US steel buyers find value in Nucor Consumer Spot Price

22nd May 2024

As the second month of Nucor’s reporting of a weekly consumer spot price (CSP) for hot rolled coil (HRC) comes to a close, steel buyers continue their efforts to gauge its influence.

The United States’ largest steel producer announced that it would deliver the CSP for HRC to its customers on April 4, becoming the first company to consistently publish a spot price each week for the benchmark steel product.

The first CSP was reported on April 8, at USD830 per short ton, and remained in a narrow range of USD825 to USD835 for the following three weeks. On the first Monday in May, however, Nucor dropped the CSP by USD65 per short ton, to USD760, citing limited spot orders and potential speculative buying. It then raised the CSP to USD770 on May 20. Nucor has committed to a lead time of three to five weeks for all spot orders at its CSP.

US steel price data reported in the May edition of MEPS’s International Steel Review placed HRC prices at USD750 per short ton for large-volume buyers.

MEPS International market analyst, Jeremy Platt, said: “There is a real risk that steel buyers place too much stock in the Nucor CSP alone. As we can see from the spot price of Cleveland-Cliffs, multiple approaches to pricing are adopted by rival steelmakers and there are a variety of economic influences on steel prices that should be taken into account.

“That is why MEPS gathers its research from participants from across the steel industry to deliver the most accurate, independent view of the market and the sector’s most trusted steel prices.”

Platt added: “It remains early days in the life of the Nucor CSP. Many buyers are still gauging its movements and how useful it will ultimately prove to buyers as the price cycle evolves.”

Greater transparency is the primary goal

Nucor says that its  CSP is based upon “both quantitative and qualitative data”. The company also claims that its benchmark price will be “forward-looking”. As such, it is not solely based on transaction prices in the week prior. It is also influenced by other factors, including inventory levels, demand and imports.

During its recent quarterly earnings call on April 23, Nucor delivered three reasons for the introduction of its CSP. The company said that customers were requesting more transparency; that it aimed to release a “more consistent, reliable, predictable and relevant” price; and that it wanted to reduce the speculative buying and consequent price spikes that typically occur during buying cycles.

An uncertain initial market reaction to the news resulted in many steel buyers and producers taking a “wait-and-see” approach as they learned more about the new weekly price point. However, following the CSP’s USD65 price drop during the first week of May, many were more receptive, acknowledging that the price will not move in just one direction.

Cleveland-Cliffs responds with its own monthly price

Cleveland-Cliffs has responded to the launch of Nucor’s CSP by introducing its own monthly spot price for HRC. Its first published price was published on April 26, setting its benchmark some USD25 above that of Nucor, at USD850 per short ton.

Commenting on the move, Cleveland-Cliffs chairman, president and chief executive, Lourenco Goncalves, said: “We encourage market transparency and have been pleased to see other market participants be more open with their pricing. As the largest producer of flat-rolled steel in North America, we felt it necessary to do the same to make sure our customers had the most timely and reliable pricing information.”

The weekly Nucor CSP will be released, at 10am ET every Monday, on its website. Cleveland-Cliffs will report prices with the monthly opening of its Hot Rolled order book, on its customer portal, near the end of each month.

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