Steel Buyers Worry About AK Steel & AM/NS Calvert

What is not driving market prices higher is AK’s issues with their blast furnace–the company has been having issues for months and their customers have not been counting on on-time delivery.

One AK customer told SMU today that their orders were flowing due to a large influx of slabs from Europe (we were told 80,000 tons). According to this source, AK had brought in extra slabs in anticipation of a scheduled maintenance outage for a partial reline on the Ashland furnace.

We understand from our sources that the reduction in supply due to AK Steel’s furnace outage is good news to the mini’s, especially Steel Dynamics.

The other item of interest to the steel community how is the new ArcelorMittal Nippon Sumitomo Calvert (AM/NS Calvert) facility going to handle steel prices under new management?

One of our sources when discussing business in the south pointed to Nucor and Severstal as being the most aggressive mills in the flat rolled sheet spot markets having lost a portion of their contract business due to the positioning each took during negotiations in 4th Quarter 2013.

With the change of ownership, some of the need for price incentives may be reduced under the new AM/NS ownership. The key for many of the former TK clients is on time delivery which is directly related to slab supply. With only a portion of the slab supply coming out of CSA and the balance out of ArcelorMittal mills in Brazil, Mexico and the USA, the expectation is for a marked improvement in delivery performance. As one supplier put it, “…they won’t have to discount for uncertainty.”

Even so, it is expected ArcelorMittal will attempt to build the Calvert sheet order book up to the 4 million ton mark and Nucor, USS and Severstal will resist giving up market share.

These two situations (along with higher inflows of foreign steel) will make for an interesting spot markets in both the North and Southern regions of the United States over the next couple of months.

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