US hot rolled coil prices head towards $2000/st

US steel prices continue to escalate to new record highs. The pace of the increases, however, appears to be slowing. This could simply be due to a summer lull in activity, or it may be a sign that prices are nearing their peak. Nevertheless, most supply chain participants expect domestic basis values to continue to rise, in the short term.

Strong demand, particularly from the automotive and manufacturing industries, is helping to keep the market tight. Increased production at US carmakers is anticipated in the coming months, as shortages of semiconductors begin to ease. A new infrastructure bill and Buy American policies should also strengthen steel consumption in the medium term.

Capacity utilisation rates at the US steel mills, currently in operation, are high and nearing full production capabilities. The majority of local steelmakers are working with significant order backlogs. Consequently, many buyers have been placed on reduced allocations and even had several of their orders cancelled to allow mills to operate more efficiently in the current market conditions.

Insufficient availability from US steel producers has prompted buyers to seek alternative sources of supply, in recent months. Total import volumes have been steadily climbing since the start of this year.

Despite expensive freight costs and import tariffs, prices for foreign material remained attractive due to the steep escalation in domestic basis values. This was particularly the situation for orders of coils and sheets from third country suppliers. These recorded significant increases, in the first seven months of 2021. Imported volumes are likely to continue rising in the near future, as previously ordered material, arrives at the docks.

As US domestic prices climb to dizzying heights, talk of the removal of Section 232 measures is gathering pace. However, this is unlikely to occur before the end of this year. Consequently, the US steel market is expected to remain tight, in the coming months. A continued price rally is forecast to result in hot rolled coil basis values reaching, or even surpassing, US$2000 per short ton.