HRC Prices: Market Commentary
A Fundamentals View
Mills took the opportunity to bump up HRC prices during the month of May. And as MetalMiner previously reported, the price increases helped to increase lead times. Extended lead times often lead to additional price gains. However, service center inventories remain elevated, though most analysts see that falling steadily over the next couple of months.
The reality is that the world is awash in steel and China has not rid itself of excess capacity, thereby sending it out in the form of exports. And though China claims the rise in exports is due to higher global demand and Chinese “export competitiveness,” we doubt both of those claims. Meanwhile, Chinese domestic steel prices continue to decline.
Global and US domestic steel producers gained a bit of ground from a stock market performance standpoint, but most of the producers performed better one year ago. We would expect to see improved stock performance on the back of rising steel prices.
The HRC Price Outlook
HRC prices seem to have begun to stabilize after falling for nearly a year by closing the month of May at $456/st. However, we remain hesitant to call bottom, particularly as the broader commodity markets remain bearish and the dollar holds stronger. It would appear challenging for HRC to make any bold price moves to the upside.
CRC Prices: Market Commentary
The Import Situation
It’s no wonder mills have kept a close eye on steel imports. Steel import data provides a mixed message. On the one hand, total steel imports declined in April by 3.7% compared to March. However, over that time period, cold-rolled sheet imports increased by 21%. CRC prices closed the month of May at $579/st, barely up from $576/st in April. New June data has CRC prices up even a few more dollars per ton, indicating this metal may be trying to solidify its floor.
Inventory levels remain the true test of steel markets. According to the most recent MSCI data, service center steel product inventories fell 0.8% from last month. However, with flat-rolled stocks at approximately 6m tons, it will still take some months to bring those levels down (and hence new orders). Meanwhile, the steel industry capacity utilization rate was 72.3%, down 7.2% from a year ago.
The CRC Price Outlook
CRC prices seem to have begun to stabilize after falling for nearly a year. However, we remain hesitant to call bottom, particularly as the broader commodity markets remain bearish and the dollar holds stronger. Like HRC, it would appear challenging for CRC to make any bold price moves to the upside.
So What Should My Industrial Buying Strategy Be?
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