Via AG Metal Miner
The Raw Steels Monthly Metals Index (MMI) rose by 8.74% from February to March. The growth was largely due to the massive increase in the U.S. HRC Futures contract, which jumped by nearly 49%. Because of this, steel prices reacted accordingly.
HRC prices continue to show bullish strength in the short term, even breaking out of their December 2022 highs. However, as prices begin to breach the $950-1000/ton resistance zone, price action would need to form a new higher low to confirm the potential uptrend. Should they continue higher, HRC prices would need to form further bullish patterns to support a possible longer-term bullish trend. A good indicator would be a retest and hold above 875.
U.S. Steel Prices Surge as Supply Fails to Meet Demand
Steel prices in the United States are once again on the rise, driven by a confluence of factors. Domestic steelmakers continue to raise prices while supply remains tighter than anticipated due to low import levels.
How Strong is U.S. Steel Demand for Q1 2023?
Schnitzer Steel Industries Inc. reported lower demand and performance for the first quarter of its fiscal year 2023. The company primarily cited a slowdown in growth and inflationary pressures as influencing factors.
That said, automotive demand will likely improve in 2023 compared to last year. For example, U.S. Steel reported better-than-expected earnings for Q1 of 2023. The company even stated that it is well-positioned for the year ahead due to infrastructure spending related to the Inflation Reduction Act.
Meanwhile, Cleveland-Cliffs CEO Lourenco Goncalves stated that his company continues to see strong order activity from automotive clients. He mentioned this likely has to do with the successful renegotiation of fixed-price contracts at the end of last year. Those fixed-price contracts are up significantly from 2022 levels.
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With Lower Demand, Can Steel Producers Keep Raising Prices?
Steel producers’ ability to continue increasing prices in 2023 appears uncertain. This is mainly due to the rising customer inventories and slowing order books. According to The Fabricator, while mill-announced steel price hikes appear to have held up for now, many experts have begun to question whether they will remain sustainable in 2023.
Even so, U.S. steel producers remain committed to regaining the pricing power they had around this time last year. Unfortunately, market conditions differ significantly. Back then, the U.S. economy was in a boom cycle with unprecedented demand unleashed by fiscal stimulus.
Today’s economy looks much weaker with adequate, if not growing, inventory levels and slowing or uncertain demand. In fact, most steel buyers remain on the sidelines as they work to deplete well-stocked inventories and manage costs. Some sources also intend to rely more on contractual supply negotiated at lower fixed prices.
From a European market perspective, the rebuilding of inventories by German stockholders and distributors also helped push up prices for flat rolled steel. Steel mills in Germany claim full order books at the moment. Meanwhile, lead times on HRC are reportedly as far out as 11 weeks.
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HRC and CRC Prices Rise, Plate Price Fall
The U.S. market witnessed a decline in steel plate prices in recent months. However, prices for hot-rolled coil (HRC) and cold-rolled coil (CRC) continue to rise. This trend has left many market participants wondering about the reasons behind the inverse movement.
This is due to a combination of factors. For starters, war and supply chain issues dominated steel markets in 2022. This led to price surges for both HRC and plate at different times. Now it appears that careful attention to capacity and market discipline on the part of producers, without the pressure from imports, has contributed to the recent price increase.
By the Metal Miner Team
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