US Steel Mills Are Pushing for Price Hikes
US steel mills
Some US steel mills including ArcelorMittal USA (MT) and Nucor (NUE) pushed for a price hike earlier this month. The move looked intriguing as steel scrap prices weakened this month. Furthermore, steel demand is generally weak in the fourth quarter. Prior to the current round of price hikes, the previous round of hikes had failed to hold ground. In this article, we’ll see why the timing of price hikes this time is crucial.
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Currently, the spreads between US and international steel prices are modest at least in the hot roll coil (or HRC) space. Lower spreads reduce the attractiveness of imports for US steel buyers. Furthermore, the 270-day deadline for the findings of the Section 232 imports probe that was ordered by the Trump Administration will end in mid-January. It’s worth noting that US steel demand was the strongest in the first quarter.
The current round of price hikes looks inspired by the above-mentioned factors. Reliance Steel & Aluminum (RS), which is North America’s largest metal service center, noted during the 3Q17 earnings call, “We are supportive of the recent mill price increase announcements for many of the products we sell and expect to see the higher prices firm up as we move into early 2018.”
Section 232 probe
If the United States decides to impose duties on steel imports in January, steel buyers could face a capitulation sort of situation. Something similar happened last year as steel buyers were left high and dry after duties were imposed on flat-rolled steel products in 1Q16. We saw a sharp rally in US steel prices in 1H16 as US steel mills made the most of the trade duties.
U.S. Steel (X) and AK Steel (AKS) are scheduled to release their 3Q17 earnings this week. In the next and final article, we’ll see what analysts are projecting for their 3Q17 earnings.