Steel Buyers: Has a Bottom Been Achieved?

“A floor is possible, but I fear that if we see the expected downward move for scrap prices in July, we may not have achieved a floor yet. The rumors are that the mills will come out with another price increase announcement in another week or two. If this turns out to be the case, one can only assume that, in light of another drop in scrap prices, they are trying to do anything they can to get some control back in this market. While some believe that they risk ‘losing credibility’ by announcing increases when fundamentals don’t appear to support higher prices, I don’t think they care because they are that concerned about trying to stop the bleeding.”

“Unfortunately, I think the chance we see a sustained rising price environment is quite small. If the price plummets further, we may see some rebounding back in the short term, but I don’t think a longer trend upward is in the cards. It’s been since the 2015/16 collapse period that we’ve seen conditions like they are now. Unlike then, there’s not much expectation of a demand growth period coming that would help to restore pricing higher. In fact, the risk appears greater that demand may move lower in the second half of this year, further complicating the picture.” General Manager, Service Center

“I think we found a floor. Because July will be a potential 2019 low point for CRU, you will see contract buyers go heavy for August orders. The question then is, is there any ‘juice’ left after the August orders are placed? We smell a dead cat.” Purchasing Manager, Service Center

“Yes, on the floor around $24.50-25.50/cwt [hot rolled], I think we will troll the bottom for a few months. Demand has been softening, and I believe we won’t see much price action until Sept./Oct. I just don’t have a lot of faith the mills have as much pricing power as they wish they had.” Executive, Service Center

“For the moment, yes. However, the big question is how many orders get placed at new, and higher, levels. If not much, we could be right back down in coming weeks. Hard to call this a ‘firm bottom’ just yet.” Executive, Service Center 

“There still seems to be an abundance of material available within the market. The import volumes in May were very low and June licenses for semi-finished product look like they are going back to historical levels.  With the production volumes worldwide in May up 5 percent, as well as the U.S. production up 5.4 percent year over year, I would expect lead times to remain somewhat constant until capacity is taken offline. Arcelor and USX prolonged outages should help, but the question is, will it be enough?”

“I don’t think we have seen the floor yet, which is primarily due to demand. Mining and fabrication seem to be showing some positive indicators, however construction and farming are rapidly declining in their outlooks. Some of the more driving factors behind the weaker demand outlook seem to be: uncertainty in tariffs, USMCA still pending, European recessionary outlooks (led by Germany on the cusp of recession) and auto remaining soft.” Purchasing Executive, Service Center 

“There has been no visible movement on lead times since the increase was announced. As for a floor on pricing…market pricing is established based on firm market fundamentals and the only way a floor will be established by announcing a $40/ton increase is if the mills are unified, disciplined and resolute, to which I say, good luck.” Purchasing Executive, Manufacturing Company

“No floor yet for plate pricing.” Purchasing Manager, Plate Service Center

“Yes, it appears that prices have reached the bottom. The mills are quoting higher prices. They are reluctant to negotiate prices. It remains to be seen if this is sustainable or an attempt by the mills to hold the line.” Purchasing Manager, Manufacturing Company 

“Prices will rise from here. I’m thinking someone will come out with another increase soon to solidify the first one.” General Manager, Manufacturing Company

SMU received the following comment from the head of commercial for a steel mill:

“Well, we are selling HRC again, which means somebody out there has toed the line, otherwise people would not be buyers (we did not lower pricing). So, I will say it has worked to kill off the most marginal offers ($23’s and $24’s) but the jury is still out on the longevity of the move. For this to succeed, mills have to get enough to get through August and/or produce a tad less steel. It is interesting that globally costs are moving in one direction, yet here due to scrap and market imbalance the market is soft longer than reasonable. [Mill name removed] should be selling ore/pellets to the spot market and making less steel. I think they would make more money doing that than selling…bands. Just a weird market. Especially on hot rolled. The energy sector is just killing the hot band market.”

SMU heard from numerous steel buyers that they anticipate a second price increase announcement before the end of July.

At the moment, the SMU Price Momentum Indicator will remain at Neutral, meaning prices could move in either direction (or trend sideways) over the next 30 days. We do believe there is some momentum building in the mills’ favor, but we’re not ready to call a complete turn in momentum quite yet.