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Steel prices dropped from
November to December.
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Bearish news continues to cloud forecasts for steel prices.
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Steelmakers are worrying that prices may soon hit their
respective break-even thresholds.
Via AG Metal Miner
The Raw Steels Monthly Metals Index (MMI) fell by 2.34% from
November to December. Ultimately, U.S. steel prices remain decidedly bearish.
Meanwhile, hot rolled coil prices saw the most substantial decline, falling
12.6% month over month. Plate prices, on the other hand, mainly remained
sideways but continued to edge slowly downward with a 2.9% decline.
Steelmakers Lob Price Hikes at Falling Steel Prices
Eager to stop the price
descent, U.S. steelmakers once again announced price increases on flat-rolled
products. Cleveland-Cliffs led the initiative in late November with a $60/st cost increase on new orders. This was soon followed by $60/st price hikes from both U.S. Steel and Stelco. By Dec. 1, Nucor and ArcelorMittal Dofasco had also followed suit.
Where is the Bottom?
Prior to the cost increases,
steelmakers cautioned that hot rolled coil, cold rolled coil, and hot dipped
galvanized steel prices were nearing their respective break-even points. Apart
from a roughly two-month rebound between March and April, prices have declined
since October 2021. That said, they remain above the all-time lows recorded
since MetalMiner began tracking prices in 2012.
For example, hot rolled coil
prices dropped as low as $362/st in December 2015. Input costs have increased
considerably since then, so the price floor will likely sit above that level.
But as the trend points downward, steelmakers are right to worry that prices
may soon hit their respective break-even thresholds.
HRC Could Hit the Bottom First
Source: Insights
This is not the first price
increase steelmakers have announced in recent months. Indeed, the last occurred
in August when Cleveland-Cliffs and NLMK USA raised prices by $75/st. This came
directly after Nucor announced a $50/st increase earlier that month. The effect
of those hikes proved short-lived, however. While steel prices briefly
flattened in August and September, the downtrend soon resumed at full speed.
Currently, there appears to be
no meaningful contraction of supply or increase in demand. As such, the latest
increases will likely prove equally, if not more, ineffective. In fact,
continued mill ramp-ups and rate hike increases from the Fed will likely
exacerbate market oversupply. That is, until break-even points force mills to
begin idling production.