STEEL NEWS

MEPS: is there a limit to the rise in US steel prices?

US buyers are taking a break from the current dizzying rise in steel prices, but as they celebrate Thanksgiving, many will wonder what to expect when they return to the negotiating table, according to British think tank MEPS International Ltd.

After a rapid recovery over the past three months, the hot rolled coil price hit $ 700 / t by mid-November, more than 50% above its August low. Several US producers are reported to be offering $ 840 / $ 850 / t for new orders. So what's behind this staggering price hike?

The imbalance between supply and demand is now undoubtedly the main driver of US steel prices. With limited access, the scales tilt decisively in favor of factories.

Steel companies have slashed production sharply amid the Covid-19 pandemic, and both distributors and end users have allowed their stocks to decline. As demand recovers, many steel buyers need to replenish stocks, but find that the factories simply do not have material to sell, as evidenced by the ever-increasing delivery times.

Capacity utilization in the US continues to rise - currently at 71.5% - but remains much lower than in the same period last year. Until steelmakers increase production to meet current demand, prices are likely to continue to rise.

The cost of scrap and other materials for factories has only increased slightly in recent months. In addition, the traditional slowdown in market activity can be expected at this time of year. It is clear, however, that the underlying cost of steel in the United States is currently not strongly related to both raw material costs and seasonality, two factors that tend to strongly affect prices.

There is also a shortage of steel in the Canadian market, exacerbated by the recent Stelco furnace lining and cyberattack. There were also supply problems from ArcelorMittal and Algoma. Imports are becoming increasingly attractive to Canadian buyers due to the rapid rise in local prices and a lack of domestic supply.