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Demand Growth Required to Sustain Rise in US Steel Prices

US steel prices, for flat products, have been under negative pressure, for much of this year. In an attempt to halt further price deterioration, domestic producers announced consecutive list price hikes, totalling US$80 per short ton, in recent weeks. This has been the catalyst for an uptick in purchasing activity. Extended delivery lead times, due to planned mill outages, and a continued shortage of import alternatives, have had a stabilising effect, while creating a pricing floor in the market.

This will offer some welcome respite to US steelmakers. US steel prices are expected to move up, either side of the New Year. Inventory replenishment and a continued revival in scrap costs should exert upward pressure on steel selling values. However, MEPS predicts that it is unlikely that this will lead to a prolonged recovery. US steel prices are forecast to peak in the spring. It is widely acknowledged that the US steel sector remains fundamentally oversupplied, given the current level of activity.

Domestic capacity utilisation, in the US, remains slightly above 80 percent, year to date. The World Steel Association predicts that growth, in US steel demand, will be just 0.4 percent, in 2020 – following on from an anticipated 1 percent expansion, this year. With little demand improvement projected, any pricing revival, in the near future, is likely to prove to be a false dawn for US steel manufacturers.

Source: MEPS International Ltd.MEPS International Steel Review