Are Steel Prices Going Up Or Down – US steel prices bottomed out in early December, then started to rise. Hot rolled coil prices are up more than 8% from their December lows. Meanwhile, plate prices fell for the first time since September.
Eager to continue the bullish momentum, Nucor announced another $50 per short ton hike in rolled steel prices. The steelmaker previously raised its steel prices by $60 per short ton in late November. This latest increase follows a $50 per short ton price increase by Cleveland-Cliffs. The Ohio producer implemented its hike on Dec. 13, bringing the minimum HRC price to $750 per short ton.
Are Steel Prices Going Up Or Down
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The uninterrupted weekly gains since HRC prices reversed in early December suggest an increasingly bullish market. This means further upside potential, at least in the short term. Meanwhile, domestic producers have capitalized on the erosion of competitively priced imports. US HRC prices are now below European prices and within a narrow range of Korean prices. Chinese steel prices, however, still occupy the lowest price tiers.
In addition to imports, the market appears to have priced in higher steel prices. Indeed, US Midwestern 3-month future HRC prices currently sit at a premium of approximately $120 per short ton over current HRC prices.
Up to this point, the US economy has proved resilient. However, the Federal Reserve’s combined rate hikes will continue to weigh on the domestic economy in 2023. This will certainly test the control steelmakers currently have over prices. Indeed, the establishment’s lead times remain short, suggesting that supply is readily available and accessible.
This plentiful supply will prevent the same sharp rally in steel prices seen after the pandemic, when steel was in short supply. And while it may not prove strong enough to arrest any further increases in the near term, the demand erosion could see the macro downtrend continue further.
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On Dec. 28, Nucor announced it would keep plate prices unchanged at $1,480 per short ton. This was surprising considering the company only dropped its prices a month earlier. However, throughout the year, the sheet metal market proved more resilient than other forms of steel. Prices have mostly moved sideways in 2022, slowly slipping off their peak. However, the decline appeared to accelerate last month and plate steel prices are currently at their lowest levels since July 2021. Whether or not Nucor and other steelmakers can stabilize the increasingly bear market looks increasingly uncertain.
Just before the new year, Nucor also announced that its Brandenburg, KY plate had officially laminated its first plate. They also said the plant will begin increasing its capacity by 1.2 million short tons annually during the first quarter. The additional capacity will follow as Algoma Steel and JSW Steel complete their modernization projects. As steel mill lead times remain short, the market looks increasingly primed for year-round oversupply. This will likely continue until and unless demand picks up, which affects steel prices.
Unlike HRC, plate prices are still significantly higher than their global counterparts. This means that imports will continue to weigh on steel prices, even if the “Buy American” provisions insulate prices to some extent. The spread between HRC and the plate will also add downside pressure. Naturally, the opposite price directions have seen the spread narrow in recent weeks. However, lower HRC prices have provided an opportunity for replacement with thicker grades for some manufacturers.
Fortunately, infrastructure and renewable energy will continue to support the plate for quite some time. Clearly, demand pressures pose a downside risk to other forms of steel. However, government funded projects and incentives will act as a limiting factor for the future decline in plate prices.
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That said, the full extent of this demand, particularly as it relates to wind towers, will likely start to hit the market in the long-term rather than the short-term. There will also be a gap between now and the peak of slab-hungry infrastructure construction. Due to the increase in domestic plate capacity, this could mean a substantial downward movement for plate prices until the next trend reversal.
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