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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