Steel Products Prices North America

Steel Buyers Supportive of the Flat Rolled Steel Price Announcements

December 10, 2015

The rumblings of a price increase have been building for a couple of weeks now as mills like SDI (Butler) and Nucor (Berkeley) have been quietly asking for higher steel prices from their customers prior to any announcements being made.

On Tuesday we traded emails with a service center executive who told us, “While rumblings of an increase persist, none has been bold enough to take that next step yet. Some have quietly increased prices on coated and to a lesser extent cold rolled. On hot rolled it is more of a line in the sand on lowering prices further. The fundamentals are starting to change and move in a positive direction.
Inventories have dropped modestly, and hopefully will continue to drop. Scrap has apparently hit bottom and has turned upwards in a few cases. Foreign offers and imports looking forward are moderating. Domestic capacity utilization and planned outages will further constrain supply. Early reports on future consumption are stable to mildly improving. Why wouldn’t prices turn and start to head back up?”

On Wednesday we saw price increase announcements out of three mills: NLMK USA (+$40), Northstar Bluescope (+$40) and AK Steel ($420 HR, $540 base CR and $550 base galvanized).

This afternoon we heard from an SDI (Butler) customer that their spot prices were now up another $20 per ton on top of the $20-$30 the mill had been trying to collect prior to the moves by NLMK, Northstar and AK Steel.

We have been hearing that a number of mills have had very good booking weeks leading up to this price move. Some of that strength was seen in the tonnage being bought by a number of mills in the scrap markets which pushed numbers up on most grades and is expected to push the numbers even higher as we move into January 2016.

We heard from a number of buyers that the base price numbers provided by AK Steel were because the mill did not chase hot rolled below $400 per ton.

Everyone seems to be in agreement that flat rolled steel prices have, at least for the moment, found a bottom. To keep prices up, the steel mills will need to be willing to lose orders when the price is below minimums the mill wants for its products.

A large service center told us, “I believe that if the mills are patient, and sit on their announced increases, they will get them – let the lead times begin to move out, imports to continue to wane, and shutdowns to have the effect needed in the marketplace. In short allow the supply/demand ratio to get closer in balance.”

One of the coating mills told us that they have not raised prices but they, “…erased the most marginal pricing. Took back some availability as tons have been sold, and working on getting some extras back….”

SMU has been in contact with a number of steel buyers around the country and this is what they have been telling us:

“This has to stick or there will be major carnage in the industry.” Service center

“Happy days are here again!!! I think it is a smart move. I think it will prompt a segment of buyers/customers to react. I think it is also a move to publish higher $ for new contract negotiations.” Service center

“I think the announcements will stop the slide as all of the mills will draw a collective line. I don’t think the prices will rise much however as the overall supply and demand is still out of balance. I also don’t think that people are going to speculate and buy stock tons. People were really hurt by speculating at $600/ton, then $500/ton and yet again at $400/ton. Speculating that the market is going to sky rocket now would be foolish in my opinion. If the mills stay disciplined I believe there will be opportunities to raise the price a little by mid-January. If they don’t stay disciplined and they fight for more market share this price announcement will blow up in their faces.” Manufacturing company

“The increase is well warranted. They need to get some positive back into this marketplace. I believe the increases, along with the AK HR base prices will stick. The service centers need to get prices to hold, too. The bleeding is not good. And no one in our industry knows where the bottom is. They continue to de-stock and I believe that will be a problem sooner than later. The only issue the mills create each time they try to raise prices…they go too far too fast. The $40 increase is fine for now. Collect that increase and see where orders go. They need to be careful, for the next round of foreign will arrive late March. I believe everyone has jumped on the offers, for they are cheaper than any other steel that was or will be offered. But…as always, this is the steel industry.” Service center

“Since we booked at $17.50 yesterday [$350 per ton], after the Beta announcement [NLMK USA], I don’t think much about it. We will see movement but not $40 unless it is coming off a $15/$16 base number for those who have that.” Service center

SMU spoke on the phone with one service center executive who has been telling their contract customers over the past few weeks that now was the time to buy and not sit back waiting for further erosion. A number of his customers failed to get their orders on the books and now it is too late as the mills (at least this company’s suppliers) will no longer honor the old quotes.

The expectation is that the mills will collect a good portion, if not all, of these increases and there will be more to come unless USS and AK Steel back off of their plans to idle some of the steelmaking capacity.