The steel industry is one of the largest emitters of CO2, and an increasing number of countries have announced long‐term goals to achieve net‐zero greenhouse gas emissions in the coming decades. US and UK are the leading countries with highest number of companies that have set goals to reduce GHG across their supply chain and there is a variety of technologies being explored with potential to reduce the overall emissions of the steel making process.

Major partnerships are being formed within value chain to secure inputs of green steel, however The US Green Steel market is likely to face a demand squeeze, as additional planned capacity only currently only meets half of the forecasted US demand.

There will be large investments to transition to and/or build new Green Steel capacity meaning that buyers will have to expect a premium embedded in production costs to procure steel from green sources.

HRC prices fell globally amid looming recession (US and EU PMI slumped to two-year low); US and EU HRC are down 11% Q-o-Q, while China HRC is down 6% over the same period. 

• US HRC prices have fallen by 11% Q-o-Q, in response to weakened demand, new capacity coming online, and lower input prices coupled with the Fed’s conviction to rein in inflation via further interest rate hikes. HRC price in the US will likely find a new floor during Q4’22.
• EU HRC prices have dropped by 11% Q-o-Q in Oct’22, as the market began to correct from the precautionary overstocking that was observed with the breakout of the Russia-Ukraine conflict. Imports from APAC (excl China) have also ramped up 65% Q-o-Q, weighing on local prices. However, with elevated energy costs (now 33% of BOF Total Production Costs) and a weakening Euro negatively affecting both demand outlook and Steel Mill profitability, many Mills have started to idle capacity in efforts to protect their margins, which should bring some stability to market prices. 
• CN HRC prices have declined by 6% Q-o-Q along with a slumping property market and a debt crisis for developers. The global economic environment is also taking a toll on demand for Chinese steel as Net Exports have started to turn downwards, although they remain at historically elevated levels. Production volume is expected to remain at low levels through the rest of the year.

Regional HRC price trends diverged globally in Q2 with US drop 34% Q-o-Q, EU plummeted 39% and China down 25% over the same period. HRC prices fell globally under the backdrop of the Fed’s interest raise. Steel market brushed off the latest disruptions and swung back into full correction.

• US HRC prices fell by 34% Q-o-Q as the Fed sought to curb the economy to combat inflation. Weakened demand, high import volume, lower scrap and pig iron prices coupled with the Fed’s conviction to rein in inflation via further interest rate hikes, HRC price in the US will likely slip further in the near-term.
• EU HRC prices have plummeted by 39% Q-o-Q to €851/MT in Jul’22, the lowest in 16 months. The price downturn was mainly the making of market correction following overstocking for the Russia-Ukraine War. While EU mills have begun to cut output due to thin margin, high energy prices as well as a weak Euro will likely provide support for EU HRC price in the coming quarter.
• CN HRC fell by 25% in Q2’22 with a weak prospect due to COVID uncertainties. Cool down of the real estate sector and concern over China’s pandemic measures will likely continue to pressure CN HRC downwards. The market reacted tepidly to Beijing’s ~$60 billion stimulus package when announced in late May.

US HRC prices rebounded 5% Q-o-Q, primarily as a result of a severe shortage of Pig Iron. Forecast: sideways

Although the market is facing a pig iron shortage and rising scrap prices, new capacity ramping up combined with ~72% Y-o-Y growth in import volumes, largely driven by the pull-back of Section 232 tariffs, are likely to correct the market.

EU HRC prices surged 44% Q-o-Q, driven by sanctions on Russia energy and steel products. Forecast: Increase

Due to high energy and input costs, EU steelmakers are cutting production, coupled with lower import volume from Russia and Ukraine (together account for one-third of Europe’s steel imports), EU steel market is facing tight supply and extremely high production costs. 

CN HRC price went up by 5% Q-o-Q, driven by multi-year low production levels. Forecast: sideways

CN HRC price is likely to remain at the current level, given that both supply and demand are constrained by the latest COVID restrictions in various parts of the country; environmental restrictions and increased M&A activity will support the price level.

Global Steel prices largely declined in Q4 2021, marking the end of a period in which US HRC prices regularly set new all-time highs. In both the US and EU, production continued to rebound from COVID-19 shutdowns, with US Mill utilization remaining above 80% throughout Q4 and EU crude steel production reaching multi-month highs. In China, the Central Bank’s decision to cut RRR by 50 bps will in turn release $188B in stimulated construction demand, driving CN domestic steel prices upward. Globally, recovery in auto demand, increased trade volumes brought on by policy change, rising M&A activity, and corporate sustainability targets, along with more traditional market drivers, will continue to influence price movement in the new year.

• US HRC prices have dropped by 39% since peaking in Sep ’21; the current price of $1,321/MT is expected to steadily decline throughout 2022, with lead-times finally normalizing. Primary downward price drivers include rebounding domestic production and surging imports. That being said, resurgent auto steel demand & impact from Biden’s infrastructure bill could put upward pressure on the market later this year.
• EU HRC price also declined in Q4 ’21, with prices dropping by 5% to 943 EU/MT; higher production volumes, stagnant purchasing activity, and fierce import competition will likely remain in place during ‘22, with EU production expected to recover to pre-pandemic levels. Overall sentiment though remains relatively bullish, with solid demand across the board.
• CN HRC and coated prices showed signs of a rebound after dropping sharply during Q4 ‘21, with prices recovering to $792/MT and $902/MT respectively as of Feb ’22; CN HRC prices are expected to rebound gradually as automakers stock up on material and production increases.