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In an exciting expert article, thefabricator.com site looks at steel price trends in 2020. In doing so, the author goes once completely through the Covid19 year and the impact on the steel industry.

Could steel prices soon reach $1,000/ton in the new year?
Could steel prices soon reach $1,000/ton in the new year?

Prices for flat steel at an incredible high

Flat steel prices ended 2020 at an incredible high – a seemingly impossible recovery from the incredible low in the spring when the coronavirus sickened the U.S. economy.

Benchmark price for HRC steel at $900/ton

By mid-December, the benchmark price for hot-rolled steel was rapidly approaching $900/ton, double the mid-August low. For a market to recover that far in just four months is unprecedented. Hot-rolled coil prices continue to set records for the speed of this price cycle, reports CRU, the parent company of Steel Market Update.

Law of supply and demand

The basic explanation for this unexpected turnaround is a lesson in the laws of supply and demand. Steel consumption has recovered faster than available supply. Not only has demand increased, but these increases have come at a time when inventories were historically low and needed to be rebuilt to meet rising demand.

Steel mills shut down blast furnaces

Steel mills quickly shut down furnaces and curtailed production in the second quarter when the government ordered non-essential operations to close to contain the spread of COVID-19. Since then, they have been strategic about how quickly they bring idled capacity back online. In addition, several plants experienced unplanned outages that further disrupted production. Combined with tariffs and duties that prevented imports, steel supplies tightened to the point where some OEMs and processors were willing to pay a high premium to secure much-needed raw materials.

Foreign steel more than competitive with tariffs

Steel prices have become so high that foreign material is now competitive, even with the tariffs. Many purchasers have begun to seek alternative sources outside the country to meet their steel needs. Steel Market Update’s Dec. 7-9 market survey found that about one-third of purchasers had already ordered foreign steel and one-third planned to buy foreign steel, while only one-third intended to continue buying domestically.

“Foreign steel is becoming more popular,” said one respondent. “Some purchasers are desperate to buy at almost any price. I haven’t seen a market like this in over a decade.”

Question: when will steel supply normalize?

It’s only a matter of time before steel supplies, and therefore prices, normalize. The only question is when. The new year should bring increased steel production, easing tight supplies. Recent capacity additions include the startup of the new electric arc furnace (EAF) at Big River Steel in Osceola, Ark. in November, doubling the mill’s capacity. U.S. Steel announced the restart of blast furnace No. 4 at its Gary Works mill in Indiana in early December. Similar announcements from other steel mills are expected to follow.

Hot-rolled sheet could top $1,000/ton mark

CRU estimates that by the fourth quarter of 2020, mill capacity has increased nearly 18% from the second quarter. However, during the same period, apparent net consumption increased by 21%, explaining the supply/demand imbalance that has driven steel prices so high. CRU forecasts that supply will increase faster than demand in 2021 and that steel prices will peak in the middle of the first quarter. In the meantime, there is still a possibility that hot-rolled sheet will exceed the rare $1,000/ton mark, last reached in 2008.

Source: thefabricator.com


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