Steel prices have fallen significantly month-over-month, but there could be further downside left
Prior to the cost increases, steelmakers cautioned that hot rolled coil, cold rolled coil, and hot dipped galvanized steel prices were nearing their respective break-even points. Apart from a roughly two-month rebound between March and April, prices have declined since October 2021. That said, they remain above the all-time lows recorded since MetalMiner began tracking prices in 2012.
For example, hot rolled coil prices dropped as low as $362/st in December 2015. Input costs have increased considerably since then, so the price floor will likely sit above that level. But as the trend points downward, steelmakers are right to worry that prices may soon hit their respective break-even thresholds. This is not the first price increase steelmakers have announced in recent months. Indeed, the last occurred in August when Cleveland-Cliffs and NLMK USA raised prices by $75/st.
Currently, there appears to be no meaningful contraction of supply or increase in demand. As such, the latest increases will likely prove equally, if not more, ineffective. In fact, continued mill ramp-ups and rate hike increases from the Fed will likely exacerbate market oversupply. That is, until break-even points force mills to begin idling production. In the interim, HRC steel prices appear poised to hit bottom first.
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