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SMU: War-Driven Run-up Has Run its Course

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Steel prices and lead times are back to their pre-Ukraine War levels following the biggest price spike the industry has seen in at least the last 15 years – and maybe ever.

What was briefly a seller’s market is now a buyer’s market. Let’s call it the great unwind. Or maybe the great rewind is more appropriate.

To get some idea of where we’ve been, and where we might be going, take a look at the chart below. It shows hot-rolled coil prices mapped out against HRC lead times.

You can see that lead times provided a good early warning signal last year. HRC lead times peaked out 10 to 11 weeks in May/June of last year. Prices continued to rise until hitting at an all-time high of $1,955 per ton ($97.75 per cwt) in September 2021.
They then fell throughout the fourth quarter of 2021 and into the first of this year. In other words, lead times – if you were paying attention to them – gave you a few months advanced notice that steel prices were in for a sharp decline.

Lead times did not provide that early warning system they usually do when prices shot up in March. That’s in part because what drove steel prices higher was not a market cycle but geopolitics, the sudden, full-scale invasion of Ukraine by Russian forces on Feb. 24.

In response, hot-rolled coil prices rose $435 per ton ($21.75 per cwt) in March alone, according to SMU records. We saw prices nearly double from $985 per ton at the start of last year to $1,955 per ton by September 2021. The climb to last September’s record high was a long slog compared to the unprecedented price spike we saw in March.

I’ve been writing about steel and metals since 2007. SMU’s numbers go back to 2007. And there is no analogue to what we saw in March. It was the biggest price jump steel has seen in the last 15 years – perhaps ever.

“We had this giant spike, the fastest steel prices ever went up. We thought pig iron prices would never come down. But we figured it out in 60 days,” one service center executive told me.

There was indeed a hot minute when it seemed like the world might be short both pig iron and steel. There was even talk of the U.S. exporting to Europe. Recall that Ukraine and Russia had accounted for roughly 60 percent of the pig iron supplied to EAF steelmakers, including not only those in the U.S. but also to those in places such as Turkey, which is similarly reliant on the EAF route.

Russia had also been an important source of slabs and finished steel for Europe. That supply was cut off when the EU rolled out sanctions in response to the war. But no shortage emerged because inflation and the effects of the war resulted in a slowdown in European demand.

In short, prices went straight up, and now they appear to be coming straight down. The question now is where the bottom is and when we might reach it. Is it roughly $1,000 per ton, or is it below that? Will we hit that bottom in Q3, or will prices slowly dribble down into Q4?

It’s basically the same question the market was trying to answer before the outbreak of war. Recall that HRC prices started out the year at $1,600 per ton and had fallen nearly 38 percent to $1,000 per ton before the war whipsawed tags higher. And now we’re trying to find that answer question again – where is the bottom?

“I’m hearing from mills today who are pretty desperate. They are all looking for orders. We had a three-month reprieve because of the war, and now we’re back to where it was before the war started,” a second service center executive told me.

Why the gloominess? Scrap prices have been down in recent months, new EAF capacity is ramping up in the U.S., and that additional supply is coming online just as inflation and rising interest rates are leading to concerns about demand.

SMU surveys the market every two weeks. And our recent survey results reflect the abrupt change the market has experienced since late in the first quarter. Nearly 90 percent of survey respondents report that mills are willing to negotiate lower prices to attract orders for hot-rolled coil. That’s a sharp reversal from March, when only 20 percent of respondents said mills were willing to consider lower prices.

The script has flipped not only when it comes to pricing at the mill level but also when it comes to service center buying patterns and resale prices.

Roughly 86 percent of service center respondents to our most recent survey report they are lowering resale prices, 14 percent are keeping prices steady, and none are raising them. That’s a sharp change from March, when 91 percent said they were raising prices, 9 percent were keeping them unchanged, and none were lowering them.

As for inventories, 43 percent of service center respondents to our most recent survey reported they were reducing them, and the remaining 57 percent were keeping them unchanged. Compare that to early April, when nearly 90 percent of survey respondents said service centers were keeping inventories steady and most of the rest were increasing stocks.

Such figures have led some to question whether the steel industry is in for a repeat of the summer of 2008. I wouldn’t join that camp just yet. There are signs that prices in Asia are stabilizing with the easing of stringent COVID lockdowns in China. Also, the steel industry is known for its “recency bias.” People tend to think that prices will never fall when they’re going up. They also tend to think that prices never rise again when they’re going down.

The thing to keep an eye on is lead times. If those start to flatten out and move up again, it’s usually a reliable signal that prices will start heading back up again too. It’s also important to keep in mind that steel mills are still very, very profitable at current prices.

“Order entry is fine, just things are getting more competitive,” one steel mill executive told me.

Time will tell whether that’s a rationale assessment of the market or wishful thinking. 

About the author:
Michael Cowden ( is the senior editor for Steel Market Update. SMU’s mission is to inform, educate and motivate those in the flat-rolled steel industry with its newsletters, website, conferences and educational programs. SMU hosts its annual Steel Summit Aug. 22-24 in Atlanta. He can be reached at

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