SMU Data and Models
Steel Mill Negotiations: Mills in the Driver's Seat
Written by Tim Triplett
February 25, 2018
Steel prices have been on the rise for the past four months, so it’s no surprise that steel buyers are reporting mills less willing to negotiate. More than 60 percent of respondents to Steel Market Update’s latest market trends questionnaire say mills are holding firm in price negotiations. About 10 percent say they still find some suppliers willing to talk price. The remainder have had mixed success in negotiating better buys.
By market segment, 83 percent of SMU respondents said the mills are holding firm on hot rolled steel orders, while only 17 percent have found mills willing to negotiate. That compares to 69 percent holding the line and 31 percent open to price negotiations on hot roll two weeks ago.
In the cold rolled segment, 31 percent said they have found some mills willing to talk price, while the majority (69 percent) reported mill prices on cold rolled as non-negotiable.
In the galvanized sector, it’s a 60:40 proposition today. About 60 percent of respondents said the mills are now standing firm on galvanized prices, while 40 percent said some mills are still open to negotiation on coated products. That’s about a 23 percent shift from a month ago when just 37 percent said mills were holding the line.
Most Galvalume buyers (58 percent) reported that mills are still open to price discussions, while 42 percent said mills are unwilling to compromise on Galvalume prices. One month ago, it was a 50-50 proposition whether Galvalume suppliers would have any flexibility on price.
The mills appear to be in the driver’s seat in the current market environment. As one buyer said: “In a conversation yesterday with a major steel mill, I was told we may see a price correction shortly. However, hot rolled black is on allocation and they could not even quote hot-dipped galvanized.”
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
Read more from Tim TriplettLatest in SMU Data and Models
SMU Survey: Steel Buyers’ Sentiment Indices contrast at year end
Both of our Sentiment Indices remain in positive territory and indicate that steel buyers are optimistic about the success of their businesses.
SMU Survey: Mill lead times contract slightly, remain short
Steel mill production times have seen very little change since September, according to buyers participating in our latest market survey.
SMU Survey: Buyers report mills are slightly less flexible on pricing
Steel buyers of sheet and plate products say mills are still willing to bend on spot pricing this week, though not quite as much as they were two weeks prior, according to our most recent survey data.
December energy market update
Trends in energy prices and active rig counts are leading demand indicators for oil country tubular goods (OCTG), line pipe and other steel products
Apparent steel supply remained near two-year low in October
Referred to as ‘apparent steel supply’, we calculate this volume by combining domestic steel mill shipments with finished US steel imports and deducting total US steel exports.