Letter to the Editor: Here is My View of the Flat Rolled Market

We are seeing a long term shift in the market overall.  The big change earlier this year was the consolidation of Thyssen into Mittal’s control. Thyssen was the low-price leader over the past several years and I do not expect they will continue to be drag on the domestic pricing.  Severstal also was another low-price leader and they made some changes to the commercial department leadership because I assume they were unhappy with the results.  I think they will take another approach and be more in line with other domestic pricing, continue on the lower end of the scale but more in line.  These are potential trends that could affect the domestic mills pricing strategy over the next few years (until Correnti builds a new mill).  While these mills are not much of a factor in the West Coast market, both CSI and UPI try to follow domestic pricing trends so will have at least an indirect affect on the West Coast market.

Over the past week, there have been a couple of developments which will definitely have an immediate impact on pricing from domestic mills.  Scrap is going to be up in the $15-$25/t range and the mills have used scrap pricing as a justification for raising prices.  AK steel has pushed out their deliveries somewhere in the middle of 3rd quarter.  Whether it is production issues or a very strong auto market it does not matter.  For all practical matters AK is out of the spot flat rolled business for the next 3-6 months.  Those spot flat rolled will need to be placed elsewhere and most like with the Midwest domestic mills.  The biggest news last week is that US Steel announced they have 2 unplanned outages taking out about 30,000t/DAY of capacity.  This is huge, whether it is only for 4 days or 4 weeks it will take the market some time to recover. My understanding is that the mills are seeing a strong increase in order bookings as customers try to cover themselves.

About 2 weeks ago the market announced a $40/t increase and pricing has been rising since.  Mills are now pushing a second round of increases, which should solidify the first $40/t and they will be more inflexible with negotiations with customers.  This is an industry that jumps on any exterior factor to justify pushing the price up.  We are now looking at a second increase after just 2 weeks, and we are likely to see a 3rd and 4th increase over the next 30-45 days.  The domestic mills will keep pushing up the price until they have a hole in their schedule.  If there is a shift in buying domestic and customers shift to foreign it will not get here until 3rd quarter so the market is going to be tight over the next 90 days minimum.

Because of the harsh winter I believe there is some pent-up demand as the weather changes to spring.  Here in the West we are seeing strong growth in the construction market which will have a definite impact on demand.  Limited domestic availability with a stronger market puts the domestic mills in the drivers seat and they will take advantage of the situation to continue to raise prices.  Customer should review all the factors and strongly consider where domestic pricing is likely to be in the early 3rd quarter and take advantage of these import opportunities.
 
As for dumping suits, will not be successful on a national level with the mills pushing these aggressive back to back increases into the market.  How do you prove injury with the domestic mills raising the price and basically being on “controlled distribution” running at full planned capacity and market is still short.  UPI could still try for a regional filing for Cold Rolled but most of their problems is mis-management-Nothing more Nothing less!

Just my thoughts.

Alfred C. Plummer