Steel Products Prices North America

Steel Buyers Mull How High Prices Can Go

October 24, 2017

Steel Market Update (SMU) found steel buyers receptive to speaking their minds on how various steel mills are responding to the price increase announcements made last week. It appears mills with shorter lead times are perhaps a little more receptive to waiving part or all of the increases. Other mills have better order books and have taken a firmer approach with their customers. In the article below, we give steel buyers an opportunity to express their opinions about where they see prices heading in the weeks and months ahead.

We found those involved with the HVAC mechanical contractor markets as having some of the lowest prices and most flexible suppliers. One wholesaler told us this morning that he was able to buy galvanized steel at lower prices last week. When asked if he was a buyer at the “new prices,” the wholesaler told us, “Yes, because they went down, not up, and our inventory was getting to a point at which we would be forced to buy.”

This same wholesaler did not disagree that prices would rise from here: “I think prices will increase as we continue into the fourth quarter. I also think we will see CRU decrease when it is published tomorrow before recognizing any increase in the numbers.”

Service Centers Mixed on Prices

When it comes to steel mills actually trying to collect price increases, the observations from service centers were mixed.

When asked if all of their suppliers were looking for the new price increase, we were told, “Yes, we paid +$.50 [$10/ton] for a small amount of HR at the insistence of a mill, saying they needed to show ‘some’ movement higher, following the increase announcement.”

From Texas we heard, “Lead times are pushing out. Big River and Nucor are quoting me five-week lead time now on HR. No November production time left.” When asked if they were a buyer at the new prices, this distributor told us, “Not yet, but getting more convinced they will stick.”

A Midwest service center told us, “We are waiting on some updates – and don’t actually have clarity on pricing yet! We did get some HRC orders in at $30 base on Friday, but some sources are quiet right now. On galv, I’ve seen $38 base this week – but item specific, and other sources have yet to quote.”

“Leadtimes, and therefore willingness to negotiate, are all over the map right now,” said a Southeastern service center. “Some integrateds appear to have filled 2017 capacity and are happy to wait awhile before discounting to fill January. They are hoping for improved conditions and new orders to get started on establishing contracts. Others are still looking to make a deal. This is making quoting unusual based on the specific items a customer needs.”

Steel Buyers Calling 232 a “Threat” Rather than a Reality

A service center buyer told us, “I think the mill’s price increase was in response to the $37 per ton weekly CRU HDG drop and import prices being higher than the traditional spread, combined with a 232 tariff threat. The increase is a bit early and also an attempt to support contract negotiations for 2018. With HDG lead times in early December, it would be unlikely that the mills will be successful in raising prices during this difficult time of year. I do believe prices will go up, like they almost always do in 1Q, but not just yet.”

How High Can Prices Go?

“Unless there’s firm action on Section 232 or the promised infrastructure, then they would stay around $650.” Manufacturing Company

“If demand stays strong, which it currently is, pricing will rise. A $700 price may be aggressive, but I would say closer to $700 than $600.” Upper Midwest Service Center

“I am not sure if the HRC base will reach $700 next year because demand does not appear to be on the rise. The enthusiasm of the Section 232, 337, and big, beautiful $1 trillion dollar infrastructure bill has waned under this current administration. Automotive appears to be trending down. Interest rates are expected to increase. China still drives the global market direction. We have seen commodities and electrode prices impacted by China’s activities. Other factors including NAFTA trade agreement, Iran nuclear deal and North Korea are weighing in on future outlooks.” Manufacturing Company

“I think the market is too high, so we will see some erosion in pricing and then it will stabilize for the rest of year. I think the mills will attempt another increase after the first of the year (as usual), but will not get it. Of course, if the government does make decisions on 232 and circumvention, and any other trade policies, the outlook will change.” Manufacturing Company

“I believe we have definitely seen the bottom in the market (though with the many indexes lagging the market, numbers out tomorrow could still indicate some further dip before rebounding.) Mill lead times are out, and before we know it, it will be into late December. So I see stability with upward pricing pressure in the coming weeks. 2018 is tough to peg, but given the typical flat-rolled demand/market strength that we see in 1Q, I would bet that $650 HR is a lock and $700 is possible.” Service Center

“I could see $700/ton hot roll, although incremental increases would be much more sustainable for longer periods of time. We believe 2018 will be a strong year; the fundamentals are there.” Service Center

“It seems like the last few months have been very flat except for the noise around 232. We expect the next few months to be similarly flat.” South Central Service Center

“The market struggles at $650NT (unless there is a positive 232 ruling). I am not sure what would be different this time.” Manufacturing Company

“I think with no HR import inbound, we will definitely see the $660 range by February. There are no other options. And contracts, I am hearing, are about full to push spot prices higher.” South Central Service Center

A Side Note: Electrode Surcharge Coming?

A large service center tried to get the domestic mills to accept a clause in its 2018 contracts. “I requested a clause be added to my 2018 contract with a minimill that states ‘no surcharge for graphite electrodes would be accepted’ and I was quickly told NO. This can have huge implications for downstream agreements with all customers.”