US steel prices hit the bottom at the beginning of December 2022, then started to rise again. Hot rolled coil prices rose more than 8% from the lowest level in December. Also, plate prices dropped for the first time since September.
Overall, the Crude Steel Monthly Metal Index (MMI) rose 7.98% from December to January.
Steel Producers Continue to Increase in Flat Product Prices
Nucor announced another $50 per ton increase in flat rolled steel prices, wanting to continue the upward momentum. The producer had previously increased its steel prices by $60 per ton in late November. This latest increase follows Cleveland-Cliffs' price increase of $50 per short ton. The Ohio-based producer implemented its increase on December 13, raising its minimum HRC price to $750 per short ton.
Has the Trend Reversed?
The weekly uninterrupted increases since HRC prices reversed at the beginning of December indicate that the market is increasingly bullish. This means more upside potential, at least in the short term. Meanwhile, domestic producers benefited from the erosion of competitively priced imports. US HRC prices are now below European prices and within a narrow range of Korean prices. However, Chinese steel prices still occupy the lowest price levels.
Beyond imports, the market seems to have priced in rising steel prices. US Midwest 3-month HRC futures prices are currently at a premium of around $120 per short ton to current HRC prices.
Up to this point, the US economy has proven resilient. However, the Federal Reserve's compound rate hikes will continue to put pressure on the local economy in 2023. This certainly looks set to challenge the control that steelmakers currently have over prices. Short factory lead times indicate that supply is ready and available.
This abundance of supplies will prevent the same sharp rise in steel prices seen in the aftermath of the steel-scarce pandemic. And while it may not be effective enough to stop further short-term gains, demand erosion could cause the macro downtrend to continue further.
Nucor Keeps Plate Steel Prices Stable as Capacity Increases
On December 28, Nucor announced that it will keep plate prices steady at $1,480 per short ton. The market was surprised by this pricing, considering the company had lowered prices just a month ago. However, throughout the year the plate market has been more resilient compared to other types of steel.
Prices moved mostly sideways in 2022 and slowly slipped down from their highs. However, the declines appeared to accelerate last month, and plate steel prices are now at their lowest levels since July 2021. It seems increasingly uncertain whether Nucor and other steelmakers will be able to offset the increasing downward trend.
Just before the new year, Nucor also announced that its Brandenburg, KY plate mill has officially rolled its first plate. They also stated that the plant will begin to increase its 1.2 million short tons/year capacity during the first quarter. Additional capacity will come into play when Algoma Steel and JSW Steel complete their modernization projects. As factory lead times remain short, the market looks increasingly poised for oversupply throughout the year. This will likely continue until demand increases, which will affect steel prices as a result.
Infrastructure Projects Support Plate
Unlike HRC, plate prices are still considerably higher than their global counterparts. This means that while the "Buy from America" provisions will isolate prices to some extent, imports will continue to put pressure on steel prices. The spread between the HRC and the plate will also increase the downward pressure. Of course, opposing price directions have seen this spread narrowing in recent weeks. However, low HRC prices provided an opportunity for some producers to substitute thicker grades.
Fortunately, infrastructure and renewable energy will continue to support the plate for a while. In this case, demand pressures pose a downside risk to other steel grades. However, government-funded projects and incentives will serve as a limiting factor for future plate price reductions.
With all this, all of this demand will start to hit the market in the long term rather than the short term, especially regarding wind towers. There will also be a time gap between now and the peak of plate-hungry infrastructure construction. Amid increasing domestic plate capacity, this could mean a significant downward move for plate prices until the next trend reversal.
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