2016 to be a Year of Volatility?

This may come as a surprise to some but, there are many who think 2016 may be one of those years where flat rolled steel price volatility, maybe even extreme volatility, could become the norm. We are now in the midst of a five month upswing in flat rolled steel prices which has taken benchmark hot rolled from its December cycle low of $360 per ton to last week’s high of $505 per ton. Our expectation is for prices to continue to move higher with the mills pushing $560-$580 as their next benchmark to hit during this cycle. From our perspective (SMU) we think the steel mills will be able to achieve $600 per ton on hot rolled, if they so desire, within the next month as there is little foreign being offered at prices attractive enough to put pressure on domestic numbers, it appears inventories at service centers are balanced to the point where flat rolled steel stocks need to be replenished and we are about to get another “up” month for ferrous scrap prices.

Late on Friday SMU spoke with a steel buyer who reported, “The last two weeks steel prices have just exploded.” Then the buyer went on to express their doubts, “I don’t understand the fundamentals behind it.”