Why CLF’s CEO Sees a Big Upswing in US Steel Prices Soon
CLF’s CEO sees an upswing in US steel prices
Cleveland-Cliffs’ (CLF) CEO, Lourenco Goncalves, believes that US steel prices should see a big upswing in the next few months. He told S&P Global Platts that the second half of 2019 will be “fantastic” for US steel pricing. Goncalves believes that the prices of hot-rolled coil (or HRC) in the US are affected by the buying behavior of service centers and mini-mills. His optimism is based on the fact that service centers have no inventory. He added, “The mills will get their pound of flesh, because the service centers allowed things to get a lot worse than they should be.”
Steel mills’ buyers’ strike behavior to reverse
He also feels that the current behavior of the mini-mills and service centers of going on a buyers’ strike is “the usual, seasonal procurement behavior,” which happens every year around June and July. This situation, he believes, happens as people are on vacation and the automotive sector is changing over for new-model vehicles.
Steel prices to gain
US steel prices have fallen 21% year-to-date. The prices are down more than 27% since they peaked at $925 per ton in July last year. The declining prices have impacted the companies across the steel supply chain. But Goncalves believes that service centers will need to start buying soon, which will support steel prices. U.S. Steel (X) has been among the worst-performing steel stocks in 2019. U.S. Steel and AK Steel (AKS) have fallen 39.2% and 37.5%, respectively, while Nucor (NUE) and Steel Dynamics (STLD) have fallen 17.7% and 28.7%, respectively. Cleveland-Cliffs’ stock has also fallen by 13%, but its year-to-date performance has been positive mainly due to positive price action in the seaborne iron ore prices.