How High Can Prices Go? Steel Buyers React to SMU Questions

“In terms of steel pricing, I can’t give you anything outside of what you have been reporting. Having said that, I haven’t met a mill rep that thinks they can book HR at $36.00 right now. I think there is strength in the market, but without 232 or a surge in spot bookings I’m not confident that they can continue to push pricing up. Scrap has gone up around $45/ton since Nov. 1, but the mills have ‘asked’ for $100/ton in increases,”  said one service center executive.

A service center who is predicting hot rolled prices will exceed $800 per ton in this cycle told us, “Fundamentals are having more impact with lower imports, flat domestic production, and increased seasonal demand. On top of this, further trade restrictions are expected.”

A HVAC wholesaler told us, “I do not think the AM prices will stick between now and Feb 1. My guess is prices may reach the $45/cwt base that AM referenced, I just don’t feel it will be as soon as the end of January. Possibly prices peak in March. Anxious to see 232’s impact, if any, on the market. Key drivers are zinc extras with a little help from scrap. Interesting to note, there is some opportunity to buy material cheaper from the service center level than at the mill level.”

A Chicago area steel distributor told us, “Mills always try in Q1 to get the price increases through. If demand continues, I can foresee pricing continue to go upwards. Mills are very busy with contract items, demand in certain market segments is good, weather issues, scrap, less foreign offers are also a component.”

Another Chicago area service center reported, “It is a very turbulent week. We have HR available from $620 to $760 and have not seen that wide a range in some time. There is a lot riding on this coming weekend’s recommendation from Wilbur Ross. There is almost an even split of customers who have bought ahead and some who are waiting. The market pricing momentum is swinging up.”

The steel buyer at a third Chicago area service center answered our questions with, “How high do you expect prices will go from here before we see a correction? HR $37.25 and CR/GV $46.75 my estimated peak, but if NAFTA and 232 go in the favor of the mills, they will push it higher.

“What is the key driver pushing prices right now? The mills have good bookings driven by contract customers booking to the high end of their contracts (and way lower price) and their year-end special buys/sales are also taking up part of the book.”   

A little further east of Chicago, we heard from a distributor, “Minimills are trying to ride the integrated mills’ price increase, but their lead times are much shorter, and it will be difficult for them to sell at $700/$720. No way will spot hold at those numbers. Import offerings will be coming shortly. Mills have pushed prices up by over $150 in about 6/8 weeks. Way too much way too fast. It will be very interesting to see where prices are in 30 to 60 days.”

A manufacturing company told us, “I strongly believe that the 232 will be a deal breaker depending on what is recommended. If there is a recommendation that is favorable to the domestic mills, I believe they will take advantage of this and act true to form. The price of domestic steel will not hit its high point until Q2.”

A large national service center said, “I think if the stars align, we see $800 before it’s over; $740 is probably more realistic. The economy is very strong. I don’t see any potential for prices to slide until mid to late Q2. Demand is strong, flat rolled imports are reduced, raw material pricing is high.”

From the Upper Midwest we heard, “$34-35/cwt appears to be the real price right now. There is a very good chance it is going higher. With the 232 it will for sure spike, but even without there is more room to run. Hot rolled is by far the strongest product. Very little import, scrap and longer lead times are helping the mills justify the increases.”

A manufacturing company in the Southwest told us, “I think $800 will be a tipping point. Mills are raising prices too fast. By the end of the second quarter, we will see the market dropping quickly again like in 2016. [There is] dwindling competition from imports, and the economy is strong. All my customers are very busy, and did not slow down in December.”

Plate Pricing and Market Information

A plate focused service center told SMU earlier this week, “Everyone is quoting me $36.50/cwt delivered for March Shipments. Lead times are six weeks at Nucor and SSAB. Lead times at ArcelorMittal are 8 to 10 weeks.

“Plate inventories are VERY low at service centers, I’m guessing under 2 months or LESS on the floor.

“Most of my 2018 OEM contracts are up 15 to 30 percent over 2017 contracts. We have an OEM that took all its first-quarter 2018 buy in the last week of December and the first nine days of January. They are scrambling for me to get them more plate (panic in their eyes).

“Purchase orders for construction customers are very strong. We have our mining and energy customers coming back. Also defense and military orders coming in over estimate.”

“We are very bullish on plate for 2018 and see the mills at $800 a ton in March (fob mill). If you think prices are high now, wait six weeks and be sick to your stomach.”

Another service center updated the spot prices being quoted on plate: “$37.50 [$750 per ton] has just about dried up. I’d say the lowest we’re seeing post-increases is $38.50 [$770 per ton] on spot for plate delivered.”