All signs point to the steel market having peaked with many participants expecting prices to moderate going forward. After weeks of ever-increasing prices, the major US indices essentially rolled over last week. Supporting this sentiment of peaking, the CME Hot Roll futures for May were at $1,195 on 11 April and show prices declining throughout the summer – $920 in July and stabilizing around $849 in October. Scrap has also stopped escalating in price. Busheling and heavy melt prices both settled in April holding steady from last month. Many expect May scrap to settle lower. Scrap export trade volume was down. Little hot roll price help is expected from imports as the EU domestic price is $915 /MT ($1,008 /t) and Asian offers into the Port of Houston range from $900 to $1,000 /t for August delivery. Against these values, hedging using futures seems more prudent.
All of this follows an unprecedented $360 /t price escalation during just the last couple months. While the Fed continued to raise rates trying to slow the economy, new job creation continued to be strong and the American consumer continued to spend, albeit through increased credit use. The strength of the US economy and the slowness of response to Fed actions has been surprising and has sustained demand higher than expected.
According to Cox Automotive, new cars sales in Q1 were up solidly from 2022. March volume was up 8.6% year over year, with fleet volume up 28% year over year. New-vehicle inventory was up approximately 70% year over year and at the highest level since the summer of 2021. This may also point to a peak – incentives and discounts are again available to consumers leery of purchasing cars with both higher sticker prices and higher finance costs.
Perhaps expecting slowing demand, eight US mills scheduled mill maintenance for some period in March through May with five currently on or still planning maintenance outages through May. Mill capacity utilization is at 74%. The continued firm market demand coupled with these outages have pushed Mill order books to close for May and new orders are being pushed into June. Mill lead time is firmly 6 to 8 weeks.
Cleveland Cliffs has led in both the timing and height of spot price increases and is at $1,300 /t while other major mills’ official positions are at $1,200 /t. Several mills are not offering spot tons as they focus on meeting contract obligations.
Most market participants are buying only what is needed waiting for more moderate prices.
Written By: Mike DeBoer, Metallurgist