from steel-intensive goods to experiences.
• While we see signs of rising flat product imports, import prices remain largely uncompetitive relative to domestic prices, particularly when transport and the risks associated with lengthy lead times are considered.
• Previously idled domestic electric arc furnace (EAF) capacity is returning, along with the start of several new EAFs during the first half of 2021, but the impact on domestic steel supply will be muted by planned blast furnace maintenance outages in the coming months. We do not foresee a significant improvement in domestic steel supply before the second half of this year.
• Scrap prices have gained substantially in March and given the tight scrap supply, scrap prices are expected to increase further in April at the same time as construction activity ramps up with improving spring weather conditions. On the back of rising scrap costs and improving construction sector demand, we expect long product prices to rise in the near term.

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