Steel prices appear to be falling after a price spike in March following Russia’s invasion of Ukraine. betoon/iStock/Getty Images
The steel market quickly returned to pre-war levels in Ukraine. The main question now is not whether prices will fall, but how quickly and where the bottom can be.
Judging by the talk in the market, some are skeptical that prices will fall to or below $1,000 a ton, which is about the level after a full-scale invasion of Russian troops.
“I’m more concerned about where he will stop? I don’t think he’ll stop until – Abracadabra! – the war will not start. the factory says, “Okay, we’re going to slow down,” the service center manager said.
The second head of the service center agreed. “I hate talking about lower prices because I have inventory and I want higher prices,” he said. “But I think we’re quickly getting back on track before Putin’s invasion.”
According to our pricing tool, the prospect of a $1,000/t hot rolled coil (HRC) price in mid-April seems unlikely when prices were close to $1,500/t. Also, keep in mind that in September 2021, prices reached almost $1,955 per ton, but the rise to an all-time high last September is a huge step up from the unprecedented price spike we saw in March 2022. A long process, when hot-rolled coil prices increased by $435/t to $31. sky.
I have been writing about steel and metals since 2007. The SMU data goes back to 2007. Similar to what we saw in March. This is the biggest increase in steel prices in the last 15 years, and possibly ever.
But now it’s not hard to imagine hot rolled coil prices at or below $1,000/ton. A new container is added. Scrap metal prices have fallen in recent months. There are now growing fears that inflation – and higher interest rates to fight it – could lead to a recession in the economy as a whole.
If you are bringing in material now that you ordered a month ago, when spot prices have risen significantly, then knowing why these fluctuations occur is a grim consolation.
“We had a small margin in hot rolling and a decent margin in cold rolling and coating. Now we are losing money on hot rolling and we have little money on cold rolling and coating,” a service center executive recently told Steel Businesses. Update.”
Figure 1: Short lead times for sheet metal allow mills to be prepared to negotiate lower prices. (HRC prices are shown in blue bars and delivery dates in gray bars.)
Given such comments, it is perhaps unsurprising that SMU’s latest findings are the most pessimistic we have seen since the start of the war. HRC execution time is reduced (see Figure 1). (You can create this and other similar graphs using our interactive pricing tool. You must be a SMU member. Log in and visit: www.steelmarketupdate.com/dynamic-pricing-graph/interactive-pricing-tool-members.)
In most historical comparisons, an HRC lead time of around 4 weeks is relatively standard. But while delivery times are back to normal, prices are still very high compared to past standards. For example, if you look back to August 2019, before the pandemic distorted the market, delivery times were about the same as now, but HRC was $585 per tonne.
More factories are willing to negotiate lower prices due to short delivery times. Respondents told us that almost 90% of domestic plants are ready to consider the possibility of lowering prices for rolled products to attract new orders. The situation has changed dramatically since March, when almost all factories insisted on raising prices (see Figure 2).
It doesn’t happen in a vacuum. A growing number of service centers and manufacturers are telling us they are looking to reduce inventory, a trend that has accelerated in recent weeks (see Figure 3).
It’s not just factories that are cutting prices. The same goes for service centers. This is another sharp reversal from the March-April trend, when service centers such as factories raised prices aggressively.
Similar reports are evident elsewhere. It was also reported that they were on the sidelines. More and more people are pessimistic about their future prospects. But you got the idea.
We are no longer in the seller’s market that we were in for most of March and April. Instead, we returned to the buyer’s market at the beginning of the year, where the war temporarily raised concerns about the availability of key raw materials such as pig iron.
Our latest survey results show that people continue to expect prices to fall, at least in the short term (see Chart 4). Will they be able to recover in the fourth quarter?
First, the bear market: I don’t like to talk about the summer of 2008. I don’t think comparisons to that period should be taken lightly, as they are sometimes. But it would be remiss if I didn’t acknowledge that some market participants were concerned about too much similarity between June 2008 and June 2022.
Some recalled the plant, which assured that everything was in order. That’s good demand, as is the backlog in the various markets they serve until those backlogs disappear almost overnight. They heard the responses of steel industry executives all too familiar with the rhetoric of 2008.
Figure 2. Steel mills insist on rising steel prices in March. As of June, they have been more flexible in their discussions about steel prices.
I’m not prepared to fully focus on the similarities of 2008. Prices in Asia appear to be stabilizing, and hot-rolled steel import offers are not very competitive given the rate of domestic price decline. There is a large gap between imported and domestic prices for cold-rolled and coated steel. But there, as we understand it, the gap is rapidly narrowing.
“If you were a buyer, you would say: “Wait, why am I now buying imports (HRC)? Domestic prices will reach $50 per centner. I’m not sure when they hit $50 they’ll stop. . So, what is a good import price?” one factory manager told me.
Remember that the US tends to be tied to the global market again and again. In the summer of 2020, we fell below Asian prices for hot-rolled steel. Remember $440/t? Then for the next two years it didn’t go anywhere.
I also recall a quote a senior steel industry analyst once told me: “When everyone throws in the towel in the steel industry, it usually comes back.”
SMU Steel Summit, the largest annual steel summit in North America, will be held August 22-24 at the Georgia International Convention Center in Atlanta. I’ll be there. We expect around 1,200 decision makers in the plate and plate industry to also attend. Some nearby hotels are sold out.
As I said last month, if you’re indecisive, think of it this way: You can schedule a client meeting six times, or you can meet them once in Atlanta. The logistics are hard to beat. You can take the tram from the airport to the conference venue and nearby hotels. You can get in and out without worrying about renting a car or navigating through traffic.
To learn more about SMU or sign up for a free trial subscription, please send an email to info@steelmarketupdate.com.
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