Final Thoughts
Final Thoughts
Written by John Packard
October 23, 2019
Over the past couple of weeks, Steel Market Update has been suggesting flat rolled steel prices were at a bottom and the domestic steel mills would soon announce price increases. Today, ArcelorMittal USA began advising customers of their intention to raise prices by $40 per ton. By the end of the workday, NLMK USA had followed suit in a letter to their clients.
As is our custom when the domestic steel mills begin announcing price increases, Steel Market Update has adjusted our Price Momentum Indicator on hot rolled, cold rolled, galvanized and Galvalume steels to Neutral. We had been referencing momentum as pointing toward lower prices for many weeks. We continue to reference plate price momentum as pointing toward lower pricing over the next 30 days.
Our sources began advising us of the increase announcements early this afternoon. When asked where this would put the mill’s base price on benchmark hot rolled coil, we were given a range of $500-$540 per ton by our initial contacts. Later in the afternoon, a service center buyer advised they were sitting with ArcelorMittal and the proposed base price was $520 per ton, which is $40 above the $480 per ton we had as our index average last week (this week we came in at $470 per ton as the upper end of our range had eroded a bit over the past week).
I expect every domestic mill will follow AMUSA lead. Nucor has been hinting about scrap prices going higher in their recent earnings conference calls. Higher scrap prices would be supportive for steel prices.
In tonight’s issue we wrote about the service centers being at a point of “capitulation,” meaning they would be supportive of the mill price increases. As of this writing I have not heard one steel buyer complaining about the increase as most consider the increase healthy for the industry and for the value of their inventory.
As with every price increase, we will communicate with steel buyers and the steel mills to see if some or all of the increases are being collected. The first step is to see if the steel mills allow a “grace period” for customers to place new orders at previously quoted pricing. The second indicator will be lead times and what impact those new orders have on the mill order books. If there is a bump in lead times, you can expect another increase, probably prior to Thanksgiving.
I will be traveling to London beginning on Friday afternoon as I will be visiting the CRU corporate headquarters and meeting with various department heads as we look at our strategy for SMU in the coming year.
We anticipate beginning to rollout the 2020 SMU Steel Conference by mid-November, so you can look for information in that regard in the coming weeks.
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Also, a reminder that our SMU Steel 101 workshop registration for the Ontario, Calif., workshop is still open and we have plenty of seats available. You can find more information and register by going to www.SteelMarketUpdate.com/Events/Steel101
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO
John Packard
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