US steel sheet prices have finally leveled off this month. Since the beginning of November, US steel sheet prices have increased weekly. On March 23, the market peaked at US$888/s.ton for HR coil. The CRU Monitor, issued on April 13, reported US Midwest HDG coil pricing at US$1,026/s.ton (inclusive of a coating extra of $58/s.ton), which represents a slight increase of $9/s.ton from March’s price of US$1,017/s.ton. HR coil is currently priced at US$874/s.ton, which represents a $3/s.ton increase from last month’s price of $871/s.ton.
While there was a slight increase this month, pricing is starting to decline and is expected to decline even further. Buyers are anticipating further price decreases, which has them waiting on the sidelines. Mills have started to lower their prices to fill their order books. Currently there’s a large spread between steel sheet prices and raw material prices, which indicates the market definitely has room to fall even further. Even though we’re moving into the construction season, pricing is expected to move downward during the summer months.
Graph Below Depicts U.S. HDG Pricing Trends: Steel Supply & Demand
With the exception of the large automotive mills, mills are starting to see a slowdown in orders. This should be short lived due to service centers carrying low inventories. There are some concerns regarding added capacity in the near future. For example, RG Steel is getting ready to start up their Sparrows Point’s blast furnace in May/June, the expansion of Severstal’s Columbus plant, and increased capacity at ThyssenKrupp’s Alabama plant. At this point, demand is slightly ahead of supply, however, this will turnaround quickly with additional capacity entering the marketplace.
Demand remains stable mainly due to the strong automotive industry. While there are some setbacks with automotive components from Japan, this is only short-term and recovery is set for the second half of 2011. North American automotive build rates will be affected by 100,000 units, which will be recovered in the second quarter. This shortage will also give Detroit Three the opportunity to gain market share.
Real demand remains absent in the marketplace. On a positive note, there has been an uptick in end-markets such as transportation, energy, industrial, agricultural and construction equipment which should boost real demand. Service centers are currently holding low inventories and distributors are destocking. As mentioned earlier, service centers are waiting for pricing to go down even further to start purchasing material. Lead-times have come off from their highs and HR coil has been reduced to 7 weeks for integrated mills and 2 weeks for mini mills.
U.S. Raw Steel Production
The week ending April 5, 2011 production for domestic raw steel was 1,818,000 net tons, representing a slight decrease from last month’s production of 1,827,000 net tons. Current production volumes increased 1.6% from last year’s volumes of 1,789,000 tons. The capability utilization rate is currently 74.35, representing a slight decrease from last month’s rate of 74.7%. The capability utilization rate during the same period last year was 74.0%.
World Market Overview
Over the last month European prices for steel sheet have decreased. Current pricing for HR coil is €625/tonne, representing a €15/tonne decrease from last month’s price of €640/tonne. Pricing for CR coil and HDG coil have decreased at the same price of €15/tonne. CR coil price is €715/tonne and HDG coil is €730/tonne including coating extras. Buyers made significant purchases in 1Q due to rising prices and now hold enough inventory to wait for steel prices to decrease.
Moving forward, buyers are hesitant when purchasing material due to the belief that pricing will decline even further. Italy’s market shows little improvement and pricing decreased even further over the last few weeks.…