Final Thoughts

We put out a note in our last issue to “SAVE THE DATES” of August 29-31, 2016 as we host our 6th Steel Summit Conference in Atlanta. Our program is looking better and better every day. We have about half of the speakers confirmed and we will share some of them with you as time goes by. Today Steel Dynamics CEO Mark Millett confirmed that he will participate in our program this year. I want to thank Mr. Millett and I am looking forward to seeing him in what we think will be an interesting format for our attendees. So, SAVE THE DATES: August 29-31, 2016. Location: Georgia International Convention Center, Atlanta, Georgia.

I was asked this morning if I thought the domestic steel mills would announce another round of flat rolled price increases in the near future. Well, the domestic mills certainly haven’t listened to any pricing advice I might of suggested in the past and I doubt that they will today either. So, these are my opinions and nothing more than that.

I am concerned about the widening of the spread between hot rolled and cold rolled/coated products. I can’t recall another time in my steel career going back to 1977 when the spread exceeded $160 per ton. The “norm” is more like $100-$120 per ton. So, if hot rolled is $410 per ton ($20.50/cwt) the norm is for cold rolled and galvanized base prices to be $510-$530 per ton ($25.50-$26.50/cwt). At the moment we are closer to $540-$560 per ton with most mills pushing the $560 number ($28.00/cwt) which would represent a $150 per ton spread.

However, there are still numbers out there on hot rolled at $380 per ton ($19.00/cwt) and for that matter we have heard of galvanized over $28.00/cwt base. The extreme has spreads of $200 per ton plus between HR and GI/AZ…

Those spreads will attract foreign steel and I expect that is already tempting domestic buyers. If so, that would put pressure on prices in the May/June time frame.

BUT, there are other things to think about: 2 steel mills are up for sale in a less than desirable market. If one, or both of these mills (Essar Steel Algoma and USS Canada) end up not selling, or being sold for parts and not run, then there are going to be some supply issues to think about.

Demand may not be as disappointing as some think as construction markets come into season (2nd quarter and beyond) and inventories become a concern. A service center executive told me today that his company was having difficulty getting all of the cold rolled that they needed. He also told me that a few thousand ton galvanized inquiry was no quoted by a couple of mills…

So, I don’t know if it is a good idea to publically go out and raise prices again. I like the model that SDI has out there which is to raise prices in small increments one customer at a time and then negotiate as needed with their customers.

However, you have AK Steel and essentially US Steel as non-players in the spot markets and one of them could raise prices just to see what happens. I guess at some point spot prices will be high enough for AK and USS to come back into the spot market.

I saw today that Nucor Berkeley took all of their galvanized lead times to “inquire”…

What do you think will happen next? Will the mills continue to raise prices as they have in the past? Send me an email with your thoughts: John@SteelMarketUpdate.com

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John Packard, Publisher