RESEARCH: US HRC prices to remain well above long-term averages in 2022

This month’s key North American steel forecast highlights:

• US prices for hot-rolled coil moved in line with our forecasts in August, averaging $1,910 per ton, within 1% accuracy of our forecast of $1,925 per ton. The market has achieved much-needed stability in recent weeks, with prices fluctuating in the range of $1,900-1,940 per ton. Reports of shortening lead times and improving availability of material were helping to stabilize the market, while impending mill maintenance outages will provide underlying support for prices near current levels in the next few weeks. We expect HRC prices to remain fairly stable in the near term, with modest downward pricing corrections to commence in the fourth quarter of 2021, when demand tapers downward during the holiday season and in response to supply chain issues, while import supply rises.

• Global supply chain disruptions continue to exert a negative effect on manufacturing activity, most notably demonstrated by further production cuts by domestic vehicle manufacturers in response to the global shortage of semiconductor chips. With increasing Covid-19 stoppages in the Asian nations that produce such chips, and the time-lag to build new capacity, the shortage was expected to extend well into 2022. With manufacturers still seeing strong demand for steel-intensive goods, inventories were becoming depleted rapidly. US light vehicle inventories were at just 24 days of supply in August, well below the normal level of 65 days, and these inventory shortages were not unique to the automotive industry; order backlogs were rising for steel-consuming goods as well. The combination of manufacturers struggling both to meet consumer demand and to replenish depleted inventories will keep demand for steel high through 2022. And although the eventual start of delayed new US steel capacity will help to meet this demand next year, the combination of strong demand and tight supply will keep US flat steel product prices well above long-term averages next year.

• US rebar prices also performed in line with our expectations, with domestic rebar prices averaging $984 per ton in August, within 1% of our forecast price of $990 per ton for the month. Upward momentum in the rebar market was forecast to persist through September, with domestic mills including Nucor and SDI announcing price rises of $50 per ton in late August. With the market facing low inventories, uncompetitive import prices at $960-980 per ton, and continued strength in construction sector demand, we expect these price increases to be successful, despite the expectation of lower scrap prices this month.

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