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guest editorial
By Tim Triplett, Steel Market Update
Record highs
Buyers wonder whether steel prices will soon peak and what will happen next

rices for flat-rolled steel products have been on a continuous uptrend for most of the past year, reaching highs previously considered unimaginable. Begging the question: When will the market peak?

Steel Market Update surveys buyers every week to track changes in steel prices, as well as lead times, sentiment and a host of other factors. As of the week of July 5, SMU reported the following average prices per net ton, FOB the mill: hot-rolled coil, $1,770 ($88.50/cwt); cold-rolled coil, $1,970 ($98.50/cwt), galvanized coil, $1,995 ($99.75/cwt), and Galvalume coil, $2,030 ($101.50/cwt). Plate prices were at $1,520 ($76.00/cwt). These were all historic highs.

The table (below) shows the close relationship between hot-rolled steel prices and lead times for deliveries of spot orders from the mills. Since the market bottomed out last summer as the pandemic tanked demand, hot-rolled coil prices have climbed from a low of $440 per ton in August 2020 to a record high of $1,770 per ton as of July 5—an astounding fourfold increase. In the same period, lead times spiked from an average of around three weeks to the current high of more than 10 weeks.

Where’s my order?
Lead times are a leading indicator of price direction. Signs that leads times are shortening would signal that the mills have fewer orders to process and may begin discounting prices to generate more business. As of the first week in July, however, there were no indications that lead times were changing.

Why the huge run-up in prices? Put simply, demand for steel continues to outpace supplies. On the demand side, the economy is still riding a sugar high from government stimulus, with more infrastructure spending likely on the way. The major steel-consuming markets—construction, automotive, manufacturing and even energy—have rebounded dramatically from the pandemic-induced recession in 2020.

bar graph
Source: Steel Market Update
On the supply side, steelmakers curtailed production last year when the government shut down much of the economy to stem the spread of COVID-19, and producers have been tactical in scheduling maintenance as they gradually bring that capacity back online. As for additional capacity, Ternium’s new rolling mill in Mexico and Steel Dynamics’ new EAF mill in Texas are expected to add nearly 7.5 million tons per year of sheet production to the North American market. Expansions are also under way at Nucor Steel Gallatin in Kentucky and North Star BlueScope in Ohio. Plus there’s a wave of foreign steel on the way to North America in the next few months. Whether, and how quickly, the new supply can balance out all the demand and trigger a price correction is difficult to predict.
Analysts at SMU’s parent company, the CRU Group, forecast that the steel market is in for a sharp correction sometime later this year as idled capacity is restarted, new production comes online and more imports arrive.
Buyer survey
Steel buyers polled by SMU in early July predict (or at least indicated their hopes for) a more gradual correction. Roughly one-third said hot-rolled coil prices will have peaked by the time they hit $1,800 per ton. About half said they see the peak somewhere between $1,850 and $1,950 per ton. The remaining 16 percent envision hot-rolled coil prices reaching an amazing $2,000 per ton or more before finally moderating later this year or perhaps not until 2022. Calculate as a weighted average of all the responses, the over/under points to a peak of $1,868 per ton. But don’t bet on it.

Nothing is certain when it comes to steel prices, except that the higher they rise, the harder they will fall. A correction of even a modest percentage could translate into large dollars for those with inventory when steel costs nearly $1,800 per ton.

Upcoming events
SMU’s Steel Summit Conference, scheduled for Aug. 23-25 in Atlanta, will be a live, in-person event, with an online virtual option for those still unable to travel. Registration information is available at
Tim Triplett is executive editor of Steel Market Update. With its newsletters, website, conferences and educational programs, SMU’s mission is to inform, educate and motivate subscribers.
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