Bullish sentiment was expected to persist in January in the US steel market, according to the monthly survey of the market by S&P Global Platts, with most participants expecting higher steel and raw material prices in coming weeks, as well as increased production, but unchanged inventory levels on average.
In the survey of US producers, distributors, traders and end-customers, conducted in the run-up to January, the index for steel price development increased from 86.8 in December to 90 in January, indicating even stronger expectations of an increase (an index of 50 indicates stability).
With the steel industry finding itself in a strong upswing going into 2021, several respondents questioned expressed concern about a possible similar swing in the other direction. "Volatile market and panic buying lead to chaos," said one end user.
"Raw material demand and pricing has continued upside for 60 days," said another.
"Prices for everything (steel and scrap) seem to be going up too high, too fast," said a mill source. "Expect a big correction at some point, but it won't be until the second quarter at the earliest."
The end-user sector was the most bullish about January prices with a 93.75 price development index level. Distributors came in at 91.7, with traders, brokers, and mill respondents not far behind.
"Raw material demand and pricing has continued upside for 60 days," said one trader.
"Q1 looks strong," agreed a distributor.
Participants expected steel production to see an uptick as well, with the index averaging all groups at 71. End users again were the most bullish at 78.1, followed by traders at 71.9.
For the third month in a row, the raw materials index was the most bullish indicator at 91, with all groups hitting above 90; except for the distributors, who were least bullish at 87.5.
"Raw materials [are] very difficult to forecast, especially given the difficulty in understanding developments in China," said one distributor, referring to China's voracious appetite for steel and raw materials as of late, including their first purchase of imported scrap following a two-year ban on the material.
Respondents put the expected finished steel production change index at 71 on average, while most believed inventories will remain unchanged at an average index level of 50.
