Market Commentary

The chart below is an updated look at the major raw materials we have been watching closely since the Russian invasion into Ukraine, with the front month busheling future (white), pig iron delivered to New Orleans (orange), and Midwest shredded scrap (green).

The last time we looked at the three of these prices was at the end of April, shortly after prices had peaked and started moving lower. Since then, they have continued to fall, but not as fast as HRC prices. As it currently stands, profitability levels at the domestic mills have rapidly shrunk and are below pre-invasion levels. In response, mills have been throttling down production. $800 was clearly the price that mills wanted to support and now that most spot prices are assessed below that level, we should anticipate more severe measures to get back to that level.


Below are the most pertinent upside and downside price risks:

Upside Risks:

  • China reopening its economy with further stimulus measures
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Energy issues abroad curtailing global production
  • Easing supply chain restraints and labor shortages causing an increase in manufacturing activity
  • Reluctance in placing import orders, leading to a dramatic reduction in arrivals later this year


Downside Risks:

  • Decreasing input costs allowing mills to aggressively sell lower while remaining profitable
  • Increased domestic production capacity leading to an increase in competitive pricing
  • Steel consumers substitute to lower-cost alternatives
  • Limited desire to restock at elevated prices and persistently short lead times causing a “Buyer’s Strike”
  • Economic slowdown caused by increasing interest rates

HRC Futures

After pausing last week, the Platts TSI Daily Midwest HRC Index continued its recent trend and was down $20 to $790.

The CME Midwest HRC futures curve is above last Friday’s settlements in orange. The curve printed lower last week, with the front down the most significantly.

The 2nd month ferrous futures ended the week mostly lower led by iron ore, which lost 7.6%, while Aussie coking coal gained 23%.

Global flat rolled indexes moved mostly lower again this week, led Midwest tandem products, CRC and HDG were down 3.5%, and 3.3%, respectively.

The AISI Capacity Utilization was up 0.8% to 79%.

Imports & Differentials

August flat rolled import license data is forecasting an increase of 157k to 1,028k MoM.

Tube imports license data is forecasting a decrease of 62k to 427k in August.

August AZ/AL import license data is forecasting an increase of 32k to 125k.

Below is August import license data through August 15th, 2022.

Below is the Midwest HRC price vs. each listed country’s export price using pricing from SBB Platts. We have adjusted each export price to include any tariff or transportation cost to get a comparable delivered price. Differentials all the watched countries differentials were lower last week, as the U.S. Midwest price fell most significantly.

SBB Platt’s HRC, CRC, and HDG pricing is below. The Midwest CRC, HDG, & HRC prices were down 3.5%, 3.3%, and 2.5%, respectively.

Raw Materials

Raw material prices were mixed last week, with Aussie coking coal up another 13.6%, while iron ore futures lost another 8.4%.

Below is the iron ore future curve with Friday’s settlements in orange, and the prior week’s settlements in green. Last week, the entire curve shifted sharply lower, most significantly in the front.

The ex-flat rolled prices are listed below.

Chinese Inventory

Below are inventory levels for Chinese finished steel products and iron ore. HRC, Rebar, and 5-city inventories all continued to fall during the week, while iron ore stocks at the ports grew, albeit at a slower pace.

Economic Data

The remaining significant economic data is to the right.

Base & Precious Metals

Base and precious metal futures were mixed last week. LME nickel was down 3.4%, and Silver was down 8%.


The U.S. dollar was up 2.49 to 108.17, while the Australian dollar lost 3.5%.


Last week, the September WTI crude oil future lost $1.32 or 1.4% to $90.77/bbl. The aggregate inventory level decreased 1.3%. The Baker Hughes North American, and U.S. rig count both decreased by 1 rig.


The U.S. 10-year yield was up 14 bps, closing the week at 2.97%. The German 10-year yield was up 24 bps to 1.23%, and the Japanese 10-year yield was up 1 bps to 0.20%.


Below are equity indexes and steel related companies:

The list below details some upside and downside risks relevant to the steel industry.  The bolded ones are occurring or highly likely.

Upside Risks:

  • Inventory at end users and service centers below normal operational levels
  • A higher share of discretionary income allocated to goods from steel-intensive industries
  • Changes in China’s policies regarding ferrous markets, including production cuts and exports
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Energy issues abroad curtailing global production
  • Easing labor and supply chain constraints allowing increased manufacturing activity
  • Mills extending outages/taking down capacity to keep prices elevated
  • Global supply chains and logistics restraints causing regional shortages
  • Fiscal policy measures including a new stimulus package
  • Contentious union labor negotiations leading to supply disruption
  • Fluctuating auto production, pushing steel demand out into the future
  • The threat of further protectionist trade policies muting imports

Downside Risks:

  • Increased domestic production capacity
  • Elevated price differentials and hedging opportunities leading to sustained higher imports
  • Steel consumers substitute to lower cost alternatives
  • Steel buyers and consumers “double ordering” to more than cover steel needs
  • Tightening credit markets, as elevated prices push total costs to credit caps
  • Supply chain disruptions allowing producers to catch up on orders
  • Limited desire to restock at elevated prices, causing a “Buyer’s Strike”
  • Economic slowdown caused by the emergence of Coronavirus Variants
  • Reduction and/or removal of domestic trade barriers
  • Political & geopolitical uncertainty
  • Chinese restrictions in the property market
  • Unexpected sharp China RMB devaluation