By John Packard and Tim Triplett
Are steel prices witnessing a dead-cat bounce or the beginning of a bullish re- versal? The market appears split on the
feline versus bovine analogy. In other words, a
huge divergence of thought exists on what is
going to happen to steel prices over the next
three or four months.
The benchmark price of hot-rolled coiled
(HRC) steel peaked at around $915/ton last summer, according to the Steel Market Update HRC
Index. HRC then began a steady descent that
took it down to $670/ton by late January—a 27
percent decline. Since then the price has recovered, moving to over $700/ton. Will this be a soft
bounce, or is it the beginning of a bull run?
Some bullish analysts forecast that the price
of hot-rolled steel could run back up as high as
$900/ton. With an assist from the Trump admin-
istration’s Section 232 national security tari;,
which puts a 25 percent duty on foreign steel, do-
mestic steel mills are operating nearly at full ca-
pacity. With less competition from imports and
pent-up demand from the harsh winter, the mills
are hoping to collect two $40/ton price increases
announced in January and February, with more
likely to follow if those prove successful.
In the dead-cat camp are analysts who are concerned about the staying power of Section 232
tari;s, which are being challenged in Congress,
in the courts, and in various trade negotiations.
It appears increasingly likely that the Trump administration will have to rescind the tari;s on
steel imports from Canada and Mexico to secure passage of the U.S.-Mexico-Canada trade
agreement sometime this year. Opening the U.S.
border to steel from the north and south could
cause a surge in supply and drive prices back
down to $600/ton, making the recent uptick in
prices just a short-term bounce.
Current Steel Prices
As of March 12, Steel Market Update’s Price Momentum Indicator was set at “higher” on flat-rolled steel, as lead times have begun to extend
and prices have begun to move up following
the mills’ two announcements (see Figure 1).
(All prices are FOB the mill, east of the Rock-
ies.) The price of hot-rolled steel averaged $705/
For steel plate, the SMU average was $990/
ton ($49.50/cwt) FOB delivered to the custom-
er’s facility. SMU’s Price Momentum Indicator
on plate was “neutral,” meaning prices were ex-
pected to remain steady over the following 30
to 60 days. This shift occurred because SSAB
made a $40 price increase announcement a few
days prior to this article being written, and it is
SMU’s policy not to influence the market when
announcements are made. Plate lead times were
six to nine weeks.
Distributors Supporting Mill Increases
Steel Market Update canvasses the flat-rolled
and plate steel markets twice a month through
the use of a questionnaire to end users, service
centers, steel mills, and trading companies. One
of the key indicators SMU tracks is whether ser-
vice centers are raising prices or continuing to
o;er discounts. The latest survey results show
that flat-rolled service centers are beginning to
support the concept of higher steel prices. Dis-
tributors are raising spot pricing on their end-
user customers, which is helping to support the
price increases announced by the domestic mills.
In the first week of March, 38 percent of the
manufacturing companies responding to SMU’s
questionnaire reported that their service center
suppliers were raising spot prices—twice the
percentage reported two weeks prior. At the
same time, the percentage of manufacturers
who reported falling spot prices declined from
39 percent to 14 percent (see Figure 2).
Service centers, responding independently
from the manufacturing companies, reported
similar results. Forty-one percent said they were
increasing pricing to their spot customers. Only
10 percent admitted they continued to o;er discounts to customers to secure the sale. Figure 3
shows the service center results.
for more information
Unpredictable steel prices to remain so
Recent price increases seem to be sticking,
but the future of the Section 232 tari;s clouds
any ability to forecast a trend
MANAGEMENT » STEEL NEWS
» Figure 1
With steel price increases looking like they might not erode anytime soon, will the steel mills feel confident enough to
continue the trend, or will changes in the Section 232 tari;s situation end any momentum for further price hikes?