Hot Rolled Prices Tick Higher as Mills Stingy on Negotiations

There are a number of steel mills whose order books are closed. We saw a letter from California Steel advising their customers that they were sold out for February and had not yet opened March. We learned from Algoma in Canada that their hot rolled order book is sold out through March and they will not have pricing for April for a couple of weeks.

Steel buyers are telling SMU that most fully integrated mills are sold out into late March/April and have very little to no spot tons to sell.

The minimills are the most receptive to even having tonnage available to sell. Many buyers are surprised at how aggressive the minis are being with the cheapest offers at $34.00/cwt and going all the way up to $36.00/cwt ($680-$720 per ton).

One service center specializing in pickled product (HRPO) called us this afternoon and told us, “Until our customers are willing to pay that price, we’re not buying it.” He went on to say, “If a mill came to us today with 2,000 tons at $33.00, we are not a buyer.”

SMU has a feeling that other buyers would jump at the offer to buy $33.00/cwt ($660 per ton) hot rolled coil out of the domestic mills right now.

We heard from many hot rolled buyers today and the comments support the theme of higher prices and good demand. Here are more comments SMU collected regarding HRC today:

“We just purchased some spot tons at $680 – it was from two separate minimills.” Service Center

“Tight – paying [mini mill name removed] $35.50/cwt.” Upper Midwest Service Center

“I last purchased Friday at $35/cwt for HRC spot. I have a current offer of $35.50/cwt. Both [of these are] from steel mills…” Manufacturer

“I don’t see anyone being able to negotiate new spot tons at $680 per ton right now (especially out of an integrated mill). This market is all about relationships and what people did for each other back in the fourth quarter when orders were scarce…  I would peg the true spot market up around $720 – and even at that number I don’t think anyone could get unlimited tons right now. That being the case, I’m shocked that the futures numbers aren’t higher right now…  Our buying position doesn’t change significantly with the market. There is money to be made in this market if someone can load up on contract tons. However, we all have been around long enough to know that what goes up hard comes down with a vengeance… This year that may not happen in July or even September (primarily dependent on Trump and 232), but it will come down…” Service Center

“John, I think you are right in the ballpark with the $680 per ton for current mill pricing on a spot basis average for February.  I think we are headed for a situation where if you have not been a continuity month-in-month-out tonnage buyer at the mills, you are not going to be making any new friends anytime soon. Everything is based on relationships and this is not a relationship-building market at the moment. I think this is one hot market. We all just need some trucks to haul material.” Manufacturer

“For the spot market, the situation has changed quickly in the last couple of weeks. Nucor did have the shortest lead time with mid to late February ship dates. Some of the mills already have lead time out into mid-March and early April for spot tons. We had just heard back from our Nucor rep that lead time is now ‘inquire only.’   We expect SDI to follow Nucor’s lead. Recently, we were quoted $710 to $730 per ton for hot rolled coil steel base prices with two to seven days validity and subject to availability at time of order. I supposed the mills are expecting favorable actions from the president regarding Section 232. It appears that buyers are trying to beat the price increases with hedge orders and the mills are struggling to keep up.” Manufacturer

“Again, I don’t even understand the relevance of spot if 80 percent of the market is purchased on contract. Which is defined by 20 percent of sales where mills have customers over a barrel if they can’t buy on contract. Doesn’t that imply that the mills have artificial, upward pricing power? So, we bought a little specialty steel at $34.50 base for minimal tons and material [mill name removed] had available. They are supposedly at $35, but have tons to sell, and are one of the few transacting (and are supposedly the main data for this week’s CRU, which is under your $680). That seems to be the number being discussed despite others asking for $36. Nucor says they are sticking to $36 on the few, small spot transactions they are taking.” Service Center

“I don’t get any domestic quotes. I only receive feedback from other customers who buy domestically. I hear imports into the gulf are around $32.00-$32.50 with lead time into April /May. Domestically, the big guys are buying at CRU minus $40.00 using the CRU from the second week of the month. So, if CRU is $660, the service centers and large OEM’s are paying $620. Most guys think that CRU will go over $700 to maybe $720. In that case, they could be paying $680. This just comes from my small group of contacts.” Service Center

“In full disclosure, I have not actually placed a PO yet. But I do have a couple of new inquiries out there right now, and all the numbers I have gotten back are at $35 or above except for one mill–and I am not getting a warm fuzzy that I will get the material when I need it from that mill. The tons I have to place are fairly minimal, just a few hundred tons, but I am a little surprised I can’t get a $34 number out of a reliable electric arc guy.” Service Center

“I haven’t purchased any HR lately, but I am seeing $680-$700 on quotes. I’ve seen one vendor as high as $740, but they don’t have any tons to sell.” Manufacturer

“I was a little confused myself earlier in the week. I do think [mini mill name removed] is sticking close to $35.00; however, we got [mill name removed] to agree to $34.50 and [another mill name removed] has quoted us $34.00 (only out of one of their mills). While I do think “$35” is the asking price for our suppliers, we are still able to get a little better if we press a bit. We are buying some stock at these levels. But, fortunately, we bought a little heavier a couple weeks ago at more like $650. So, we are only buying the most common items and not seeking to build too heavy at these pricing levels.” Midwest Service Center

“I placed a pickled CQ order on Friday that works back to a $34 base fob local NW Indiana mill.  With that said, it does surprise me that the average is $680; that does seem a little low. I can’t buy at $680 today, I don’t think, unless it’s an item with heavy extras.” Service Center

“We buy very little HRC in the U.S., but in Canada our last offer was at $38.00 Can base.” Manufacturer