Industrial Insight

Steel prices | May 10, 2016

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Steel price rally is temporary – Moodys
Moody’s Investors Service in a relase on May 9th said that the recent steel price rally does not signal improved demand and will provide only a temporary boost to producers. It said “Since December 2015, steel prices have increased by about 55% after hitting a 7-year low, with production and capacity utilization rates firming. Hot rolled coil prices rose to USD 550 per ton in May 2016 from USD 355 per ton in December 2015, while utilization rates rose to 72% in April from 63% in December. Overall the rally is expected to expand margins and improve operating results for the domestic steel sector versus those in recent quarters.”

In a new report, "Recent Steel Price Spike Unlikely to Be Sustained," Moody’s indicated the rally has been driven by temporary supply side factors that were likely to wane in the near future, noting that steel prices and utilization rates remain at historically weak levels. The ratings agency noted that industry conditions would not support materially improved credit profiles for the rated steel producers.

Moody’s Vice President Michael Corelli said "Despite this recent spike, the underlying issues that plagued the domestic steel industry last year will persist in 2016. We’re still seeing significant excess worldwide steel and raw material capacity along with softening demand and economic growth."

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I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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