Press releases

HRC price hike partly sticking; US market skeptical - 26 July 2012

The US market appears to have accepted half of a recent $40/short ton hotrolled coil price hike, but skepticism is building, according to market observers.

“Very recent price increase announcements — part of which have stuck — have bolstered confidence in some investors that this could be an inflection point; that price increases could be sustained for the rest of the year and even more increases are yet to come,” stated a note by Goldman Sachs Global Investment Research.

“The reality is that steel supply/demand fundamentals, particularly for flat steel, (are) far from rosy. We believe that mills will have difficulty maintaining prices. Although not part of our base case scenario, we will not be surprised if HRC prices sink back to the lows of (a) sub-$550-level in coming months.”

On a conference call with analysts, Metals USA ceo Lourenco Goncalves said he expects the price hike to ultimately falter due to exchange rates.

“We are not confident they will actually be able to succeed,” he said. “That is mainly due to the appreciation of the US dollar against both the euro and the Brazilian real, creating a new obstacle to US mills’ ability to export steel.

"The adverse exchange rates no longer support the significant tonnage exported from the US in 2011 and throughout the first months of 2012. Unless further shutdowns are announced by the domestic integrated mills and minimills alike, we do not expect any significant price increase realization by the mills, and consequently, we do not anticipate any change in end-users’ market perception or any improvement in their current buying behavior.”

Platts Steel Business Briefing last assessed HRC prices at $605-620/s.t ex-works, normalized to a midwestern US mill basis. The Steel Index, the specialized pricing wing of Platts SBB, shows HRC up 1.5% to $620/s.t for the week ended July 22 with lead times down week-on-week from 3.4 weeks to 3 weeks.

 

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