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What Lies ahead for US Steel Prices in the Fourth Quarter?

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US steel prices

US steel prices have risen sharply this year after the Section 232 tariffs. Companies like Nucor (NUE) and Steel Dynamics (STLD) are posting record earnings and rewarding shareholders with generous buybacks amid higher cash flows. Meanwhile, US steel prices have already come off their 2018 highs.

According to Platts, “US HRC (hot roll coil) steel prices averaged $893.09/st ex-works Indiana in August, down from $917.75/st in July, and compared with $626.09/st in September 2017.” Now, let’s look at what could impact US steel prices in the fourth quarter.

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Outlook

We could see some more moderation in US steel prices in the fourth quarter. While incremental supply is expected from U.S. Steel’s (X) Granite City facility, steel demand is seasonally lower in the fourth quarter. Lower scrap prices could also negatively impact US steel prices, as buyers tend to negotiate for lower steel prices when scrap prices fall.

While US steel prices are expected to soften further, they might not fall off a cliff. Markets already seem to be factoring in a decline in US steel prices (XME), as do steel companies’ 2019 earnings estimates.

Some observers expected US steel demand to fall after the Section 232 tariffs. In the next article, we’ll look at some indicators of US steel demand (AKS).

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