SMU Price Momentum Indicator Adjusted to Lower

Galvanized spot base prices have been dropping as well moving off the $865 per ton ($43.30/cwt) peak we reported the week of March 20th to the low $800’s.

What we have been waiting on is for a number of mills to enter into the spot markets offering discounted tonnages on hot rolled cold rolled and coated products. We saw that over the past week as steel buyers have been advising us that both integrated and EAF mills have holes which are being shopped.

In our HARDI galvanized steel conference call held earlier today, one of the wholesaler executives on the call told the group that his company used two mill suppliers and they both have approached their company offering a $20 per ton incentive for them to increase their monthly buys. “We are not a buyer at lower prices,” he said.

A large national brand service center also communicated with Steel Market Update and reported that a number of trading companies are laying speculative positions on the ground perhaps anticipating a negative (for traders) outcome on the Section 232 and Circumvention investigations.

He told us, “In doing some checking around on imports for future, there’s cases where Traders are moving ahead and laying in speculation tons at ports. They’re doing this to make up for less volumes from skittish buyers, who are wary of 232 and circumvention case outcomes. Buyers are advising that the pricing on earliest arrival Specs in late spring/early summer, is still attractive enough to buy the spec tons. I found this interesting because buyers dealing with Traders aren’t on the hook from a risk standpoint anyway, so the Traders are just going ahead and doing the spec tons. This is more of a win-win for the buyers since they can buy material when needed in real time, thus reducing the longer supply time, and the price risk as well. This of course causes the buyer to need less forward tons from domestic mills.”

On the domestic side the same service center advised us that at least one fully integrated mill was shopping hot rolled tons.

From one of the steel mills we learned a second integrated mill had holes in coated while a Southern EAF mill also had “non-contract” coated availability. Our mill source told us, “…There is no doubt that we will continue to see summer pricing erosion but not noticing anything too out of whack with normal summer doldrums. Demand is really not bad.”

Lead Times

Steel Market Update continues to watch lead times. We saw lead times out of The Techs (galvanized conversion mills owned by Steel Dynamics) mostly referencing the week of June 11th (4-5 weeks). The SDI Butler facility was reported to be the same week for hot rolled and add one week for galvanized. Out of SDI Columbus the HRC lead times were one week longer with galvanized being the week of June 19th and cold rolled (fully processed) and painted coils were reported to be the week of June 26th.

NLMK USA lead times were reported to be similar as SDi at Farrell (6/12 week) while Portage was out one extra week for HRC melt. Galvanized lead times were referenced as being the week of June 26th (6-7 weeks).

Nucor Berkeley lead times were similar with HRC being quoted as similar with HRC being quoted as the week ending June 24th (5-6 weeks) on narrow width and one week longer for over 54” widths. Cold rolled was the same as hot rolled and galvanized was 7-8 weeks depending on the width.

The key here is no one is having any issues finding steel and when there is more supply out there than need, prices tend to drop. We are not expecting a “crash” in steel prices, but time will tell as there are many moving parts and a number of them are associated with the U.S. government and no one is quite sure how the trade reviews will turn out.