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As of July 15th, 2024,Nucor’s announced Cold-Rolled Steel (CSP) base price has decreased to $650 per ton for all producing mills. This marks a continuation of the downward trend observed in recent weeks, with prices dropping steadily since early June. Here’s a quick recap of recent Nucor CSP price movements:
| Date | CSP HRC Base Price (Most Mills) | Change from Previous Week |
|---|---|---|
| July 15th, 2024 | $650/ton | Down $20/ton |
| July 1st, 2024 | $670/ton | Down $10/ton |
| June 24th, 2024 | $680/ton | Down $35/ton |
| June 17th, 2024 | $715/ton | Down $65/ton |
| June 3rd, 2024 | $780/ton | Up $10/ton |
| May 27th, 2024 | $770/ton (Tiered Pricing) | N/A |
This price decline reflects a confluence of factors impacting the broader steel market. Let’s delve deeper into some of the potential causes:
1. Spot Iron Ore Prices: A significant driver of steel pricing is the cost of raw materials, particularly iron ore. Spot iron ore prices have been on a downward trajectory since early July, falling five out of the last six weeks. This recent decline follows a strong surge ahead of the Fourth of July holiday. As of July 15th, spot iron ore settled at $108.35/mt, down from $110.32/mt the week before. Despite the recent dip, iron ore prices ended the second quarter up 11%, even after a nearly 30% decline in Q1. Upcoming economic policy meetings in China, scheduled for July 15th-18th, could potentially influence iron ore prices through any stimulus measures announced.
2. Zinc Prices: Another factor impacting steel production costs is zinc, a key alloying element. Zinc pricing has also fallen for the second consecutive week, settling at $2,869/mt ($1.301/lb) on July 15th, down from $2,914.50/mt ($1.322/lb) the prior week. Similar to iron ore, concerns about weakening demand, particularly in China’s industrial sector and property market (which consumes roughly half of the global zinc supply), are putting downward pressure on prices. The short-term demand outlook hinges heavily on the outcome of China’s upcoming economic meetings and any potential stimulus packages announced.
3. Coking Coal Prices: Coking coal, essential for steel production, has resumed its downward trend after a brief period of stability. Prices fell for the third time in the last four weeks, settling at $248.00/mt on July 15th, down from $258.00/mt the prior week. This translates to a 3.9% decrease from the highs observed in early March. This decline coincides with India’s plans to shift some coal purchases to Mongolia and Russia following a disruptive mine explosion in Australia.
4. Domestic Steel Production: U.S. raw steel production dipped significantly last week due to the July 4th holiday. Mills produced an estimated 1,695k tons at a capacity utilization rate of 76.3%, down from 1,721k tons and 77.5% the prior week. This represents the lowest weekly output since late January, with production dropping in four of the five regions. The Great Lakes region saw the most significant decline (in tonnage terms). While year-to-date production remains slightly higher than last year, this recent dip reflects the typical slowdown associated with holidays.
5. Carbon Steel Consumption: The ongoing surge in steel imports coupled with softer export activity has outweighed stronger domestic mill shipments, leading to a slight decrease in total steel consumption in May. Daily consumption dipped to 276.2k tons compared to 277.4k tons in April. However, this May figure still represents a 1.7% increase year-over-year. Notably, carbon flat-rolled steel consumption, a key indicator of manufacturing activity, has exhibited a 14-month streak of year-over-year growth, despite a slight decline in May compared to April.
Looking Ahead
The recent decline in Nucor’s CSP price reflects a complex interplay of global market forces. The upcoming economic policy meetings in China will be closely watched to gauge potential stimulus measures that could impact raw material pricing and overall steel demand. Additionally, how long the current downward trend in steel production persists will be a factor to monitor. While year-to-date consumption remains positive, a sustained decrease in production could eventually lead to tighter supplies and put upward pressure on prices.
Will these downward pricing trends continue?
Several factors will influence the future trajectory of steel prices. Here are some key areas to consider:
- Global economic conditions: The health of the global economy, particularly in major steel consumers like China, will significantly impact demand. A slowdown could lead to further price declines.
- Raw material costs: Continued fluctuations in iron ore, zinc, and coking coal prices will directly influence steel production costs and finished product pricing.
- Trade policies: Trade tensions and import duties can disrupt global steel markets and lead to price volatility.
- Supply chain disruptions: Any disruptions in the global supply chain, such as those caused by port congestion or geopolitical events, can constrain supply and drive prices up.
What does this mean for steel buyers?
Steel buyers should closely monitor market developments and consider these factors when making purchasing decisions. Negotiating flexible contracts with price adjustment clauses can help mitigate risk in a volatile market. Additionally, fostering strong relationships with steel suppliers can provide valuable insights and ensure access to materials during times of tight supply.
