Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

ArcelorMittal, Nucor, NLMK USA, and Nucor increased flat rolled steel prices in the first week of May but no price increases have been announced for longs products to date. As a result, US flat rolled prices have gained while rebar prices have inched down.  


Mill price increases raise flat rolled

ArcelorMittal, Nucor, NLMK USA, and other mills increased flat rolled steel prices in the first week of May by $40-60/nt. These price increases moved HRC to a base price of $500/nt at most mills. However, market participants expect another round of price increase announcements to support minimum base prices as the automotive supply chain restarts over the next couple of weeks. Some spot trades are beginning to surface for HRC at $500/nt fob mill but low volumes remain low.


The early May announcements bumped up HRC prices by a fraction of the intended increase with spot deals for HRC moving up by $11-44/mt to $480-490/nt ($529-540/mt) fob mill from $440-480/nt ($485-529/mt) fob mill in mid-April. The lower prices in range were on volume discounts as mills sought to trim inventories. Order to delivery lead times at mills stand at 3-4 weeks currently. These are significantly shorter than the historical levels of 6-8 weeks.  


Market participants told Davis Index they expect prices to find further support as the US recovers from COVID-19 related shutdowns across automotive, construction and other industries, even as flat rolled sheet supply remains tight from the idling of blast furnaces by US Steel, ArceloMittal and others. 


Longs deteriorate

Unlike flat rolled products, mills have not made price announcements on long products. The OCTG and pipe manufacturers, already facing weak demand in Q1 2020, were largely affected by the drop-in oil prices and decreased demand with COVID-19 stay-at-home orders enforced worldwide. 


A bleak outlook for the oil and gas industry isn’t helping either. New drilling projects are not coming online given the surplus of oil and gas. Pipeline projects with an outlook of five years may still see capital investments but shorter-term oil drilling potential paints a dim picture for OCTG for the next three years. 


The demand for merchant bars—typically used in light commercial construction, joist manufacturing, industrial and commercial fabrication, and in the manufacturing process of trailers and other heavy equipment—is also low.


The rebar business remains strong. Activity in rebar has increased as contractors accelerated jobs fearing future shutdowns. Some market participants told Davis Index they are also concerned about changes to financing options as banks get stricter with financing loans citing longer questionnaires that are difficult to answer with any certainty because of COVID-19. These tighter financing terms and amounts will limit working capital at fabricators and distributors while limiting project starts. 


Rebar was trading at 29-31¢/lb ($580-620/nt, $639-683/mt) fob mill in late February. The price range remained unchanged in March and April. However, in May, rebar prices fell to 28.95-29.95¢/lb ($579-599/nt, 638-660/mt) fob mill, down $1-23/mt. Market participants can negotiate slightly further price discount depending on terms and volumes. 


At the mill level, rebar mills are trending down by 20-25pc of usual production market participants told Davis Index.

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