SMU Data and Models

Steel Mill Negotiations a Mixed Bag

Written by Tim Triplett

January 4, 2018

Despite price increases by the major mills in December, followed by additional increases this week, the majority of buyers of flat rolled steel report mixed results in their negotiations with mill representatives. About 53 percent of respondents to the latest Steel Market Update market trends questionnaire report that some mills are firm and some still flexible when it comes to talking price. Only 25 percent say mill order books are strong and there is no negotiating a better deal.

“Most of the mills are firm. We are seeing the mills less willing to entertain lower offers than a few months ago,” commented one manufacturer. “Negotiating for contracts is possible, but the window is closing, and mills could be getting firmer in the New Year,” said a trader. “Order books have certainly improved at the mills, but there are still deals if you can time an opportunity at a mill,” added a service center executive.

By market segment, 57 percent of SMU respondents say the mills continue to hold firm on hot rolled steel orders, while 43 percent report they’ve found mills willing to negotiate. That compares to 60 percent who reported the mills holding the line on prices in mid-December. Though the percentage has ticked down a bit, it is still unusual for a majority of buyers to report mills holding the line on prices. The last time was back in July.  

Negotiations have loosened ever so slightly in the cold roll market, as well. In mid-December, it was about a 50-50 proposition for steel buyers, with half reporting mills willing to dicker and half reporting mills firm. This week, 55 percent said mills are open to price discussions, while 45 percent said prices are nonnegotiable.

In the galvanized sector, the situation is about the same as last month, with about half (51 percent) saying mills are negotiating and half (49 percent) saying mills are toeing the line. That shows a tight market compared with 74 percent who reported flexible prices just a month ago.

In the Galvalume market, about 60 percent of Galvalume buyers said their suppliers were unwilling to talk price. That’s up significantly from the 30 percent who reported firm pricing a month ago.

It should be noted that steel buyers responded to SMU’s questionnaire prior to the latest round of price hikes this week. Spot market transactions are just beginning to pick up again following the holiday lull. But given the reported levels of price negotiation still taking place, how successful the mills will be in collecting higher prices remains an open question.

 

Note: SMU surveys active steel buyers twice each month to gauge the willingness of their steel suppliers to negotiate pricing. The results reflect current steel demand and changing spot pricing trends. SMU provides our members with a number of ways to interact with current and historical data. To see an interactive history of our Steel Mill Negotiations data, visit our website here.

Tim Triplett

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