U.S.Steel Corp (NYSE:X) kicked off another round of price hikes this week for benchmark steel products, though industry observers don’t see the gain as signaling a post-pandemic rebound in demand.
The second-largest U.S. producer raised prices on new orders of flat-rolled products by a minimum of $60 a ton, according to a letter sent to customers and seen by Bloomberg. Supplies remain tight, mostly because steel-plant usage has been running near multi-year lows as Covid-19 pandemic lockdowns sapped demand for areas including construction, automobiles and appliances.
“There’s a lot of capacity off the market that’s being restricted that will ultimately come online,” Phil Gibbs, an equity research analyst at KeyBanc Capital Markets, said in a phone interview. “Demand is improving for sure at the margin, but this is really a supply-side squeeze and those tend to be short-lived.”
U.S. steel plant usage is running at about 65% capacity, down from about 80% a year ago, and was near half capacity at the peak of lockdowns in the spring. Researcher CRU estimated last month at one of the industry’s largest conferences in North America that consumption of U.S. steel sheet -- the benchmark product -- will drop 18% in 2020 and is unlikely to return to pre-pandemic levels until some time in 2022 to 2023.
U.S. Steel raised its steel sheet prices by at least $40 a ton in July, following a similar increase in May. The producer said the second quarter was the trough, and Chief Executive Officer David Burritt said he’s confident that the worst of 2020 is behind them, though uncertainty will remain through 2021.
“I think they got away with the last few price hikes and now it appears to me it’s just getting too aggressive; arguably unwarranted,” Keybanc’s Gibbs said.