Price Increase? What Price Increase? Steel Buyers Speak

Another steel distributor told SMU, “I do not think the current market supports this move. Flat September scrap is the leading reason, in my opinion. However, with global pricing gaining upward momentum and essentially zero offshore offers in the market, I believe lead times should move out in the next 45 days and we will see all of the domestics raise prices.”

“Surprising that this was not picked up. Lead times are steady, but AM is very long,” said another distributor. “I think mills saw the momentum slip away from scrap and postponed a formal increase.”

A Southwest-based service center spoke about inventory levels in their response to SMU this morning: “I do not feel the market at the present time is strong enough to justify this increase. We are still looking at a 4-6 week lead time from some of our mills and there is still inventory at the port available to buy. I feel like everyone is also in a good position presently with inventory.”

A large OEM spoke out with, “I do believe the mills have gotten a bit ahead of themselves based on current demand and lead time. I don’t know if others will follow, but I don’t think we’ll see the $30 increase reflected in this week’s pricing.”

Another large EOM said about the AK Steel announcement, “This is clearly AK being AK. They announce a price increase, hope everyone follows, and then they will come behind everyone and cut deals below the announced price to fill their books. Classic AK. No way the market supports the increase.”

Yet another manufacturing company told us, “Demand will certainly increase due to the last two natural disasters.  Whether pricing does will be the question. I think at this point pricing is at its peak and they will struggle to get these increases.”

Out of Canada we heard, “We have not seen HR prices increase in Canada. For the most part, changes to the FX [exchange rates] have eaten up most if not all price increases recently.”

We heard this from a number of steel buyers: “AK may have jumped the gun a little. Other mills are now hanging them out to dry since scrap didn’t go up as much as they originally thought. I believe HR prices are in a good spot.”

A Midwest company told us, “They’ve definitely gotten ahead of themselves. Scrap did not support up here in the Chicago market, which I believe they were banking on. No mills we work with are supporting the increase.  Several mills have “holes” in various products and are definitely willing to deal (mill and product dependent). I quite honestly expect pricing to retreat a little in the short term, especially in CRC and HDG.”

A second Midwest distributor put it into simple words: “If the market was strong enough, other mills would have followed.”

We will give an OEM the last word on the subject: “I do not think the market is strong enough as is to justify higher prices. At $630/ton for HRC, I think we are at the top end for now and don’t anticipate any further increases sticking. Without some further governmental action (i.e. Section 232) I don’t believe current demand is enough to justify further price increases. Especially now that we are headed towards the end of the year. Most companies are going to begin their 2018 negotiations with the mills.  Even more reason to keep inventory low and buy only as needed.”

Written by: John Packard, John@SteelMarketUpdate.com