Steel Products Prices North America

Steel Mills Battle Market Blahs

September 13, 2016

The uncertainty in the market (called the “blahs” by a number of our steel sources) is affecting both buyers and sellers of steel.

Steel mills have been doing all that they can in an attempt to keep flat rolled steel prices from slipping too far. One of our mill sources had a sense of humor when discussing their need to adjust prices lower. When asked if they were being “forced” to adjust their prices we were told, “Forced? Sounds harsh. I am actually looking at this as an opportunity to make winners out of our loyal customers!” Our mill source then went on to say that some of the buyers who bought foreign steel a few months back may not be so pleased with those tons when they arrive compared to domestic. He told us, “The domestic reset is going to make things interesting in a few months.”

The situation appears to be different depending if you are a mini-mill (EAF) or fully integrated mill. Industry sources are telling us that US Steel will most likely help their joint venture partner (POSCO) by sending some hot rolled coil to USS/POSCO on the west coast. One service center executive believes, “…the Posco UPI impact hasn’t been felt in the marketplace yet, will drive USS to ‘operate in allocation selling even more.’”

We were also told that AK Steel could have some free tandem time available in the months of November and December. If they are unable to move the tons into the coated markets they may become a short term player in the hot rolled spot markets. AK selling spot HR could put more pressure on HR prices.

With scrap prices retreating (approximately $30 per gross ton on primes) this allows the EAF mills to be more competitive.

At our conference SDI CEO Mark Millet was asked if the formula used by Keith Busse of prime scrap + $150 equals the approximate cost of SDI to make a hot band. Mark replied that they are doing much better than $150 per ton conversion rate… With prime grades of scrap trading around $230-$260 per gross ton that would put SDI well below $400 per ton to make hot rolled. So, there is still plenty of room to move should the market demand it.

As we moved about the market we got mixed messages regarding demand. Those associated with construction and automotive seem to be quite content, although we did hear of some issues cropping up in the automotive sector. One auto supplier told us that the auto market is mixed depending on the model being supplied. However, the trend is for the companies to be lower production instead of higher.

Service centers told us that business was everything from “good” to “decent” but a number reported business as weakening more than anticipated. One service center told us, “Overall demand is continuing to decline – the seasonal reduction for July and August was greater than normal, the seasonal recovery of September has yet to materialize.”

A modest sized pipe and tube manufacturing company told us, “Business is solid for us.” They reported their Ag business as improving and construction markets were doing quite well.

Demand continues to be an issue we will watch carefully for any changes.

At this moment steel buyers seem to feel that prices are only going to move in one direction, lower, and that is not a good sign for stronger order books at the steel mills.