Northern Steel Prices Appear Firm - South Has Some Flexibility

We learned from other sources that Essar Steel Algoma does not expect to be back into the spot market in the U.S. until July at the earliest. Their issues are related to the ice problems affecting iron ore shipments on Lake Superior. The same ice problems which are impacting iron ore supplies at USS Gary Works.

Spot prices in the North appear to be consistently in the $680 range for new spot business on hot rolled and close to the $815 per ton offer level on base prices for both cold rolled and coated steels. As our service center source pointed out in the comments above, other mills in the north have picked up orders which would normally have gone to US Steel or AK Steel. It won’t be until those two mills return to full production AND actually return to the spot markets before customers who now have double purchased steel will start moving orders out or cancelling tons, thus affecting lead times and spot pricing.

When you move south, the mill players and available tonnages have not changed although lead times are modestly longer. We are learning that a couple of mills continue to be aggressively pricing flat rolled spot products for June production.  

We have learned that there are offers on hot rolled for late May production at, or slightly below, $660 per ton from at least one southern mill.

The southern mills with whom we communicated with this week are reporting tough sledding on Galvalume spot pricing due to the significant influx of foreign AZ into southern ports over the past couple of months. The galvanized market has been modestly better but SMU is hearing of prices which are being offered in the South well below the previously announced base price levels of $39.50/cwt. “These guys are still hungry,” is how one service center buyer put it to us this afternoon.

This could change if foreign steel becomes less available or significantly higher priced. We heard from multiple sources that some of the cheaper foreign price offers that have been out there are either being pulled or have limited life left to them.  Here is what one service center executive told us this afternoon:

“…[I] Was just offered Chinese CR and Galvanized for late Aug Houston arrival, at $31.50/cwt & $34.25/cwt, respectively, loaded truck at dock. This is same level as the last 2 months. However they need answer in days, as price increase is expected to come.”

None-the-less, we heard from other buyers that they have to consider buying foreign steel. A large service center buyer told us, “Foreign steel definitely has to be on your radar screen down south.”

A manufacturing company who was also entertaining pricing on cold rolled from both Chinese and Russian steel mills told us the Chinese offers were pulled today and Russian prices were up by $35 per ton as trading companies (and foreign mills) sense some blood in the water and are getting a little “opportunistic” in their price offers to U.S. customers.

We will need to watch the marketplace and lead times – especially between the southern mills vs. northern mills – to see what impact order patterns will have on pricing.

As an aside, just about every service center and manufacturing company with which we spoke today indicated that demand was getting better.  Many referenced March as being a good month and that, so far, the month of April is starting out very well. Some of this is pent up business due to weather related issues but some of this is genuine expansion in demand – especially in the construction markets.

On the automotive side we spoke with one service center which services the automotive industry. They reported that the list of items being inquired by General Motors was about half the number of items this week as compared to last week. “The market is fairly tight but I don’t see anybody shutting down…They are handling it.”

A manufacturing company told SMU, “I am not afraid of running out of steel. But, I may have to pay more for it….”