Final Thoughts

August 19, 2021

Steel Market Update’s check of the market this week shows HRC setting a new record at $1,955 per ton, just a stone’s throw from a $2,000 mark that was once unimaginable but now seems inevitable. As one observer opined: “I don’t expect to see any actual easing until we get to $2,000 a ton.”

Very few of the steel executives responding to SMU’s questionnaire this week reported any increase in available tons or any easing of spot pricing. “We remain either on strict allocation or getting no-quoted. We’re definitely watching the automotive/microchip situation closely to see if more tons appear in the spot market,” said one source.

Despite the experts’ predictions of a sudden and steep drop in steel prices to come, almost all the comments we received from service center and OEM executives this week describe a gradual correction once steel prices eventually begin to normalize. Here’s a sampling:

“It will be gradual. The mills have too much control now.”

“There is so much pent-up demand, I don’t see how prices could collapse. And the mills have proven they will take production out to keep the prices up.”

“If lead times crumble, it will be the Titanic. If they can shore up lead times with outages, the slide will be gradual.”

“The extensive slate of planned maintenance outages will keep the market supported through November, at least.”

“I expect a rapid 5-10% drop because current spot prices have been leading the indexes by $100 a ton. However, the indexes will catch up in the next few weeks as more market participants become concerned about inventories and struggle to pass along the ‘spot price.’ Then I expect a more gradual easing through October, followed in Q1 2022 by a rebound based on improved auto demand (chip shortage eases).”

“I think the consolidation that has taken place over the last five years, along with the mix continuing to shift away from integrated mills to EAFs, bodes well for mill discipline. But at the same time a buyer strike, when there is blood in the water, could make for some big drops. Maybe a stepladder down, where we drop, then stabilize a little, then drop, then stabilize.”

“It’ll be a gradual correction, at least in comparison to (1) previous cycles and (2) the rapid climb upwards of these past 56 weeks. Between the outages of Q4, solid-to-steady overall demand, inventory rebuilds, infrastructure, China mandating their own restrictions, the eventual automotive normalization/rebuild and U.S. mill discipline/consolidation, things truly are different this time. For real!”

SMU Events

SMU’s next Steel 101: Introduction to Steel Making & Market Fundamentals Workshop is set for Oct. 5-6. You can learn more about the Steel 101 workshop by clicking here.

The Introduction to Steel Hedging: Managing Price Risk Workshop will be held Nov. 2-3. You can learn more by clicking here.

Both events will be virtual, so no need for COVID concerns.

SMU will also co-host the Tampa Steel Conference, along with Port Tampa Bay, on Feb. 14-16, 2022, at Tampa’s Marriott Water Street Hotel. This event will be live and in person and will include a more extensive conference program than in the past. You can learn more by clicking here.

As always, we appreciate your business.

Tim Triplett, SMU Executive Editor, Tim@SteelMarketUpdate.com