US steel prices
Despite improving domestic fundamentals after imposing tariffs, weaker spot steel prices are driving the weakness in US (IVV) (SPY) steel companies’ stock prices. Spot hot-rolled coil peaked at ~$920 per ton in July. Now, the prices are trending ~23% below that level.
Prices are returning to a higher level
US steel prices fell 13% in the fourth quarter. The slowdown in China’s economy was a major concern. The slowdown led to weaker steel prices worldwide, including in the United States.
According to Argus, the Argus US Midwest HRC index increased by $7 per ton to $710 per ton on March 5. Buyers are rebuilding stocks, which leads to price gains. Pipe and tube buyers, which were largely absent during the fourth quarter, are returning.
Supportive of earnings
Cleveland-Cliffs (CLF) remains optimistic about US steel demand and prices in the domestic market. In the company’s fourth-quarter earnings, Cleveland-Cliffs CEO Lourenco Goncalves mentioned that “current steel mill capacity utilization rate at 81% in the United States, which is the highest in a decade, clearly reflects a healthy demand for steel in the domestic market. As a consequence, demand for our pellets remains strong.”
As the seasonally weaker period ends, the prices seem to have bottomed out. Cleveland-Cliffs benefits from steel prices rising quicker than domestic steelmakers.
There’s another catalyst for higher steel prices in the United States, which we’ll discuss in the next part.
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