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POSTED December 22, 2020

Market Overview – Late December 2020

SCRAP                               

The AMM shredded scrap index for Chicago increased to $370/GT, up $80/GT, from $290/GT achieved in early Nov ’20. The index is up $135/GT since late Aug ’20. After scrap prices finalized significantly higher in Dec ‘20, market participants expect scrap prices to increase again in Jan ‘21. Tight scrap supply and strengthening demand, in both domestic and offshore markets, has been cited for the increased prices. Jan ’21 price increases for scrap are speculated to be $40/ton or higher.

CARBON PLATE             

Mill lead times extended to 8-9 weeks from the West Coast and 9-11 weeks when rail is included from plate mills east of the Rockies. In mid-Dec ’20, North American plate mills issued a second price increase for the month with SSAB’s most recent price increase listed at $100/ton. In total, domestic plate mills have announced nine price increases since May ’20 for an estimated $450/ton. Most North American plate mills including Nucor, SSAB, Evraz, Algoma, and Cliffs have closed order books for spot tons for the balance of Dec ’20. Mills are expected to open spot ton availability, subject to lead times, in Jan ‘21 at higher prices. Nucor’s transition to pricing plate on an ex-works model, separating freight and fuel surcharges from material, appears to be fully implemented for 2021.

HOT ROLL SHEET          

Mill lead times remain extended at 11-12 weeks for delivery from the Midwest to the West Coast with similar lead times from West Coast mills. Coil is still in short supply as domestic sheet mills continue to use controlled order entry and rolling closures to manage spot tons at higher prices. Domestic sheet mills have announced a series of price increases since Aug ’20 moving coil indexes higher by an estimated $500/ton, with $200/ton of those price changes occurring in Dec ’20 alone. Domestic coil prices are closing in on a 12-year high with coil prices in Europe and Asia also increasing. Additional coil capacity is expected to be brought back online in ’21 with USS announcing the restart of its number four blast furnace, but not before prices continue to escalate in the near term.

HSS TUBE                         

Tube mill rolling cycles are 4-5 weeks for West Coast tube mills, but reduced coil availability is pushing some mills’ rolling cycles on mechanical sizes out to 5-7 weeks. Tube mills are following domestic hot roll sheet mill price increases since coil is the raw material used in tube manufacturing. Domestic tube mills have announced two $100/ton price increases in the month of Dec ’20, boosting prices by $200/ton for the month. Domestic tube mills have announced eight price increases for roughly $525/ton since late summer.

MERCHANT BAR           

Lead times are roughly 4-6 weeks for most production runs on the West Coast. Domestic merchant bar mills, including Nucor and Gerdau, issued a second price increase in the month of Dec ’20. The first Dec ’20 price increase was $50/ton announced early in the month with a second price increase of $60/ton occurring late in the month. Cumulative merchant bar increases are in the amount $170/ton since late summer. Higher scrap prices have been cited as the primary driver for rising merchant bar prices.

BEAM                                

Lead times are roughly 7-9 weeks for West Coast delivery with mill inventory becoming less available. Domestic beam mills, including Nucor, SDI, and Gerdau have now issued four price increases since early Nov ’20 totaling $205/ton. The most recent price increase was for $80/ton announced in late Dec ’20, which followed an earlier price increase of $70/ton in early Dec ’20. Price increases for beams are due to strengthening demand and rising scrap prices.

REBAR                              

Lead times are roughly 4-6 weeks from West Coast rebar mills. Domestic rebar mills announced a second price increase in the month of Dec ’20. The first Dec ’20 price increase was $65/ton announced early in the month with a second price increase of $40/ton occurring late in the month. Domestic rebar mills have announced a combined $175/ton in four price increases since late summer. Higher scrap prices have been cited as the primary driver for rising rebar prices. Some recent import offers were also reportedly rescinded, as rebar was selling higher in home markets.   

MARKET                           

Steel prices for all major product lines have increased dramatically in Dec ’20 with nearly all mills announcing two distinct price increase for the month. Sheet, tube and plate have logged the largest gains over the last several months with cumulative price increases ranging between $450 and $525/ton. Higher scrap prices are driving prices higher for all finished steel with supply and demand dynamics playing a large part in sheet, tube and plate product prices. According to the Institute of Supply Management (ISM), manufacturing expanded for the seventh month in Nov ’20 after its first contraction in Apr’ 20. ISM indicates domestic manufacturing expanded with an index of 57.5 for Nov ‘20, which is down 1.8 from 59.3 in Oct ‘20. The ISM New Orders and Production Index expanded with readings of 65.1 and 60.8, respectively in Nov ’20. The ISM New Orders index is down 2.8 and the Production index is down 2.2 compared to Oct ’20. ISM readings greater than 50 signal expansion. According to the US Dept. of Labor, the unemployment rate declined to 6.7% in Nov ‘20, down .2% from Oct ’20, after private-sector payrolls rose 344,000. The US Dept. of Commerce issued a Q3 ’20 estimate of GDP that expanded at 33.1%, after decreasing due to COVID-19 effects on the US economy by -31.4% in Q2 ’20 and -5.0% in Q1 ’20. US GDP is expected to expand in Q4 ’20.

Sources Include:  Domestic Steel Mills, Scrap Processors, US Labor & Commerce Departments, ISM, AMM, Bloomberg, AP

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