SMU Market Trends: Steel Conditions Confuse Many

Following are some of their insightful observations:

“Demand is good, the economy is good, imports are low, yet there is no price resurgence. Why are prices dragging?

“Limited steel imports and Section 232, and pricing continues to drop?”

“Although the economy is being expressed as very positive, you wouldn’t know it by my order book.”

“With cheap foreign imports supposedly on the decline, I see customers buying finished product (slits, sheets and blanks) at or lower than my new domestic or foreign pricing. I simply cannot get a feel for where I should buy or sell. There is no consistency, rhyme or reason.”

“Supply is outstripping demand right now.”

“The market is soft and automotive schedules are down with July plant shutdowns looming.”

“Tariffs are not working; we have seen no hike in business as a result of them. Margins are under heavy pressure as a consequence of increased cost.”

“There are too may indicators pointing in different directions.”

“No clear direction. Demand is good, but prices are stagnant. There’s too much supply.”

“The market is trying to find a bottom. Demand also seems to be slow, especially for service centers. I suspect more business is going mill direct.”

“Volume is good, it’s just very tough margins.”

“The mills are still trying to push the pricing up, but there is not enough demand to make it stick. This is causing a small yo-yo effect.”

“Demand is fair, spot lead times are not very long. I think mill pricing reflects the uncertainty going forward.”

“I am very confused by the weakness in scrap given the volume of steel that is being produced in this country. More steel being produced should lead to higher demand for scrap, yet there is a demand/supply imbalance. Could the entire reason prices are down be due to lower exports of scrap?”

“Less incoming imports (year-over-year), less future imports, service center inventory at roughly 2.5 weeks and demand is solid with construction and energy coming back. I’m not sure why mill capacity is only at 81 percent utilization. And prices are still dropping?”

“Overall supply and demand, along with lean inventories, would suggest a stronger price market. Fear is keeping buyers on the sidelines. Assuming demand continues, they will have to come back and buy soon, firming up prices.”

“I had expected some improvement in domestic prices on the back of relatively low import levels. I suspect I did not weight properly the influence new capacity would have on prices domestically. The other element we may be living through is a boring price cycle, i.e. modest price movements. Is the market in for some Utopian state where supply and demand are relatively balanced? I just can’t convince myself that is really true. The scars of 2018 are still fresh.”

“Pricing for plate is moving down due to an inventory overhang. This should correct itself over the next 3-4 months.”

“No one is buying ahead because they feel the market will continue to price soften or their overall business conditions are deteriorating.”

“Prices are all over the board as mills are not full yet, and some are trying to mask it. I think prices will bounce along, deals will be made, and sooner or later more import will start coming in as the U.S. market is better than the world market.”

“Demand is not there to justify increases.”

“Up, down, nobody knows.”

“Demand just is not that good. There can be all the tariffs in the world on our goods. If nobody is buying, it does not matter.”

“Demand is good, the economy in the U.S. is doing well, imports are at an all-time low, domestic supplies have not added that many tons yet, so there ought to be longer lead times and eventually higher prices.”

“Customers are sitting on their hands.”

“Although there is still some economic optimism, macro numbers suggest the economy’s leveling off, at best. Supply and demand will take over steel prices.”

“Domestic competition has replaced import competition and it’s more severe and more difficult to read.”

“Continued strong output by the domestics is keeping pricing down. With NLMK losing their appeal, I would expect to see price appreciation. Perhaps those in the C-suites at the domestic producers should reconsider some of their announced expansions.”

“Too much HR capacity has been brought on-line in the past 12 months. Expect prices to continue to fall during May before stabilizing. Major steel consumers are seeing a slowdown. Auto, ag and commercial construction have been delayed due to extremely wet weather in the Midwest this spring.”

“There are so many factors that could change the market and any one of them could happen at any time. You just have to stay in touch with the market and have valuable suppliers who will tell you what you need to know to make good decisions.”

“I’m not confused, but frustrated. The domestic mills have failed to create pricing credibility in a captive market. By letting prices swing wildly they decimate service center margins and create uncertainty in end-users’ minds, keeping them on the sidelines. A unified commitment to price stability would help all sectors in the chain, producers, distributors and end users. Will the mills ever learn?”