Economy

SMU Market Trends: Steel Price Has Buyers Stumped

January 24, 2019

Steel Market Update asked: When do you expect flat rolled steel prices to reverse course and begin rising? Judging by the widely varied responses to this week’s market trends questionnaire, there is no clear consensus among steel buyers on when prices will turn around.

A small group, about 6 percent, said they believe prices will increase yet this month. Indeed, on Monday, California Steel Industries and USS-POSCO Industries announced a flat rolled price hike of $40 per ton. But whether the mills are able to collect the increase remains uncertain.

The largest group of respondents, 39 percent, predict prices will bottom and begin to rise in February. Another 24 percent don’t expect the change to come until March. The other 31 percent speculate that it won’t happen until sometime later this year.

Clearly, the market has buyers stumped, which explains the reluctance of many to purchase steel. SMU’s poll reveals that 55 percent of service centers are maintaining flat rolled inventories at their current levels, but nearly all the rest are in an inventory-reduction mode. Similarly, 65 percent of manufacturers responding to SMU’s questionnaire are maintaining their flat rolled inventories, while 32 percent are reducing inventory levels. That does not portend well for steel demand in the short term. Rather than beefing up stock levels in the first quarter, buyers are waiting for some clarity on steel prices—clarity that is nowhere in sight.

Following are some respondents’ thoughts on steel prices going up:

“Announcements made or coming. Will they stick?”
“It’s starting now on flat roll. Prices will not rise, but a floor will be set. Lead times will increase. After the second round of increases in February, you will start to see actual price increases.”
“It really depends on the outcome of trade negotiations with China and the ability of the USTR to reach an agreement by the 3/1/19 deadline.”
“We’re not expecting increases, just hoping that it stops falling.”
“I’ll settle for stabilize. Demand is still solid.”
“Maybe [prices will rise], but there’s too much capacity.”
“ONLY if order books at the mills improve.”
“I don’t see prices going up…”