The Raw Steels Monthly Metals Index (MMI) moved sideways, with a modest 1.86% decline from April to May. U.S. flat rolled steel prices found a bottom at the close of March and proceeded to move sideways. HRC prices saw a modest increase, but ultimately closed the month at $838 per short ton. Meanwhile, HRC Midwest Futures saw a strong decline throughout April, which saw the delta between MetalMiner HRC prices and futures narrow to a mere $1 per short ton as of May 1. This is signals that markets expect the sideways steel price trend to continue near current levels.
Nucor, Cliffs Publish Weekly HRC Prices
Two major steelmakers recently announced new initiatives to publish HRC spot prices. Nucor led the market, publishing weekly prices on Monday, April 8. Cleveland-Cliffs followed Nucor, releasing a monthly "Cliffs Hot Rolled Market Price" on Friday, April 26. According to reports from World Steel Dynamics, Steel Dynamics (SDI) does not intend to follow moves by Nucor or Cliffs.
By Monday, May 6, Nucor's price stood at $XXX per short ton, while Cliffs stood at $850 per short ton. Meanwhile, HRC prices currently stand at $826 per short ton. Both Nucor and Cliffs cited increased "market transparency" as the rationale for the moves. Nucor stated its published pricing aimed to reduce market volatility and they did not intend it to replace other HRC indexes.
It remains safe to assume that Nucor and Cliffs do and will continue to operate in their own best interest. While both companies stated that their weekly published pricing would benefit customers, the mills likely hope to influence HRC indexes at the very least.
Nucor's first published price ($825 per short ton) stood at the bottom of the market. Opening at a lower cost was likely part of a plan to boost the credibility of its newly published steel prices. However, this could shift over time as establishing an inflated market floor would benefit domestic mills.
Increased control over domestic prices may indeed help reduce volatility, which has been apparent over recent years. However, it is worth noting that Nucor's decision came immediately following a nearly 26% quarterly decline in steel prices as mills lost control of the price trend. This suggests that mills appear primarily concerned with steel price volatility to the downside.
Other major domestic producers, particularly SDI and U.S. Steel, declined to publish their own prices. However, this will allow both to fall in line with Nucor and Cliffs without risking the legal implications of price fixing.
It remains unclear to what extent negotiations will impact the prices buyers pay. Historically, larger buyers have greater bargaining power. Nonetheless, the ability of mills to influence market conditions will continue to require them to manage the supply-demand balance through capacity discipline.
Mill Quarterly Reports Show Mixed Results
Q1 2024 saw mixed results among steel mills with steel prices. Overall, shipments from the four leading domestic producers trended up from the previous quarter. Both Nucor and SDI saw an increase in total shipments, which offset quarterly declines from both U.S. Steel and Cleveland-Cliffs.
Historically, Q1 typically sees an uptick in steel shipments, so the increase is unsurprising. However, shipments fell across all mills from Q1 2023. This suggests weaker conditions on an annual basis. Despite the nearly 3% decrease in shipments from Q1 2023 to Q1 2024, the average Q1 MetalMiner HRC price rose 8.62% year over year.
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