After lagging behind the broader commodity rally to start the year, steel prices in the US are soaring as Russia’s invasion of Ukraine threatens to choke off imports from key suppliers.
Prices slumped about 30 percent in the first two months of this year, even as the commodity indices hit new highs.
A dropoff in demand at the end of last year and higher domestic production had producers warning of catching a “falling knife,” with CEOs at the largest producers saying customers from automakers to appliance manufacturers were not booking as many orders.
That has all changed with Russia’s invasion. While prompt supply is still considered adequate, fears of shortages are seen in the futures market.
May shipment prices have jumped 59 percent since the day before the war started on Feb. 24, while steel for March delivery is just up 15 percent.
The rebound in North American steel prices also highlights the far-reaching impact of the war, which has fueled a surge in commodities from oil to wheat to nickel.
Because Russia and Ukraine are key suppliers to the US and Europe, “the futures market has been bid up since the start of the invasion,” Freight Investor Services steel derivatives broker Josh Toney said in an e-mail.
In the US hot-rolled coil market, “steel mills are back in the driving seat, pushing through price hikes for new orders and extending lead times,” he said.
The supply concerns come as signs had been pointing to softening demand in the US industry, which earlier last year rode record steel prices to higher earnings and revenue.
US Steel Corp on Thursday forecast earnings that were well below analysts’ estimates, and Nucor Corp, the largest US producer, also gave a weaker-than-expected outlook.
Any reduction in imports could have a big impact in the US, forcing customers to look for supply from other markets or hope domestic steelmakers that are already running near full capacity can take on more orders.
Steel shipments from Russia and Ukraine account for about 5 percent of total US imports for consumption, US Census Bureau data show.
