Market Commentary

This week was a continuation of downward price pressure in the domestic steel market, as raw materials (all below pre-invasion levels) are still searching for a pricing floor. This should encourage mills to continue reaching for lower prices within the market, as it will not impact their profitability. Additionally, global steel prices fell further last week. The chart below shows the monthly averages for Midwest HRC (white) and a tariff-adjusted global price assessment including transportation (orange).

While short domestic lead times and falling prices reduce the likelihood of a meaningful increase in import arrivals, global prices tend to lead the domestic market and we would look for global prices to stabilize before calling a domestic price floor.

With current spot prices nearly $150 higher than what is available on the futures curve, the most prudent approach is to pause. The next couple of weeks will be an insightful time when making plans for 2023 with the forward curve providing prices below what was expected to be the floor in February. As the spot price and futures prices continue to converge in the coming weeks, we will be closely watching how mills react. Up to this point, there have not been rumors around the idling of any domestic furnaces, but a decrease in production may be the best lever mills have to stabilize prices. As we mentioned earlier, the global market tends to lead the domestic market, and last week we saw announcements that higher-cost mills in the E.U. were going to be idled.


Below are the most pertinent upside and downside price risks:

Upside Risks:

  • China reopening their economy with further stimulus measures
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Seasonal pick-up in demand leading to regional shortages
  • Easing supply chain restraints causing an increase in manufacturing activity
  • Reluctance in placing import orders earlier in the year leading to a dramatic reduction in arrivals going forward

Downside Risks:

  • Decreasing input costs allowing mills to aggressively sell lower while remaining profitable
  • Elevated price differentials and hedging opportunities leading to sustained higher imports
  • 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

The Platts TSI Daily Midwest HRC Index was down $70 to $1,070.

The CME Midwest HRC futures curve is below with last Friday’s settlements in white. The entire curve shifted lower, most significantly in the front, indicating concern around lower demand amid an increasingly hawkish Fed.

The 2nd month ferrous futures were primarily lower this week. Busheling futures fell steeply, down 14.5%, and Aussie Coking Coal Future was up 0.8%.

Global flat rolled indexes were mostly lower once again, led by Platts Weekly Midwest HDG, down 9.8%. Since prices peaked last September tandem products have fared much better than HRC, causing historically wide spreads between the products. Even after this week’s decrease, the current spread is more than $125 over its 4-year historical average.

The AISI Capacity Utilization was up 0.1% to 81.7%.

Imports & Differentials

June flat rolled import license data is forecasting a decrease of 58k to 896k MoM.

Tube imports license data is forecasting an increase of 78k to 564k in June.

June AZ/AL import license data is forecasting a decrease of 44k to 120k.

Below is June import license data through June 13th, 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 decreased across the board less Europe, whose price decreased more than the U.S. price.

SBB Platt’s HRC, CRC and HDG pricing is below. The Midwest HDG, HRC & CRC prices were down 9.8%, 6.1%, & 5.2% respectively. Northern European HRC price was down the most, down 9.9%.

Raw Materials

Raw material prices were all lower this week, led by Pig Iron CIF US NOLA Import, down 19.4%.

Below is the iron ore future curve with Friday’s settlements in orange, and the prior week’s settlements in green. Last week, the entre curve shifted slightly lower once again.

The ex-flat rolled prices are listed below.

Chinese Inventory

Below are inventory levels for Chinese finished steel products and iron ore. Inventories increased for the 5-city, Rebar, and HRC for the third week in a row, while iron ore at the ports continues to destock.

Economic Data

The remaining significant economic data is shown to the right.

Base & Precious Metals

Base and precious metal futures ended lower, led by LME Aluminum futures, falling 6.8%. Gold futures lost 1.9% on the week.


The U.S. dollar gained 0.46 to 104.65, while the Brazilian Real lost 3.3%.


Last week, the July WTI crude oil future lost $11.11 or 9.21% to $109.56/bbl. The aggregate inventory level was up 0.3% and crude oil production was slightly up at 12.0m bbl/day. The Baker Hughes North American rig count was up 22 rigs, and the U.S. rig count was up 7.


The U.S. 10-year yield rose 7 bps, closing the week at 3.23%. The German 10-year yield was up 15 bps to 1.66% and Japanese 10-year yield gained slightly at 0.23%.


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
  • 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 & construction industry rebound
  • 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
  • A weakening US Dollar
  • Fiscal policy measures including a new stimulus package
  • Fluctuating auto production, pushing steel demand out into the future
  • 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 buyer’s 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 property market
  • Unexpected sharp China RMB devaluation