Citigroup predicts rising steel prices

Despite talks of a looming or growing recession, steel prices continue to climb to record levels, prompting analysts with Citigroup to predict “a period of higher prices, margins, and earnings, with shares damped by pessimistic multiples compression until the U.S. economy stops deteriorating.”

As of March 24, the price of hot rolled coil, or HRC, was $800 per ton, up from a 2007 peak of $580 per ton, and the price of cold rolled coil, or CRC, was $880 per ton, up from a 2007 peak of $680 per ton. The price of rebar was also above 2007 peak prices.

The Citigroup analysts expect those price hikes to “stick,” but added “optimism should be tempered by the recognition that little volume is likely being transacted at record-high prices, that most of the gains are cost-driven, and that it will take time for these prices to flow through the broader customer base to lift company-average realizations.”

Calling previous forecasts “conservative,” the analysts now predict HRC prices for 2008 at $743 per ton, up from $550 per ton, and CRC at $840 per ton, up from $650 per ton. For 2009, they predict prices in the $700 to $800 per ton range and for 2010, those estimates drop again to the $650 per ton to $750 per ton range.

—Eric Lidji