Steel prices are the major driver of steelmakers’ earnings and revenues. According to Platts, in 2017, US steel prices rose 17.5% on average compared to 2016. The steel price momentum started showing upward movement in December 2017 after remaining more or less range-bound in the rest of 2017. The momentum in January 2018 also remained strong.
Upside to steel prices after trade action
After the announcement of tariffs on imported steel, there is more upside for prices. In the past, steel prices have shown upward momentum after trade action. Even in 2016, after duties were imposed on imports from several countries including China, there was a sharp increase in flat-rolled prices. Spot HRC (hot-rolled coil) prices rose from $380 per ton to $640 per ton between January 2016 and June 2016, a phenomenal rise of almost 70%. While several other factors contributed to the spike, trade action was the key driver.
Realized prices for CLF
Cleveland-Cliffs (CLF) sounded bullish regarding its realized prices from the US segment on its 4Q17 earnings call. It stated that—based on the year-to-date prices of $77 per ton for iron ore, $675 per ton for US HRC, $58 per ton for US pellets, and holding all other assumptions constant—the company expects US realizations to be in the range of $97 to $102 per long ton. This range is significantly higher than the $88 per ton realized price the company achieved in 2017.
The recent trade action will act as another positive catalyst for steel prices in 2018.