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US Steel Producers Push for a Price Hike

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Price hike

Steel prices are a key driver of steel companies’ performance. Spot steel prices eventually impact steel companies’ ASP (average selling prices)—a key driver of their profitability. Looking at 3Q17, Steel Dynamics reported a marginal and sequential fall in its 3Q17 ASP, while Nucor’s (NUE) 3Q17 ASP was ~2% higher compared to 2Q17. Among other steel producers, AK Steel (AKS) expects its 3Q17 ASP to be lower than 2Q17 due to fewer automotive shipments.

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US steel prices, especially in the flat-rolled space, have been weak since September. A combination of seasonally lower demand and falling raw material prices have weighed on US steel prices this month. Just when market participants were expecting more deterioration in steel prices, US steel producers announced a fresh round of price hikes.

Could the hikes hold ground?

Nucor and ArcelorMittal USA (MT) announced price hikes last week. Can the price hikes hold ground? Generally, you would expect steel companies to announce price hikes when the demand is good or there’s cost-push inflation. So far, we don’t see either of these factors in US steel markets. In contrast, steel scrap prices have fallen this month. However, we’ve seen a spike in spot electrode prices due to curtailments in China. We’re into steel’s seasonally weak demand period. It will be interesting to see how the current round of price hikes impacts US steel prices (X) (CLF).

In the next part, we’ll look at the key events that US steel investors should follow this week.

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