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Key steel at products
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Flat product news
2008, 2020 steel rallies seen very
di erently
By Mark Shenk, Thorsten Schier, Amy Bennett - Wednesday 03 February
Ferrous markets are volatile, and 2020 marked one of the most up-and-
down years for steel pricing in recent memory, but perhaps no year was as
unpredictable as 2008.
That year, nished steel prices shot to their highest levels yet, while raw
materials rose, and sank, at record pace. In the following review and outlook,
Fastmarkets’ steel reporters Thorsten Schier and Mark Shenk - along with
principal steel consultant Amy Bennett - look at some of the factors that
drove volatility then, what is driving it now, and what the market can
expect for 2021 following the record highs of last year.
What most market participants we spoke to agree on is that the factors this
time around di er signi cantly from when the commodity super-cycle was at
its peak in 2008.
“Today is very di erent; there are US issues and world issues. So far in
January, crude steel output is 10% below last year, but producers will not
restart integrated capacity, even with current prices, because they lack
con dence,” John Tumazos, president and metals analyst with John Tumazos
Very Independent Research, told Fastmarkets.
The same goes for other commodities, like wood, Tumazos said, where tight
supply is driving prices higher despite returning demand and backlogs. And
one factor that may be behind producers’ lack of con dence is the changing
US presidential administration, which means uncertainty around things like
environmental regulations, taxes and the Section 232 duties on foreign steel.
Also, shortages of certain raw materials - due to absenteeism in the labor
force and underproduction due to Covid-19 restrictions - could also be
contributing factors, Tumazos said.
“This is really unique, because the companies have orders and they don’t
want to produce more,” he said.
During 2008, there was a broad-based commodity rally that ended end in
September when the bankruptcy of Lehman Brothers helped spark the Great
Recession, sending both steel and raw material prices tumbling. Last year,
steel and raw material prices dropped after the Covid-19 pandemic shuttered
much of the global economy during the second quarter. Steel rebounded
during the second half of 2020, while raw materials lagged.
“In 2008, we were at the peak of the global commodity boom with oil prices
at $100 [per barrel],” Philip Gibbs, equity research analyst at KeyBanc Capital
Markets, said. “It was also the peak of the global demand cycle, so raw
material input prices hit new highs.”
Fastmarkets looked at two sets of interlinked nished steel products and their
raw materials to be able to compare these two volatile years: the spreads
between hot-rolled coil, busheling scrap and pig iron, and those between
rebar, heavy melting scrap and shredded scrap.
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Weekly Market Newsletter
29 January - 05 February 2021
HRC, busheling, pig iron
Fastmarkets’ daily steel hot-rolled coil index, fob mill US hit $56.25 per cwt
($1,125 per short ton) in May 2008. The consumer buying price for steel scrap
No1 busheling, delivered mill Chicago and the assessment for pig iron, import,
cfr Gulf of Mexico, US reached respective record highs of $890 per gross ton
($794.64 per short ton) and $930 per tonne ($843.68 per short ton) in July of
that year.
HRC reached a new record as 2021 started, and a similar uptrend was seen in
raw materials and other commodities.
Fastmarkets’ index surged from a 2020 low at $21.89 per cwt on April 30 to
end the year at $51.50 per cwt. Prices further advanced to an all-time high of
$58 per cwt on January 14, up by 164.96% from the April low.
“I think the main di erence between the two periods is that the price curve
preceding 2008 had been driven up initially by raw materials,” said James
Moss, a partner at First River Consulting in Pittsburgh, Pennsylvania. “There
was a lot of concern then about availability of all kinds of raw materials,
including scrap. The current price curve has been driven by the curious
dynamics of a pandemic market demand where things can suddenly get
active after being largely shut and where inventories are lean.”
US steel mills responded to the pandemic and the resulting economic
slowdown by curbing capacity utilization, which tumbled to 51.1% in the week
ended May 2, 2020, after uctuating between 81% and 83% in January and
February, according to American Iron and Steel Institute data. Restarts in the
automobile industry helped bolster steel demand and led to a rebound in steel
capacity utilization rates.
“When prices dropped, mills minimized their supplies of slab, scrap, coal and
other raw materials,” Gibbs said. “Until October, mills were running for cash,
not pro t. Liquidity was their aim, so they depleted their stocks of raw
materials.”
Integrated steel producers were responsible for the bulk of the drop in
capacity utilization because they idled mills, while mini-mills curbed output
without shuttering units, according to Tyler Kenyon, an analyst at Cowan &
Co.
During the last ve months of 2020 while HRC prices climbed steadily, pig iron
rose at a slower rate, and scrap prices did not rally until December.
“Companies and consumers have lower levels of debt than they had in 2008,
so they were able to quickly return this time around,” Kenyon said. “In some
end markets such as automobiles, you saw a V-shaped recovery.”
Fastmarkets’ price assessment for pig iron, import, cfr Gulf of Mexico, US
climbed to $575 per tonne ($521.63 per short ton) on January 15 from $560-
575 per tonne ($508.02-521.63 per short ton) a week earlier and roughly
double the 2020 low of $285-290 per tonne ($258.55-263.08 per short ton)
reached in April. The consumer buying price for No1 busheling, delivered mill
Chicago rose by $80 in December and $100 in January, reaching $480 per
gross ton ($428.57 per short ton) on January 11; that price is up 84.62% from
an August 2020 low of $260 per gross ton ($232.14 per short ton).
But still, “we don't have the same supply problems in raw materials that we
do in nished products,” John Foster, president of Kurt Orban Partners, said.
This is the main di erence between the rallies in 2008 and last year, he said.
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Key steel at products Weekly Market Newsletter
Rebar, heavy melting scrap and shred
Strong but gradually waning demand and a signi cant raw material cost
push sent Fastmarkets price assessment for steel reinforcing bar (rebar), fob
mill US to its highest ever in 2008. The price started the year at $29.75 per
cwt ($595 per short ton) and reached $52.80 per cwt ($1,056 per short ton)
in the late summer, only to fall back to $33.80 per cwt ($676 per short ton) in
November and December as raw material prices nosedived.
The No1 heavy melt consumer buying price, delivered mill Chicago climbed as
high as $515 per gross ton ($459.82 per short ton) in May and July 2008,
before plummeting to $90 per gross ton ($80.36 per short ton) in
November. The consumer buying price for shredded auto scrap, delivered mill
Chicago climbed to $605 per gross ton ($540.18 per short ton) in July 2008,
only to dip as low as $125 per gross ton ($111.61 per short ton) that November.
Overall, the rebar price rose by 13.61% during the year, while the No1 heavy
melt and shredded prices fell by 34.17% and 26.34% respectively.
Fastmarkets described demand as “tepid” in mid-year 2008, but sources
thought prices would be supported by the gains in raw materials. Those were
not thought to waver much, but ended up falling o a cli by year-end.
In the words of one scrap executive at the time: “I don't know of anyone that
is experiencing what you experience before a big market crash, where you
have a lot of scrap deliveries and people are getting ooded with scrap.
That's not happening.” He pointed to solid steel mill utilization rates as his
reasoning.
In comparison, 2020 shows a steadier picture, at least for rebar. Prices did not
rise as drastically as they did in 2008, with rebar reaching a year-to-date high
of $37 per cwt ($740 per short ton) on December 30. Meanwhile, No1 HMS
and shredded scrap rose modestly through the year, peaking at $335 per
gross ton ($299.11 per short ton) and $370 per gross ton ($330.36 per short
ton) respectively, also in December.
Rebar ended 2020 up by 23.33% from January levels, while No1 heavy melting
scrap rose by 48.89% and shredded by 38.58%, according to Fastmarkets’
calculations.
The steady gains meant margins for producers held fairly stable, Fastmarkets
AMM data shows. US long products capacity, exclusively electric-arc furnace
(EAF)-based, was not curtailed to the degree that at-rolled was, leading to
more stability even when demand rebounded.
And rebar’s typical end market, construction, with its longer lead times, did
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29 January - 05 February 2021 2
not decline as much as automotive and other white goods that consume at-
rolled products.
“Construction wasn’t hit as badly as in 2008,” Kenyon said.
Outlook
With at product prices returning to 2008 highs in late 2020 and early 2021,
there is understandably debate regarding a potential repeat of history - with
2008 heights followed by the 2009 crash - and if a similar scenario will
emerge in 2021. While we concede that prices have again risen to
unsustainable highs and that a downward correction at some point in 2021 is
inevitable, we do not foresee a collapse in 2021 on a par with 2009.
A key di erence between current market conditions and those witnessed in
2008-09 is that, in the 2008 period, record-high prices encouraged steel and
other commodity and raw material producers to maximize production, with
ample supply available during the peak pricing period and contributing to the
price collapse. In mid-2008, when US hot band prices last exceeded $1,000
per ton, US average mill capacity utilization rates were around 89%.
Despite domestic HRC prices now exceeding $1,000 per ton once again, US
steelmakers are operating at an average capacity utilization rate of just 75%,
with numerous furnaces still idled from the early 2020 lockdown period.
Soaring steel prices in 2020-21 re ect an actual steel supply shortage, not
arti cially in ated demand and speculation as in 2008. In fact, demand – as
measured by US service center steel shipments – has continued to fall,
slipping by 1.3% year on year as of November 2020; that marks the lowest
rate of decline since February 2020, but supply – which includes total US steel
shipments plus net imports – has fallen more acutely, dropping by more than
13% year over year in November, Fastmarkets data shows.
A shortage of key steelmaking raw materials - namely prime busheling scrap
in the US and iron ore globally - also has been lending cost-push support to
prices in the current cycle. Cost-push pricing support was absent in 2008-09,
with ample supplies of competitively priced raw materials available once
demand collapsed, amplifying the market downturn.
Rather than the downward pricing spiral that characterized steel prices in late
2008-09, we expect to see a more moderate downward correction in steel
prices in mid-2021. The combination of increased domestic production, both
from the restart of idled capacity and the ramp-up of new capacity, as well
as increased scrap supplies will help to ease the sharp pricing pressure in
evidence in late 2020 and early 2021.
Still, with limited import competition - due to elevated steel prices globally,
various trade actions previously imposed, and the weak value of the US dollar
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Key steel at products Weekly Market Newsletter 29 January - 05 February 2021 3

relative to numerous other global currencies - we forecast prices to remain
well above recent historical lows. Still-elevated scrap prices, by historical The index was based on the following inputs:
standards, and stronger end-use consumption in 2021 also are expected to
buoy prices this year. Assessment at $54 per cwt
Deal at $55 for medium tons
Assessment at $57
HRC rises to near record; spot tons Deal heard at $55
O er at $57
coveted O er at $55
Assessment at $55
Assessment at $55
By Dom Yanchunas - Tuesday 02 February Assessment at $55
Hot-rolled coil prices climbed to within $3.80 per ton of its record high Assessment at $57
after steel buyers vied for the few spot tons that trickled out from Deal at $57.50 for large tons
domestic mills. Deal at $55 for medium tons
O er at $55
Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at Assessment at $55.50
$57.81 per hundredweight ($1,156.20 per short ton) on Tuesday February 2, up O er at $54.50
by 2.2% from $56.56 per cwt on Monday and by 3.1% from $56.06 per cwt on Assessment at $57.50
January 26. This marks the second-highest level on record since Fastmarkets Deal at $56.25 for small tons
began collecting HRC data in 1960, with the all-time high of $58 per cwt Assessment at $57.50
recorded on January 14. O er at $56
O er at $58
Data were collected in a range of $54-62 per cwt, representing con rmed Assessment at $55
deals, mill o ers and general assessments of spot market price levels. Fresh O er at $58.50
inputs were received across all three sub-indices. Deal at $60
Assessment at $55
Heard in the market Assessment at $56
Hot-rolled coil lead times are still generally reported to be at least eight Deal at $57 for small tons
weeks, although persistent buyers are able to nd occasional availability Deal at $57 for medium tons
o ered for March rollings while mill personnel nd a way to wedge a few O er at $58.50
additional spot orders in between their contract-tonnage commitments. Assessment at $55
Other buyers are still receiving no spot o ers from any mills. Assessment at $56
Assessment at $55
Some market participants expect April availability to be just as tight as Assessment at $58
March. After that, mills might try to adjust the timing of maintenance Assessment at $56
outages in whichever direction helps them maintain their pricing advantage.
Either they will postpone outages to keep producing while prices are near Fastmarkets speci es volumes under one of the following four categories:
historic highs, or they might pull forward some maintenance work to reduce Small: 50-499 tons
output if they feel the need to keep prices from retreating too rapidly, sources Medium: 500-1,999 tons
said. Large: 2,000-9,999 tons
Extra-large: 10,000 tons or more
While some buyers acknowledge that their inventories are still too lean, others
said they have slowed restocking because downstream customers are Any data submitted under a Data Submitter Agreement will not be published.
reacting negatively to the spike in steel prices by canceling orders and slowing Fastmarkets uses its expert judgment to exclude outlying or unrepresentative
their own projects. numbers, and discounts or discards prices that it believes might otherwise be
questionable and/or unreliable. Discarded inputs are not included in this trade
Quote of the day log, but when inputs are discarded, it is noted in the daily market report.
"I believe the market remains strong enough to hold pricing for the next four
months," an East Coast distributor source said. "Once we get to the summer To provide feedback on this trade log or if you would like to provide price
slowdowns, this may all change. And the lack of foreign [steel] gives the information by becoming a data submitter, please contact Grace Asenov at
domestic mills all the power they need to keep the prices up.” pricing@fastmarkets.com. Please add the subject heading: FAO: Grace
Asenov, re: US HRC Index.

Trade log: US HRC - January 25-29, 2021 To see all of Fastmarkets’ pricing methodology and speci cation documents,
go to https://www.fastmarkets.com/about-us/methodology.
By Grace Lavigne Asenov - Monday 01 February

Fastmarkets publishes trade logs for its key price assessments and indices
to bring more transparency into the markets it covers and the pricing
process it applies.
Fastmarkets’ daily steel hot-rolled coil index, fob mill US averaged $56.15 per
hundredweight ($1,123 per short ton) for the week ended Friday January 29,
up by 0.5% from an average of $55.87 per cwt the previous week.

Key at products
Symbol Description Date Price +/-

This material is provided by Euromoney Global Limited (a company registered in England and Wales under number 142215) doing business as Fastmarkets MB and
Fastmarkets IM, and Metal Bulletin Holdings LLC doing business as Fastmarkets AMM, collectively referred to in the material as ‘Fastmarkets’.
It is provided to you subject to your compliance with the terms of your license agreement with Fastmarkets, in addition to the Fastmarkets Copyright Notice and Disclaimer.
If you need additional access please contact hello@fastmarkets.com © Fastmarkets 2021
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Key steel at products Weekly Market Newsletter 29 January - 05 February 2021 4

Symbol Description Date Price +/-

MB-STE-0028 Steel hot-rolled coil index domestic, exw Northern Europe, €/tonne 05 Feb 2021 710 0.00%

MB-STE-0047 Steel hot-rolled coil import, cfr main port Southern Europe, €/tonne 03 Feb 2021 650 - 670 -3.30%

MB-STE-0107 Steel hot-rolled coil export, fob main port Turkey, $/tonne 05 Feb 2021 730 - 740 -4.55%

MB-STE-0014 Steel hot-rolled coil export, fob Black Sea, CIS, $/tonne 01 Feb 2021 695 - 725 -5.65%

MB-STE-0144 Steel hot-rolled coil index export, fob main port China, $/tonne 05 Feb 2021 649.21 0.79%

MB-STE-0139 Steel hot-rolled coil import, cfr Vietnam, $/tonne 05 Feb 2021 655 - 660 0.77%

MB-STE-0184 Steel hot-rolled coil index, fob mill US, $/cwt 05 Feb 2021 59.23 0.00%

MB-STE-0153 Steel cold-rolled coil domestic, delivered Eastern China domestic, yuan/tonne 05 Feb 2021 5300 - 5340 -0.37%

MB-STE-0026 Steel cold-rolled coil domestic, exw Northern Europe, €/tonne 03 Feb 2021 800 - 810 -0.62%

MB-STE-0185 Steel cold-rolled coil, fob mill US, $/cwt 04 Feb 2021 67 0.00%

MB-STE-0172 Steel cut-to-length plate carbon grade, fob mill US, $/cwt 05 Feb 2021 51.5 0.98%

MB-STE-0034 Steel domestic plate 8-40mm, exw Northern Europe, €/tonne 03 Feb 2021 660 - 680 3.88%

MB-STE-0155 Steel plate domestic, delivered whs Eastern China, yuan/tonne 05 Feb 2021 4510 - 4550 0.11%

MB-STE-0883 Steel hot-dipped galvanized coil (hot-rolled base), fob mill US, $/cwt 04 Feb 2021 67 0.00%

MB-STE-0186 Steel hot-dipped galvanized coil (cold-rolled base), fob mill US, $/cwt 04 Feb 2021 67.5 0.75%

MB-STE-0021 Steel hot-dipped galvanized coil domestic, ex-whs Eastern China, yuan/tonne 05 Feb 2021 5710 - 5790 -2.38%

MB-STE-0030 Steel hot-dipped galvanized coil domestic, exw Northern Europe, €/tonne 03 Feb 2021 820 - 840 0.00%

MB-STE-0187 Steel coil Galvalume, fob mill US, $/cwt 19 Jan 2021 62 29.17%

MB-STE-0850 Steel coil Galvalume import, cfr main ports South America, $/tonne 05 Feb 2021 890 - 900 0.00%

This material is provided by Euromoney Global Limited (a company registered in England and Wales under number 142215) doing business as Fastmarkets MB and
Fastmarkets IM, and Metal Bulletin Holdings LLC doing business as Fastmarkets AMM, collectively referred to in the material as ‘Fastmarkets’.
It is provided to you subject to your compliance with the terms of your license agreement with Fastmarkets, in addition to the Fastmarkets Copyright Notice and Disclaimer.
If you need additional access please contact hello@fastmarkets.com © Fastmarkets 2021