Demand pickup keeps hot band prices on run

U.S. hot-rolled band prices remain on an upward run despite a dip in ferrous scrap tags, according to market sources.

"Demand (for steel in the United States) is good," one Midwest service center source said Wednesday. "Their (U.S. mills') costs are up, and that's definitely part of what is driving this. But you can't get prices to go up like this without demand pushing them forward, and demand definitely has been better."

The 5.4-percent increase in U.S. hot band prices during the past three weeks landed in the middle of the road, according to SteelBenchmarker's Feb. 14 report, released Wednesday, just below Western Europe with a 6.5-percent increase from three weeks earlier. The world export market was at the high end of the scale with a 9.6-percent jump in hot band prices, while China was on the low side with a 2.6-percent increase.

U.S. hot band prices rose for a sixth consecutive time to $897 per tonne ($813 per ton) f.o.b. mill, up from $851 per tonne on Jan. 24, according to SteelBenchmarker.

But those prices lag the current U.S. spot market, according to an informal survey of buyers by AMM, which puts hot-rolled sheet at $900 per ton ($45 per hundredweight) and cold-rolled sheet at about $1,000 per ton ($50 per cwt) following price increases of around $50 per ton announced by U.S. steel producers late last week.

Last week's announced increases were the seventh for the U.S. flat-rolled market since early November, moving hot-rolled sheet nearly 61 percent above the early November level of $560 per ton.

SteelBenchmarker puts cold-rolled coil in the U.S. market at $1,004 per tonne ($911 per ton), up 2.8 percent from three weeks ago; standard plate at $1,024 per tonne ($929 per ton), up 4.3 percent; and rebar at $836 per tonne ($758 per ton), up 6.6 percent.

The U.S. steel price increases come even as ferrous scrap tags retreated somewhat, with SteelBenchmarker pegging shredded scrap in the U.S. market at $425 per tonne delivered, down 4.9 percent from the Jan. 24 report; No. 1 heavy melt at $391 per tonne, off 6.5 percent; and No. 1 busheling at $453 per tonne, down 3.6 percent.

The surge in steel prices has led a number of steel industry analysts to increase valuations in the sector. Aldo Mazzaferro, director of research at Burke & Quick Partners LLC, New York, said in a research note that the price gains compared in magnitude with the historic price increases of 2008. "We continue to view price strength as sustainable," he said as he upgraded ratings on AK Steel Corp., West Chester, Ohio, and Los Angeles-based Reliance Steel & Aluminum Co. to "buy" and Nucor Corp. to a "hold" rating.

Likewise, Goldman Sachs Group Inc., New York, reiterated its "buy" rating on shares of Steel Dynamics Inc., Fort Wayne, Ind., stating that while the recent drop in scrap prices creates some anxiety among investors that steel prices could follow, "in our view it is too early to throw in the towel as we have just entered the seasonally strong demand period and the global cost curve is yet to rise in (the second quarter), which should force global prices to rise further, thus giving support to the U.S. price."

Meanwhile, SteelBenchmarker said hot-band prices in the world export market logged a sixth consecutive gain to stand at $773 per tonne f.o.b. port of export, up from $705 on Jan. 24; prices in Western Europe rose for the fifth time in a row to $802 per tonne ex-works from $753 previously; and tags in China increased to $630 per tonne ex-works from $614, also a fifth consecutive increase.

SteelBenchmarker (www.steelbenchmarker.com), launched by World Steel Dynamics Inc., Englewood Cliffs, N.J., and AMM/Metal Bulletin in April 2006, publishes steel benchmark prices twice each month for hot-rolled band, cold-rolled coil, standard plate and rebar in the United States, Western Europe, China and the world export markets, as well as benchmark prices for steel scrap in the United States.