Will Section 232 Delay Impact Flat Roll Prices?

Some steel executives believe the delay in Section 232 will open the door to more imports, putting downward pressure on prices in the second half. Following is a sampling of their more insightful comments:

· “The prospect of a Section 232 announcement led to an accelerated market in June/July, which was beginning to show signs of price erosion, and the lack of action may lead to a return to that erosion at a quickened pace. However, the fact that imports have been pulled forward due to the fear/prospect of trade barriers, which now seems to be reduced, there could be a slight tightening of supply, helping offset the downward pressure and allowing for longer stability and mill discipline into the fourth quarter.” Service center/wholesaler

· “Mills are trying to raise prices and it is not working. Once the foreign traders start taking orders without Section 232, you will see the domestic mills come back to the real world.” Service center/wholesaler

· “Considering the recent import arrivals of flat rolled and OCTG and current raw steel production rates, prices in the U.S. are going to moderate. The only question is to what extent?” Service center/wholesaler

· “More steel imports should push prices down in the fourth quarter, but Chinese prices are increasing, so discounts might not be as great.” Trader

· “It will take a few weeks, but I think we will hit a slower patch that will test domestic mills. If they can’t maintain pricing, it will slide quickly with offshore mills generally able to follow the market.” Steel mill

· “Summer doldrums mean prices should be lower, but foreign steel is still coming in. A mill rep stopped by for a visit recently and said they expect a shortage of steel late in the third and into the fourth quarter, so I had better get my orders in soon. A hint of another attempted increase? Smaller service centers simply cannot pay $42 base for cold roll + extras + $3-4 freight. Cold roll at $48 FOB the East? That’s crazy!” Service center/wholesaler

· “Market fundamentals will take over. A lot of material was bought, though, during the uncertain period to cover potential increases. I can see pricing taking a nosedive over the next couple of months. Mills are going to have to entice us to buy again.” Service center/wholesaler

· “Prices will probably be flat for a while, but then drop. The summer doldrums have been pushed out to the fall, the perfect time for annual negotiations.” Manufacturer

Other respondents to SMU’s questionnaire see prices as stable or rising:

· “Prices are stable. They will go higher only if a real event develops, such as an unplanned outage, a sustained increase in demand or tax reform.” Service center/wholesaler

· “Third-quarter orders look good. Expect to see steel price increases near term.” Service center/wholesaler

· “Price may dip in the short term, 30-60 days, then rebound.” Service center/wholesaler

· “Prices will be up for the next 1-2 months due to scrap moving higher and imports dropping dramatically in Sept/Oct.” Manufacturer