Final Thoughts

Here are some of the other items covered in last week’s flat rolled steel survey:

Is there a limit as to how far the domestic mills will be able to push (and collect) higher prices? Yes = 88%, No = 8%, Other = 4%.

Manufacturer’s trend for purchasing more, less or the same amount of steel as they did one year ago has been changing going back to December 2015 and continuing to improve (buy more steel) through this past week.

Service centers are in sync with manufacturers as distributor trend has broken the negative trend regarding their customers releasing less steel than they did last year. However, we are not yet seeing the percentages improving for those reporting their customers as releasing more steel. The data has been relatively flat over the past three months.

We also look at the pace of new orders that are going through the service centers. That trend has also radically changed over the past 30 days.

We have been watching manufacturing and service centers buying history since our survey began in late 2008. We have seen a dramatic change in the percentage of service center respondents reporting their company as engaged in a reduction in inventory compared to where they were just a couple of weeks ago.

We have reported in the past about how both manufacturers and service centers view SC spot prices into their customers. Our survey has accurately predicted that price increases would happen based on what we call distributor “capitulation.” Capitulation is that point in time when 75 percent or more of the distributors are lowering prices in an effort to dump high-priced inventory. On the flip side we can also predict if price increases are going to stick based on the percentage of service centers who are raising prices (thus supporting the increases). There has been a distinctive change in the data over the past few market analysis we have performed.

Our analysis also goes to trading companies, mills and toll processors as we try to understand the flat rolled markets better. Traders told us that foreign prices are starting to rise compared to one month ago. That is a change in the trend.

Traders still believe foreign prices are at levels where business can be transacted.

The trade suits have/have not affected trading companies ability to quote and service U.S. customers. They are also offering steel from countries not impacted by trade suits.

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John Packard, Publisher