Dead Cat Bounce..?

Here is what one service center executive told SMU this afternoon:

“I haven’t heard of any announced increases. What is occurring, however, is that a number of mills have admitted to taking some “opportunity” orders within the last 2 weeks at price levels between $29-31.00/cwt. Reported volume for the low-end $29.00 price, was 25,000+ tons. Since then, mills are now attempting to put a $31.00/cwt bottom in the market, and not go below that for now. I basically see the market as $31.50-ish for around 2-700 ton orders, and $31.00 and lower, for higher volumes. The change, if there is one, is mills trying to declare a new price minimum, as opposed to an actual price increase, in order to send a message and to attempt to stem the price slide for the time being.”

Is this a “dead cat bounce” if the mills did indeed collect some low priced orders and then quickly returned to “minimum” base price levels suggested by our service center executive above? We won’t know for sure for a few weeks.

What appears to be happening now is there is a move (mostly out of service centers) to put a bottom to prices and call for the domestic mills to raise prices. The rumor mill is in the early stages as those companies (not necessarily mills), not wanting to see further erosion in hot rolled coil pricing (and other flat rolled products), are beginning to float the notion that the domestic steel mills are thinking about raising steel prices. As one steel buyer for a large service center group put it to me earlier this afternoon, “I have not heard anything about an increase; however, steel mills should always be publically raising prices – especially when the market is in free fall.” I spoke with a couple of mills on the subject and they told me that we would be hard pressed to identify a specific mill and mill rep who is stating that their mill was going to raise prices.

There appear to be two areas of concern within the steel mill community – falling scrap prices and a continued worry regarding foreign imports – and maybe the third concern is the other steel mills. As usual for this market, each mill is acting in their own interest and not all mills are participating at the low end of the ranges suggested.

Buyers need to be aware of the rumor mill (and the futures markets) and take the necessary steps to gather more information before just assuming prices will do nothing but go down from here.