After the April market crash and a false start in June, American steelmakers are currently struggling to push steel prices as high as possible. Plant downtime, depletion of distributor stocks, and rising scrap prices have combined to push hot coil prices from $ 450 per tonne to about $ 600 per tonne over the past two weeks.
Another reason for the rise in prices is the recovery in demand both after the low caused by the coronavirus and for seasonal reasons, since the market traditionally revives after the summer recession. Automotive demand is high as dealerships run out of new cars.
Delivery times to steel mills are increasing. Capacity utilization continues to increase gradually and is now about 65%, but this figure remains well below the pre-pandemic level. US steel mills are reluctant to resume all of their operations after the quarantine is lifted, as resuming large-scale production is likely to abruptly halt the current price recovery.
One of the obstacles to reviving industry profitability is weak demand for steel from the oil and gas industry. Activity in the energy sector remains slow as oil prices refuse to rise. North American WTI crude is trading at around $ 40 /bbl, with only a few short-term factors contributing to its modest gain.
US financial institutions expect the oil supply deficit to return in the third quarter and become slightly more pronounced in the last trimester of this year, but oil stocks are expected to remain high for a long period. Since the price of oil is unlikely to reach pre-pandemic levels in the near future, it is difficult to say when demand from the energy sector will start to improve markedly.