US domestic flat-rolled and rebar prices are now reaching high points that were not expected this year given the global economic slowdown from the COVID-19 pandemic. Demand improved in Q4 after Q2 stoppages, driven by stock replenishing at steel centers and a rebound in automotive production to pre-pandemic levels. Initial expectations of steel center replenishments ending in November did not materialize continued demand and tight finished steel supplies pushed lead times out to 10 weeks from four weeks in August. Mill production schedules have quickly filled up for December and spilled into Q1 2021. With demand catching up to supply, domestic mills are expected to continue strong production schedules in January and February while assessing stronger pricing.
Higher finished steel prices are being driven by rising raw material prices. As scrap prices increased in the early December scrap trade, finished steel representatives began to factor in higher sales prices for their goods. Not only is the market facing higher scrap prices but also higher scrap alternative prices such as imported basic pig iron (BPI), direct reduced iron (DRI) and hot briquetted iron (HBI). Due to this, semi-finished alternatives such as billet and slab prices are also surging. Iron ore pricing is also booming compared to year-ago levels.
US December scrap prices increased predominantly by $70-85/gt against November settled prices across secondary grades depending on region. A few regions such as the Carolinas increased by $60-65/gt across all grades against November settled prices and in Philadelphia, some truck shippers were more apt to be up $50/gt. Prime grades increased prices in December by $70-120/gt against November settled prices. Mills seeking scrap inventories began to move trade levels into January pricing. A few obtained additional scrap volumes but most scrap sellers preferred to wait for January negotiations.
The benchmark for scrap price hikes in January will depend on the effective sales prices in December. Those who sold at $70-85/gt are reporting expectations of a $50/gt increase at the minimum. While those that achieved a portion of the January pricing in December trading are expected to increase their January prices by a more modest number of a $20-30/gt increase. Dealers reported that higher scale prices are taking effect in increasing flows at yards which should help balance inflows against demand. However, some scrap dealers believe that the January demand may be higher than feasible on the tight supply inventories in winter and could result in further price increases of $20-30/gt against the expectations above.
Due to the tightness in scrap flows, scrap prices have surged globally. US spot pricing for hot-rolled-coil (HRC) is trending at $880-$900/nt ($969-$992/mt) fob-mill Midwest with many market participants expecting further increases announced weekly seeking to close the gap between list price and effective deals. HRC prices are up $485/mt against mid-August prices and $353-363/mt against mid-September prices. Cold-rolled-coil (CRC) spot prices are at around $1,020-1,060/nt ($1,124-1,168/mt).
In rebar, market sources report that after tons that were price-protected, companies purchasing rebar are realistically looking at $700-720/nt ($771-793/mt) fob mill Midwest this week. Rebar deals on the West Coast are trending $20/nt higher than the Midwest. Present rebar prices are up $121-132/mt against mid-September prices and $165-176/mt against mid-August prices.
Internationally, HRC in the UK and EU is also priced firm with limited availability. In Asia, HRC prices have been rising but expected to pause this week as buyers resist. Turkey domestic and export HRC and rebar prices have soared on higher scrap import costs. The latest deal at $419/mt cfr Turkey is $126/mt cfr higher than deals in late to early October which were trending around $293/mt cfr. Turkey is facing limited US scrap offers and some believe that March shipments could see numbers at close to $440-450/mt cfr, up $20-30/mt from the latest deal.
An additional sign of improvement in the US is the slow but growing rig count. For the week ended December 11, 2020, Baker Hughes reported US oil and gas rig count rose by 15 to 338 units against the previous week. Canada also increased its rig count on a weekly basis by 9 to 102 units.