What Factors Are Supporting Steel Prices?

Steel prices have been quite volatile in 2016. The steel market sentiment was quite subdued at the beginning of the year, when prices fell to multiyear lows. However, prices later rose significantly.

According to data compiled by Metal Bulletin, spot HRC (hot rolled coil) prices rose from $380 per short ton to $640 per short ton between January 2016 and June 2016. Spot CRC (cold rolled coil) prices rose from $520 per short ton to $840 per short ton over the same period.

However, the rally in US steel prices, which was largely fueled by trade cases, lost pace in 3Q16, and spot HRC prices fell to $470 per short ton. As the spread between US and international steel prices rose to record highs, steel buyers actively scouted for steel from international markets. As a result, we saw a rise in flat rolled steel imports, negatively affecting US steel prices.

Steel market sentiments started to improve somewhat in November. Donald Trump’s election acted as another catalyst in supporting steel prices. Trump’s views on most economic issues resonate with US steel companies. Trump appears to favor a more aggressive trade policy, regularly citing job losses as a result of imports from other countries, especially China.

Steel producers such as U.S. Steel Corporation (X), ArcelorMittal (MT), and AK Steel (AKS) frequently list “unfairly traded steel products” as the biggest challenge for the US steel industry (STLD). Notably, Nucor’s (NUE) former CEO, Dan DiMicco, is among Trump’s economic advisors.

Meanwhile, the Trump effect is not the only factor supporting steel prices. Let’s discuss this in the next article.