How Can Steel Procurement Professionals Survive a Recession?

The irony is not lost on steel buyers when they hear the phrase “the cold, hard truth.” After a massive spike at the beginning of March, HRC, CRC, and HDG steel prices are finally losing momentum. However, as any savvy procurement professional knows, they are not out of the woods yet. Recession indicators continue to rear their ugly heads, leaving many bracing themselves for the worst market demand since 2008.

Experts continues to provide mixed predictions regarding upcoming steel prices and demand. Some sources suggest that demand will grow in 2023, while others believe an incoming recession will drastically impact costs. Either way, steel buyers and suppliers need to prepare themselves to survive the recession, whatever it may bring. This means looking for cost-saving opportunities wherever possible.

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Steel Prices: HRC

Price action for HRC continues to slow down in the short term, largely trading sideways. However, this represents a medium-to-long-term bullish pattern, meaning the rally will continue if price action shows a breakout to the upside. On the other hand, a new downtrend may begin if HRC steel prices reverse here and break down.

Numerous factors are at play with HRC prices. Suppliers were eager to keep prices up after hitting bottom in early December last year. Now, prices are losing momentum again following that sharp spike on March 1^st. That said, the market is yet to confirm a true, long-term uptrend. As MetalMiner discussed in its Steel MMI, producers’ ability to keep raising steel prices at this momentum remains uncertain. This is even more true considering the many recessionary signs haunting the market.

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Recommendations for Steel Buyers

One thing steel-buying organizations can do to help leverage steel prices in recessionary times is increase spot purchases. When metal prices trade sideways, make “spot” purchases should be utilized as much as possible as opposed to buying forward. Some will recognize this strategy as “buying as needed.”

Another thing steel buyers can do is evaluate their inventory levels. Back when everything was in short supply, buying organizations increased on-hand inventory levels across the board. Now, with the demand off and material in greater supply, they can strategically “right size” inventory levels for the items purchased.

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Steel Prices Could Face Extreme Volatility

Steel buyers should expect fluctuating steel prices throughout 2023. This is due to a variety of factors, including supply and demand changes, production costs, global economics, and the U.S. economy. Prices may increase, while a decrease in demand may lead to lower prices. Whatever happens, steel buyers need to stay informed and monitor market trends to make knowledgeable purchasing decisions.