What Drives the Price of Steel?

Prices for hot rolled carbon have risen dramatically since their lows of around $440/short ton this past summer. This is due to the fact that steel mills are running behind due to a variety of factors that have impacted production. As a result, lead times have been greatly extended with many no longer having capacity for the remainder of the year and into 2021. In addition, imports have reached their lowest levels in 10 years. Until recently, global steel prices were higher than domestic offers, which further limited imports.

HRC (hot roll coil) is the principal finished steel form in the global steel industry and an important raw material for manufacturers. It is a critical material that requires accurate and timely spot pricing and analysis. Many factors, ranging from the cost of the raw material to global trade agreements, ultimately impact pricing of the carbon steel product you purchase.

Here is a closer look at three of these factors:

Steel begins in the raw state of iron ore, scrap, coking coal, and natural gas. The price of these resources is influenced by the producing countries and traded on exchanges like CME.

Macro-economic factors that influence supply and demand dynamics play a large role. For example, when the U.S. administration imposed a 25 percent tariff on steel in early 2018 via Section 232, the U.S. experienced a rise in the pricing of HRC.

Throughout much of 2018, on a non-tariff adjusted basis, U.S. steel prices traded at a wider premium relative to European and Chinese steel prices. When adding in applicable tariffs, however, the spreads appeared to have been more in line with historical norms.

Mill treatments: Depending on the end-use of a product, HRC undergoes various treatments at the mill, all of which add value but come with an added cost (see chart).