SMU Price Momentum Adjusted to Neutral

Next, although hot rolled and plate steels are relatively “tight,” they are not impossible to purchase. Lead times vary on other products as noted by one of the respondents to SMU’s query of steel buyers earlier today: “Demand remains strong and the mills appear busy. However, we’re seeing a retraction in lead times at several mills and they are actively seeking Coated and Cold Rolled tons for the August/September time frame. The continued uncertainty of the tariffs is creating what I would classify as ‘artificially’ higher prices in the U.S. than should exist. I agree completely with a previous SC executive’s comments in SMU about a $200/ton drop between now and the end of the year.”

We have heard from steel buyers and steel mills that perhaps the current price levels are adequate and provide a solid rate of return to the domestic steel mills. One commercial manager of a domestic mill told SMU this morning when asked about the projected direction of flat rolled steel prices, “Neutral is probably accurate. Want to know something odd? My price is the same…yet our contract volume is very strong. To the point where we are really entirely full through early Q4. We will find ways to make more steel. Demand is good. Or perhaps we have picked up some business from somebody that has import issues and feels better with a reliable local supplier.”

We had an interesting conversation with a service center regarding the “golden opportunity” that exists for those buying foreign steel right now. There are price offers on coated steel at $100 to $150 per ton below domestic pricing, including the 25 percent tariff. The service center executive with whom we were speaking said, “This has opened a green light window to fire up the foreign machine again.” He went on to say the opportunity was a “no brainer that has never existed before.” This steel buyer was referring to the odds of the 25 percent tariff being removed in the not-too-distant future. Just imagine what would happen to prices if that took place and the foreign steel bought at $100-$150 below domestic had the 25 percent duty removed?

U.S. Steel has new capacity coming online with the two blast furnaces at Granite City. Over the next 30 to 60 days, the summer maintenance schedules will be completed and the mills that are late on deliveries should catch up.

For the moment, plate steel Price Momentum continues to be rated Higher due to the plate mills being on allocation. One plate buyer told us about the product, “Plate mills are basically providing allocated or historical buy pattern tonnage each month.” Another plate steel buyer told SMU, “Mills had some tough outages. SSAB and Mittal are on allocation, and plate less than 3/8” is tougher to come by, for sure.”

A Neutral rating does not mean prices will fall further from here. A Neutral rating means the market is in transition and prices could go in either direction over the next 30 to 60 days.

We will continue to follow the markets and adjust our Price Momentum Indicators as markets ebb and flow.