July 28, 2022

Pent-up consumer demand for new cars, trucks, and SUVs will lead to higher steel shipments in 2H 2022, according to steel producer Cleveland Cliffs. The company made these statements in its 2Q 2022 earnings report. This renewed demand comes after two years of lackluster automotive production, when North American light vehicle production averaged 13 million units per year, down from 17 million units per year prior to 2020, according to their calculations. Cleveland Cliffs is the largest steel supplier to the automotive market, according to S&P Global.

This year so far has been an ugly year for steel prices, as prompt month August CME HRC futures have dropped just shy of 50% since mid-March, as last trade was $850/st (7:00 AM CST). This could be a good time for steel end-users such as automotive equipment manufacturers (OEMs) to hedge future needs by buying swaps or call options. Both of these strategies would establish a maximum steel price. Such positions are basic for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (7/28/2022)

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Price Indications

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AEGIS Insights

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7/24/2022: Column: Aluminium producers feel the margin pain as price slumps

7/22/2022: Cliffs expects automotive steel demand rebound by year-end: CEO

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