Has the Steel Market Stablized?
The current Hot Roll Coil market price has stabilized after a struggle between reluctant buyers and mill price increase announcements trying to put a floor under the previously sliding price. Major indices show the hot roll market around $880/ton. Mill lead times are generally 4-5 weeks, into the August order book, but a couple mills still have open order status in late July. Though most mills have exited planned maintenance, SDI Sinton continues to struggle commissioning their new mill and has entered an unplanned maintenance on their hot end due to caster shear issues. Though the mills are trying to hold a firm floor price, larger volume spot buys can be had well under published prices. As these transactions influence the published indices, this movement is indicating a further general decline in pricing is probable.
PLATE CONSUMERS
For those following the plate market, infrastructure and energy projects are providing steady price support for discrete plate. In result, the gap in pricing compared to HRC has further widened to almost $700/ton. This expands an ongoing market price savings for fabricators that can take advantage of smaller plate widths by shifting to thick Hot Roll Coil. When compared to discrete plate, plate from coil can be produced with a better surface, higher yield from customer lengths, up through 1” thick, and incorporate numerous common plate specifications (ASTM A36, A572, A656, A709).
DEMAND
Demand for steel is the point of discussion for many market watchers. Automotive build seems strong while home improvement and new appliance sales are stalling. Inventory of electric vehicles at dealers has significantly increased, but this may be more about consumer preference than strength of the sector. Overall, new car dealer inventory is almost double than what it was a year ago. Easing supply chain issues and higher finance rates have allowed auto builders to catch up. The question is whether consumers will continue to buy or hold off to ultimately result in slow production rates. Since October of 2022, the Institute for Supply Management PMI index has been below 50% and signifying a contraction in manufacturing. After showing improvement in April, the index fell in both May and June and now sits at 46%. This suggests the next 6 months will be slower than the past 6 months.
FUTURE
The CME Futures market firmed up after the mill price increases announced late last month. August sits at $940/ton with each month forward showing a gradual decline through December to $813/ton. Anticipation is that these values will drop to a new normal market price sitting below $900/ton and taking effect on forward sentiment.
Many have consistently underestimated the buying power of the US consumer and resiliency of the US economy – even the FED have been mystified. The current consensus is steering towards a slowing without entering a strong recession. Prior to the June mill price announcement, there was anticipation of the market rapidly falling to $700/ton, yet it is still holding closer to $900/ton. Although summer seasonal slowness, recent deals below index pricing, and relatively short lead times all suggest further price softening is possible, the potential of a decline to $700/ton seems increasingly unrealistic.
