Steel Products Prices North America

SMU Price Ranges & Indices: Big Move Lower

January 13, 2015

Flat rolled steel prices continued to drop this week as the domestic steel mills struggled with holes in their order books due to growing inventories at the service centers, a sharp drop off in pipe and tube orders associated with the energy markets, and the continued flow of imported steel (which is part of the growing inventories story at the distributors).

Based on the data we received from steel buyers over the past few days, we have seen the benchmark hot rolled prices plummet to a low point on our range of $550 per ton and our average is now down to $570 per ton. Both the low end of our range and the average are $20 per ton lower than one week ago.

The last time we saw $570 average HRC was back in mid-May 2013. The low point in that pricing cycle was May 21, 2013 at $565 per ton. We have to go back to late November 2010 before we can find HRC numbers below $565 per ton.

We have had a number of buyers telling us the hot rolled number “needs to be at $500 per ton.” When taking into consideration freight equalization and the waving of some extras the specialty HRC numbers are closer to $500 than one might expect.

Galvanized and cold rolled numbers are falling “in line” with hot rolled, according to one of our service center sources. We are being told that numbers are moving quickly. The debate amongst those with whom we spoke with today is at what point will prices bottom, and what will cause the market to bottom?

One large service center told us, “…I think there will be orders at 500 (already there if you include freight or grade extras), but I can’t imagine lower. That should be the point that has mills look to reduce rollings and attempt to prop up reporting to the CRU to move contract prices higher. Several mills have already stopped chasing.”

A large service center told us this evening, “It’s a fragmented situation for the mills, with distinct differences based mainly on geography. Southern-based mills are suffering more for lack of OCTG orders, and also because they are more vulnerable to the low-cost port imported inventories. Northern-based mills serving the contractual business in the automotive industry are in better shape, but only relatively speaking. AK-Dearborn has a lot of excess capacity following the acquisition, and AMNS is trying to shift volume from north to south, to achieve better balance among their US assets. Essar Algoma is back at full capability, but is suffering with low orders currently. Unfortunately, they are trying to work their way back into the market with very difficult market factors against them.”

The market is moving and it is a time when buyers need to be careful. One service center told SMU that buyers should be watching the HRC Forward Curve. We were told, “Another sign of reaching of bottom is the spread between physical steel buys and the forward curve. With low priced physical, and a contango on the curve, more domestic orders should show up. Then those locking in the sale on the forward curve should push the curve lower.”

For now we cannot be sure at what point flat rolled steel prices will end their slide.

Here is how we see flat rolled prices this week:

Hot Rolled Coil: SMU Range is $550-$590 per ton ($27.50/cwt- $29.50/cwt) with an average of $570 per ton ($28.50/cwt) FOB mill, east of the Rockies. Both the lower and upper ends of our range declined by $20 per ton compared to last week. Our average is now $20 per ton lower than one week ago. SMU price momentum for hot rolled steel is for prices to drift and trend lower over the next 30 days.

Hot Rolled Lead Times: 2-4 weeks.

Cold Rolled Coil: SMU Range is $660-$720 per ton ($33.00/cwt- $36.00/cwt) with an average of $690 per ton ($34.50/cwt) FOB mill, east of the Rockies. The lower end of our range declined by $20 per ton compared to one week ago, as did the upper end of our range. Our average is now $20 per ton lower than last week. SMU price momentum on cold rolled steel is for prices to drift and trend lower over the next 30 days.

Cold Rolled Lead Times: 3-7 weeks.

Galvanized Coil: SMU Base Price Range is $33.50/cwt-$36.50/cwt ($670-$730 per ton) with an average of $35.00/cwt ($700 per ton) FOB mill, east of the Rockies. The lower end of our range declined by $10 per ton compared to one week ago while the upper end declined by $20 per ton. Our average is now $15 per ton lower than one week ago. SMU anticipates galvanized prices will drift and trend lower over the next 30 days.

Galvanized .060” G90 Benchmark: SMU Range is $739-$799 per ton with an average of $769 per ton FOB mill, east of the Rockies.

Galvanized Lead Times: 3-7 weeks.

Galvalume Coil: SMU Base Price Range is $34.50/cwt-$36.50/cwt ($690-$730 per ton) with an average of $35.50/cwt ($710 per ton) FOB mill, east of the Rockies. The lower end of our range remained the same compared to one week ago while the upper end declined by $20 per ton. Our average is now $10 per ton lower than last week. Our expectation is for Galvalume prices to drift and trend lower over the next 30 days.

Galvalume .0142” AZ50, Grade 80 Benchmark: SMU Range is $981-$1021 per ton with an average of $1001 per ton FOB mill, east of the Rockies.

Galvalume Lead Times: 3-7 weeks.

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