Steel Products

SMU Price Momentum Varies by Product (Region?)

April 10, 2019

SMU was speaking to a coated sheet steel buyer this afternoon about flat rolled steel prices. He made an interesting observation about how the markets have become quite complicated. When looking at galvanized, for example, there are different starting points for light gauge, medium gauge and heavy gauge steels. There are also regional differences (southern vs. northern mills), and then there are differences between minimills versus the integrated steel mills.

As we canvassed our data sources today, we asked where they were seeing momentum on the products they purchase. It didn’t make any difference if they were buying flat rolled or plate steels, no one saw the price of the steel they bought as moving higher. The comments were sideways or lower. Although no one believes the price of their product will collapse from here.

Based on what we have been seeing in the market, SMU has decided to adjust our Price Momentum Indicator on flat rolled and plate steels.

Normally we make the change on all flat rolled and on plate steels as single entities. Based on the data we have been collecting since late last week and through the first two days of this week, we are adjusting individual products as opposed to a product group.

Flat Rolled Mixed

Hot rolled pricing dropped again this week, and the average is now under $680 per ton ($675 per ton). The drop in the average was due to the top end dropping from $720 per ton down to $700 as well as the bottom of the range declining by $10 per ton to $650 per ton from the $660 per ton we posted last week. Our data providers are telling us hot rolled is the weakest product in the market. They are surmising the reasons are supply based, too much HRC is available for the current demand. As we have mentioned in the past, the additional tonnage coming out of JSW Mingo Junction is also having a minor impact (we have not posted the low $600s out of JSW unless we see them matched by other mills).

SMU feels there will be continued pressure on hot rolled pricing over the next 30 days and we therefore have adjusted our HRC Price Momentum Indicator to Lower.

Cold rolled pricing remained stable this week at $820 per ton. We are being advised cold rolled is the second weakest of the flat rolled products. We are adjusting our CRC Price Momentum Indicator from Higher to Neutral. This means we expect cold rolled pricing to move sideways over the next 30 days.

As we looked at galvanized it was important that we took into consideration regional variations and differences in products. The galvanized market does not appear to be moving in unison right now. We do not see GI prices moving higher over the next 30 days, rather we see prices as being Neutral for most of the markets with some pockets of weakness. This week our average on galvanized declined by $15 per ton to a $41.50/cwt average base. We captured base prices as low as $40.00/cwt and as high as $43.00/cwt. We are adjusting our Price Momentum Indicator to Neutral on GI.

Galvalume prices dropped slightly as we picked up lower numbers on the low side. However, the bulk of the responses were in the $42.00/cwt-$43.00/cwt range. We are taking our Price Momentum Indicator on AZ to Neutral from higher. We see potential pressure building on AZ, but we do not see any swoon in AZ prices over the near term.

A service center that purchases hot rolled, cold rolled and galvanized steels penned us these comments regarding how they are seeing the market and market pricing: “While these are the ranges we are hearing and seeing above, we are not finding customers that are willing to book based on these numbers! It seems like a number of these spot customers are being swept into bucket programs that are CRU based and below spot market pricing.”

Another buyer of multiple flat rolled products spoke about the differences in the products: “Coated and CR have been a little stronger than HR for most mills, so they are being less flexible with those prices, but not rigid. With the weather beginning to break, we’re seeing at least a minor rebound from March shipments to customers related to construction. How firm and extended this pickup in construction demand remains will predicate if this trend expands or fails to materialize any further.”

We heard from multiple buyers of a disconnect between southern and northern mills when it came to coated steel pricing. Galvanized prices were noted to be firmer in the south than in the north. We also learned the minimills (EAF producers) were more flexible in their negotiations than fully integrated producers.

Plate Prices Unsettled

Plate has been trending sideways for some time now and we picked up some weakening in plate spot prices as we canvassed plate buyers today.

The plate buyers are seeing an “unsettled” market and are anticipating lower plate prices, and we have moved our Price Momentum Indicator to Lower for plate.

Here are some of the comments received from a plate service center earlier today: “Market in plate remains unsettled. SC behavior is virtually 100% risk mitigation, resale prices are below replacement, in some cases below $48.00/cwt delivered. Lead times are late May at the bigger mills, a little shorter at Nucor Tusc and the AM Burns Harbor 110” mill. Lead times are pretty stable, but I think slightly weaker. Still a staring contest between mill lead times and SC inventory levels. I think if you ponied up 5,000 tons you might get a bite at $46.50. For smaller regular buys, I think $47.00 – 48.00 is the best you will do.”

A second plate service center told us, “Lead times are coming in [getting shorter] at all plate mills.”