The market for steel remains extremely tight, with pricing momentum continuing to the upside. So, what's the driver?
How are metal prices determined?
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 the price of carbon steel. Let's highlight three:
Raw input: 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 global exchanges.
Global market: Macro-economic factors that influence supply and demand dynamics play a large role. For example, when the U.S. administration imposed a 25% 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 process: 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.
Galvanized - The process of applying a coating of zinc to the finished cold-reduced sheet or to fabricated parts made from strip products. The coating is applied by hot dipping or electrolytic deposition.
Galvannealed - An extra tight coat of galvanizing metal (zinc) applied to a soft steel sheet, after which the sheet is passed through an oven at about 1200 degrees Fahrenheit. The resulting coat is dull gray without spangle especially suited for subsequent painting.
Pickled and Oil: An acid solution is used to remove scale and surface oxides from a hot rolled coil. Oil is applied at the exit end of the pickle line to inhibit oxidation (rust) after the acid removes the top scale.
Other metals, like aluminum are influenced by different factors. Here is a quick look at The Price of Aluminum.