Are Steel Prices Consolidating at Current Levels?



Steel prices

Steel prices are a key driver for steel companies. Steel prices crashed by almost two thirds in 2009. Last year, steel prices dropped by ~10%. Most of this came towards the latter half of the year. Prices of all base metals have corrected in tandem with the fall in crude oil prices.

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Prices consolidating

The previous chart shows the prices of hot-rolled coil (or HRC) in the United States. Please note that there are several grades of steel. However, analysts see HRC price as a benchmark for other varieties of steel products. The movement in HRC prices generally impacts the prices of other grades of steel also.

HRC prices are down by almost a quarter this year, as the above chart shows. However, most of this fall came in the first two months. Steel prices fell by ~5% in March.

Apparently spot HRC prices have been below $500 per ton for two consecutive months. Even at the peak of the global financial crisis, HRC prices remained below $500 per ton for only about four months. Steel prices rebounded sharply after that.

A fall in steel prices is negative

A fall in steel prices is negative for all steel producers, as it negatively impacts average selling prices for companies like US Steel (X) and Companhia Siderurgica Nacional (SID). US Steel currently forms 3.25% of the SPDR S&P Metals and Mining ETF (XME). Schnitzler Steel (SCHN) and Nucor (NUE) form 1.14% and 3.71% of XME, respectively.

The prices of major steel-making raw materials also impact steel prices. Iron ore and steel scrap are among the major raw materials for producing steel. In the next part, we’ll discuss the latest trends in iron ore prices.


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