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

Finished steel prices in the US are struggling under COVID-19 related uncertainty and potential, still unrealized demand. 


In May, economists, and steel specific research entities projected higher prices in the industry with each quarter progressively improving in 2020. At that time, Q2 2020 represented a slump with prices firming up in subsequent quarters and continuing the upward climb into 2021. Now, Q3 2020 is being forecast as a difficult period for steel companies worldwide given the lack of steel demand in the period. 


Uncertainty from macroeconomic COVID-19 related policies, cash flows from government assistance programs, expansion of programs, and the potential for a second round of pandemic-related shutdowns are limiting price gains for US hot-rolled coil (HRC), cold-rolled coil (CRC), and rebar. 


Flat-rolled steel

Steelmakers are concerned about individual COVID-19 positive cases being traced back to steel-producing or steel processing plants, which could potentially cause a second round of shutdowns. General Motors (GM), for instance, is negotiating with the United Auto Workers union (UAW), in regard to keeping a GM assembly plant in Texas open despite the potential of the virus spreading from an employee at the plant who tested positive. The UAW requested the carmaker to revamp processes or potentially suspend production in its Texas and Missouri plants due to outbreak concerns.


Finished steel prices have softened with further discounts due to volume, freight, or payment terms in the past few weeks although official price declines have not been announced.


US HRC is at 22-24¢/lb ($485-529/mt), fob mill. The grade’s prices have declined by $11-44/mt from early May’s 24¢/lb ($529-540/mt), fob mill. Deals at 25¢/lb ($551/mt), fob mill that surfaced temporarily as automotive companies returned to production in early June were not reported in July deal discussions. US CRC is at 32-34¢/lb ($705-749/mt), fob mill.



Rebar prices are at 29-31¢/lb delivered at present as reported by various buyers on the East Coast, Southeast, and West Coast, thereby correlating to 27-28¢/lb ($595-617/mt), fob mill. Rebar prices decreased by $22/mt against early June prices at 28-29¢/lb ($617-639/mt), fob mill.


Domestic mills are tracking import competition closely. For example, shipments into the US were reported at 26.5-27¢/lb ($584-595/mt) fob Houston port. Some imports are being offered not only on the coasts but also in the Midwest into St. Louis and up to Minnesota as the product is brought via New Orleans.


An importer noted that large shipments into the US market are still limited, even from Canada, despite the free trade agreement, due to the fear of shipping to the US and facing additional commerce barriers. Imports not only continue facing Section 232 but also declining credit insurance availability as the top three insurers have slashed financial limits and weekly require extensively more coverage acceptance.


Fabricators are facing project cancellations and postponements from municipalities, cities, and states due to deficit budgets and overall constraints that will require federal support. Revenues into government agencies dropped sharply with COVID-19 social distancing rules, but some market participants believe the increased level of project cancellations in the past two weeks are politically motivated for more stimulus support.


With a 56pc capacity utilization, long lead times are not a concern for buyers. However, uncertainty is limiting larger buys at, what some referred to as, bargain prices. Moreover, with scrap prices trending down from zero to $20/gt for cuts and fragmented scrap grades in the US market during last week’s July trading week, prices negotiated this week will continue under pressure. 


Assuming a successful US infrastructure bill is passed soon by Congress, it will take nine months to a year before any meaningful progress in the physical steel markets. Market participants acknowledged that while futures and stock markets may show a positive effect for companies if a bill passes, the physical trading aspect of steel will require allocation of funds, project design, and appropriation of money to vendors. The nine-month mark is optimistic if the design is finished and only financial support is required for the project to proceed.


The short-term outlook for finished steel is relatively flat but soft for the next month.

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