Back in early January we posted our expectations for the steel market throughout the course of this year. And though we called for higher steel prices throughout the year, we thought pricing would come in the form of a roller-coaster. Whereas we don’t anticipate any short-term dips in steel prices, the ferrous scrap markets have taken a breather so to speak. According to ISRI’s latest report, “Scrap Price Bulletin did report falling composite ferrous scrap prices this week, with No. 1 dealer bundles down $16/gt for the week to $465.17, shredded scrap down $21/gt to $454.83 and No.1 HMS off nearly $20/gt to $420.83, while other sources were reporting even bigger drops in both domestic and export ferrous scrap prices.
Despite these scrap price dips, all of the current pricing, however, appears higher than historical averages so we would not suggest steel-buying organizations will see any steel price drops in the near term. In fact, The Steel Index suggests lead times for all forms of steel (with the exception of HRC which has held steady and rebar which continues to decline) have lengthened, further suggesting that recent price increases will likely stick at least for the short term. Another indicator we track involves domestic capacity utilization. For the week ending February 12, the AISI (American Iron and Steel Institute) reported capacity utilization had increased from 74.0 during the week of February 5 to 74.8%. These utilization rates appear higher (slightly) than domestic capacity utilization during 2010, which hovered in the low 70% range, though global steel production averaged 73% throughout the year.
The Steel Index reports domestic HRC pricing in the upper $820+/ton range and CRC pricing in the $910+/ton range. These represent 15+% increases for HRC and over 13.5+% increases for CRC for the past four weeks. And though HRC and CRC prices have also risen in China, (The Steel Index reports HRC at $685/ton and CRC at $795/ton vs. our own MetalMiner IndX HRC at $704/ton and CRC at $825/ton) the discrepancy in prices between the domestic and Chinese markets would suggest we might expect to see an increase in import activity (of course the discrepancy between our own MetalMiner IndX pricing which reflects local China pricing and not export pricing, makes for an altogether different analysis).
Source: US Data From Steelbenchmarker and The Steel Index, China data from MetalMiner IndX(SM)
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We will continue to monitor key steel input costs and related trends for further steel price direction.