Speed Dating for the Steel Industry: Where Will Prices Go From Here?

On Monday most of the steel people were running around Manhattan attending steel meetings with customers and/or suppliers or attending various industry sponsored events. Steel Market Update attended the Platts NYC Steel Forum which was held in the Hard Rock Café and then later that evening we attended a Bank of America Merrill Lynch sponsored dinner with metals and mining analyst Timna Tanners and her team, as well as 20+ steel people and approximately 30 investors.

The key commodity in these meetings is trying to learn as much as you can from as many sources as possible in the shortest period of time. Speed dating for the steel industry.

What we heard was a wide variety of opinions and there is not a consensus as to exactly where steel prices are headed from here, at least not among the analysts.

We heard one analyst, Aldo Mazzaferro express his opinion to the Platts Steel Forum group that benchmark hot rolled prices would probably remain range bound at current levels for the remainder of the year plus/minus $10 per ton.

Timna Tanners, metals and mining analyst from Bank of America pegged HRC to average $620 per ton for the second half 2014.

The Platts/SBB and The Steel Index people seems to be relatively optimistic and did not believe that prices will move too much lower from here. Although they did admit there is some sag in the market at this moment. Platts just moved their hot rolled coil average down to $665 per ton on Monday.

We heard this afternoon (Tuesday) from those who saw Peter Marcus speak at the World Steel Dynamics Steel Success Strategies that his opinion was U.S. prices for both scrap and steel were too high compared to world prices.

I got a note from a hedge fund manager who reported that Goldman Sachs believes there is little downside from here and that U.S. steel prices can live in a world with a $150 per ton spread between U.S. and domestic prices vs. the more traditional $100 per ton spread.

In other words, unlike last year when just about everyone had booked business at lower prices by the time they left New York City, this year there is a divergence of opinion. Most believe there is short term price risk and then we have mixed opinions out three months into the future as to what direction prices will move.

As always, time will tell.