US steel prices
Steel prices are a key driver of steelmakers’ earnings. It’s crucial for investors in companies like Cleveland-Cliffs (CLF) and U.S. Steel (X) to keep track of spot steel prices (XME). While there are several types of steel products, analysts see HRC (hot rolled coil) prices as the benchmark. It’s worth noting that US steel prices have underperformed some of the other major steel consuming regions this year.
Notably, US steel prices have been quite rangebound this year. In contrast, we saw significant volatility in steel prices over the last three years. Specifically, steel prices faced severe downward pressure in the second half of the year for the last couple of years. We saw some pressure on US steel prices in 2H17 as well. However, US steel companies including AK Steel (AKS) kept pushing for price hikes in a bid to arrest falling steel prices. We’ve seen three rounds of price hikes from US steel mills over the last couple of months.
After the recent round of price hikes, we’ve seen some momentum building in the HRC space. According to data compiled by Metal Bulletin, spot HRC prices are ~$620 per ton. HRC prices were in the vicinity of $590 per ton at the beginning of November.
Higher HRC prices are positive for companies like Nucor (NUE), which have a higher share of HRC in their flat-rolled product mix. Generally, rising HRC prices help build momentum for other steel grades. However, we’ve seen some softening in CRC (cold roll coil) prices this month.
In the next part of this series, we’ll see what’s driving this divergence in HRC and CRC prices and discuss its implications for steel producers.