Steel Products

Letter to the Editor: West Coast View of Lack of Service Center Spot Price Support Article

February 15, 2013

Dear Editor,

While not currently a subscriber I did receive your February 13th newsletter earlier this morning. I’ve been active in the steel industry out here on the west coast since 1974 and since you’ve invited comments I’d like to make a few.

You note that a lack of service center support for mill increases is one of the problems the mills face in getting their numbers up and that it’s been a couple of years since a successful series of price increases. I think we all know by now that increases not related to true changes in either supply or consumption will be short lived and quite painful to service centers.

The absence of these fundamental changes when price increases are announced are generally regarded, at least by me, as mills merely trying to put a floor under their current numbers; an attempt to change the conversation from “ I want a cheaper price” to “I’m not accepting an increase”.

You may recall the last successful run-up in pricing began in Q4 of 2010 and ran thru the early months of 2011. Capacity utilization was still in the low to mid 60% area and consumption was improving modestly. We are true believers when the fundamentals are right, not merely because the mills announce an increase.

I’d like to make a couple of final points. There’s no reason for mills to announce price increases with lead times under a month, it’s a waste of everyone’s time.

Lastly with regard to service centers raising their prices in the spot market. In order for us to raise pricing we need to be willing to lose orders. That is a really tough thing to do these days. While we’ve all more or less adjusted to our circumstances we don’t get a sufficient number of sales opportunities to knowingly pass on too many of them because we think the price is too low.

West Coast Service Center