Musings:
U.S. prices rebound, but who benefits?
U.S. sheet prices have
been on the rise, and can continue to surge near term, in our view. Three
positive catalysts include: 1) scrap prices expected to rise $20-30/t m/m for
Sept; 2) slab prices too steep to be rolled economically in the U.S. (Chart 2);
and 3) integrated mills behind schedule. We expect benchmark hot rolled coil
(HRC) can continue to surge, topping $500/st near term, so long as integrateds
remain behind schedule with auto customers. However, we expect prices can
retreat in 6-8 wks assuming auto normalizes, construction softens, and further
furnace restarts. Mini-mills can take share, but margins should remain lean as
scrap prices rise with steel, while integrateds sell limited tons on the spot
mkt, leaving limited beneficiaries of higher near-term prices. We stay
cautious.
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