Steel Surplus Pushes U.S. Steel Prices to Multi-Year Lows
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The oversupply situation in the U.S. hot-rolled coil (HRC) and hot-dip galvanized (HDG) steel markets has driven prices to their lowest levels in several years.
Current Market PricesHRC Prices: The HRC Midwest and Southern assessments have dropped to $650 per ton, the lowest since November 29, 2022.HDG Prices: HDG prices fell to $840 per ton, the lowest since September 29, 2020.
Market DynamicsThe U.S. flat steel market, particularly HRC, has been experiencing an oversupply for over a year. New flat steel production led to a price decline to $670 per ton in September 2023, a 44% drop from the peak of $1,200 per ton in April 2023. Despite a brief surge to $1,100 per ton in January 2024 due to the end of a 1 million-ton maintenance outage in Q4, HRC prices have since fallen by 41%.
Several service centers report that demand from some customers has dropped significantly due to high interest rates affecting downstream industries like construction and agricultural equipment. Many service centers believe that the only way to increase prices amid weak demand is to cut production, although no steel manufacturers have indicated plans to do so.
Economic ImpactTo combat U.S. inflation, the Federal Reserve has maintained the federal funds target rate at 5.25-5.5%—the highest since February 2001—since late July 2023. This rate hike started from nearly zero in March 2022. Higher interest rates have increased borrowing costs for consumers and businesses, delaying home purchases and investments in construction projects.
Supply and Import DynamicsU.S. HDG supply has been bolstered by additional galvanized supply from new coating lines at Steel Dynamics' Sinton, Texas plant and US Steel's Big River Steel plant in northeast Arkansas.
An import surge has exacerbated the flat steel oversupply:
HDG Imports: By May 2024, HDG imports reached 1.18 million tons, an increase of 336,100 tons compared to the same period last year.All Coated Products: Imports of all coated products rose by an additional 231,500 tons to 563,400 tons.HRC Imports: By May 2024, HRC imports were at 872,300 tons, up 188,000 tons from the same period last year.
ConclusionThe U.S. steel market is facing significant downward pressure due to oversupply and high import volumes, coupled with weak demand from key sectors impacted by high interest rates. This situation is driving steel prices to their lowest levels in several years, with no immediate signs of production cuts to balance the market.
[/tintuc]
The oversupply situation in the U.S. hot-rolled coil (HRC) and hot-dip galvanized (HDG) steel markets has driven prices to their lowest levels in several years.
Current Market Prices
HRC Prices: The HRC Midwest and Southern assessments have dropped to $650 per ton, the lowest since November 29, 2022.
HDG Prices: HDG prices fell to $840 per ton, the lowest since September 29, 2020.
Market Dynamics
The U.S. flat steel market, particularly HRC, has been experiencing an oversupply for over a year. New flat steel production led to a price decline to $670 per ton in September 2023, a 44% drop from the peak of $1,200 per ton in April 2023. Despite a brief surge to $1,100 per ton in January 2024 due to the end of a 1 million-ton maintenance outage in Q4, HRC prices have since fallen by 41%.
Several service centers report that demand from some customers has dropped significantly due to high interest rates affecting downstream industries like construction and agricultural equipment. Many service centers believe that the only way to increase prices amid weak demand is to cut production, although no steel manufacturers have indicated plans to do so.
Economic Impact
To combat U.S. inflation, the Federal Reserve has maintained the federal funds target rate at 5.25-5.5%—the highest since February 2001—since late July 2023. This rate hike started from nearly zero in March 2022. Higher interest rates have increased borrowing costs for consumers and businesses, delaying home purchases and investments in construction projects.
Supply and Import Dynamics
U.S. HDG supply has been bolstered by additional galvanized supply from new coating lines at Steel Dynamics' Sinton, Texas plant and US Steel's Big River Steel plant in northeast Arkansas.
An import surge has exacerbated the flat steel oversupply:
HDG Imports: By May 2024, HDG imports reached 1.18 million tons, an increase of 336,100 tons compared to the same period last year.
All Coated Products: Imports of all coated products rose by an additional 231,500 tons to 563,400 tons.
HRC Imports: By May 2024, HRC imports were at 872,300 tons, up 188,000 tons from the same period last year.
Conclusion
The U.S. steel market is facing significant downward pressure due to oversupply and high import volumes, coupled with weak demand from key sectors impacted by high interest rates. This situation is driving steel prices to their lowest levels in several years, with no immediate signs of production cuts to balance the market.
