Steel Trends in March 2023

By Andrew Wilson, Vice President, Supply Chain, Central States Manufacturing. 

The steel market is forever changing, and recent events have shifted prices significantly.  

In the few months since sharing an update on the steel market, there have been many shifts in the trade. From a $200/ton drop in price of HR Steel at the end of 2022, to a new steep prediction of prices rising to nearly $1,300/ton by this summer, we’re learning that market predictions can constantly change and are not always consistently accurate. The unexpected rise in prices is staggering and surprising to many, as experts had predicted the 2023 prices would stay within the $650-$700/ton range.  

The earthquake damage in Turkey did not significantly impact the overall industry, except for a temporary pause as people responded to the immediate devastation. While it is possible that this could cause an increase in US scrap prices as more material is exported in the short term, it seems unlikely to have a lasting impact, the current scrap supply situation is not unusual given the seasonality. 

Lead times have crept up slightly, but the supply/demand equation doesn’t seem to support the increases we are seeing. 

Mills are still operating below their historic utilization levels, some additional supply shortages have been seen due to the ongoing bankruptcy with AHMSA in Mexico, which has reduced available capacity within USMCA, however, this alone does not explain why lead times are beginning to show signs of increasing along with pricing. Import prices are becoming more attractive once again as near-shore costs rise, which will inevitably lead to an increase in the amount of imported steel. It will take several weeks for this increase in imported steel to flow through to the markets, but I expect this is going to put some downward pressure on prices in the mid-term. 

The news from financial markets is often conflicting, but it appears that the increased cost of borrowing money has not yet had a significant effect on our nation’s spending and construction activity beyond the normal seasonal trends. A slowdown is anticipated, but it may take some time to manifest throughout the construction lifecycle. Some industry analysts predict an 18-month lag between costs and construction. 

Many of the mill’s customers have shifted from contracted purchases to increased spot market strategies after watching the projected price of material decrease, expecting 2023 to be more of a “buyers’ market.” There is a commonly held belief that the mills are driving the spot market pricing up to secure better, fixed contract pricing. 

One thing is certain when it comes to predicting steel prices, the future is unpredictable. I expect elevated prices to persist for the next few months, before market pressures of an economic slowdown and the full benefit of actual capacity increases in the mills correct this and begin to push prices lower again and stabilize for the remainder of the year. The impact of possible future black swan events or a better-than-expected shift in the economy could, of course, totally change all that! 

Original article source: Central States Manufacturing