-Pricing expectations in the buying community continue to be bearish, but this week showed signs that a temporary floor may be in sight. Oil prices are strengthening week after week with Brent North Sea Crude at $125/barrel and NYMEX Crude at almost $109/barrel. The Dollar has weakened against the Euro as of late and Iron ore is steady at $140/ton.
-Pricing for HRC is closer to parody with Northern Europe than it has been in some time. Foreign cargoes are set to arrive late next month and early April from Russia and N. Europe – pricing here is in the $660 range. The import tons that are inevitably referenced in every pricing forecast have yet to arrive. Their impending delivery, however, should likely be “baked into the cake” as far as the supply community is concerned. So, with HRC trading at $680 on the low side and $700 average, we may not have that much more room to move downward if at all.
-The futures curve has firmed up as of late, as long positions in the $710+ range have been reluctant to offer tons to unwind those positions.
-Two main reasons cited for buyers continued malaise are both supply driven—excess North American capacity and imminent delivery of imported steel. How much true excess capacity is out there is a good question. We do not believe that RG is having any significant impact on the marketplace after the start / stop / start of late last year. It is doubtful that they are or will book full unless they significantly cut the price – which will be difficult for them given the cost structure at Sparrows.
-A closer look at current capacity questions just how much of this “excess capacity” is actively being traded in the market place. Mills reliant on automotive and OCTG tons have maintained strong order books going back to 2011. At least two mills have had recent delivery disruptions to the extent of shaking buyer confidence of on-time shipment. It would seem that current market pricing is being disproportionally influenced by the mills that are actively booking and shipping spot tons. These mills—mostly EAFs—have been successfully filling their March order books.