Steel just keeps getting cheaper for fabricators and manufacturers—a trend with no clear end in sight. That’s good news for steel users, but not so good for holders of inventory.
A check of the market in the week of Feb. 7 by Steel Market Update (SMU) showed the benchmark price for hot-rolled coil (HRC) dipping below $1,200/ton ($60/cwt) for the first time in a year. As of the second week in February, the average hot-rolled price had declined to $1,190/ton, a plunge of $765/ton, or nearly 40%, since peaking at $1,955/ton in early September 2021. The downward trajectory is almost as steep for cold-rolled and coated steel products as well.
Steel producers and distributors enjoyed record profits in 2021 as steel prices spiked to historic highs when COVID and the government’s efforts to stimulate the economy threw steel supply and demand out of balance. In 2022 as steel prices normalize, mills and service centers can’t expect the same windfall. Their results will depend on how much longer, and how much lower, steel prices decline.
SMU surveys the market each week to keep track of industry trends. In early February our questionnaire asked: Where do you think HRC prices will be at the end of Q1 2022? Predictions were all across the board (see Figure 1), but 40% said they expected the price to be less than $1,100/ton. A weighted average of all the responses put the consensus prediction for the HRC price at roughly $1,125/ton by the end of March.
SMU’s questionnaire also asked: When will HRC prices find a bottom? More than half (64%) were betting the downward slide will be over by the end of Q2 (see Figure 2). But another 15% believed it could take until the end of the year, if not into Q1 2023, before prices plateau.
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