OREANDA-NEWS. October 12, 2015. US buyers and sellers of steel have lots of time on their hands to study their predicament as the market remains in the doldrums, but gaining perspective could produce even more malaise.

It has been more than a month since US integrated mills’ union contracts reached their expiration date and there are still no settlements with the United Steelworkers union. Union contracts at American automakers — steel’s best customer — are in limbo too, with United Auto Workers at Fiat Chrysler voting down a tentative agreement that could have set the standard for the industry.

Many in the steel industry are coming to the conclusion that mills must shutter some capacity for prices to rise and stimulate the market. But it seems like the labor situations are complicating matters, making it difficult for a mill to settle on a strategy.

A big boost in demand would solve a lot of the steelmakers’ problems with production, imports and inventories — and it might even help with the union situation — but no such boost is on the horizon. To the contrary, a labor strike or lockout in the auto industry could seriously dim the demand picture.

Steel market players are trying to avoid gloom and doom, but some are seeing a historically weak market. America’s Great Recession is the context for the economic health of the country, and for the steel industry, the current market compares unfavorably.

A look at domestic US hot-rolled coil prices, the bellwether steel product, over the past 10 years tells the tale. While the plunge in prices was more dramatic in 2008, from an unprecedented peak of about \\$1,100 a short ton in July of that year to about \\$400/st in May of 2009, the recovery was shorter.

By recovery, though, we don’t mean all the way back to \\$1,100/st, which was clearly an anomaly, despite suggestions by some mill executives at the time that this was the new normal, that cyclical changes may be a thing of the past and that steel buyers had better “get used to it.”

Looking at the span since 2005, the average HRC price, ex-works Midwest mill, has been more like \\$600/st and HRC prices bounced back to that level to begin 2010, a mere seven months after the 2009 HRC price nadir.

The current US HRC market is flirting with \\$400/st again after a wrenching 16-month decline from \\$675/st in May of 2014. The Platts price assessment for US HRC now stands at about \\$430/st ex-works, but that is for orders of up to 500 st. Bigger deals get bigger discounts and talk of sub-\\$400/st HRC is emerging for big buys.

While that’s bad enough, many in the market don’t see a recovery until perhaps the second quarter of 2016, which means the market will have been wandering in the wilderness (or sleeping in a Motel 6) for about two years.