Final Thoughts

SMU puts the current hot rolled price in a range from $440-520 per ton, though most of the numbers fall higher in the $480-$520 range. Some mills still allowed low-number orders to be booked last week. We do not believe these offers are still out there.

Many of the comments we collected from steel buyers expressed skepticism about the mills’ chances for success in collecting and sustaining higher prices given the current uncertain state of steel demand. Some anticipate the mills announcing a second price hike in the coming weeks to help them collect all of the first. Following are some of their insightful comments:

• “Scrap can bottom and prices can bottom, but if demand is poor—and it is for the most part—it really doesn’t matter what the mill prices are. No one I know is buying anything unless it’s sold.”

• “The mills can announce all of the increases they want, but if demand is not there, then the increases will only produce a temporary bounce. Demand must begin with a rebound in energy pricing and sustained demand from automotive, construction (res and non-res) and appliance. Save for those markets serving as fundamental drivers, the only other avenue available for the mills will be to rationalize supply.”

• “Mills will most likely be able to collect a little of the increase if and when buyers need to place orders. But most likely it will be a short-lived increase.”

• “The price increases are $40 over what? I interpret that as stopping the downward price momentum.”

• “Are prices firm? Some mills are close to being full for the year, others still have November and December availability.”

• “In the short run, the mills will get some of it. When the second round of price increases comes out in a week or two, then they will get the rest.”

• “The mills will collect an increase, but probably not until a Jan/Feb timeframe. The increase will probably have legs for first-quarter 2020.”

• “It’s too early to tell if the mills will collect. It’s a dead cat bounce for sure unless the mills push out or postpone the new capacity projects.”

• “Prices are really in a flux right now. We are seeing some lead times move out. I would imagine buyers that have deals based on CRU are buying right now. It’s too early to see if prices will hold, but they have stopped falling.”

• “I think they will have to follow up with another increase to get the first one. I’m not sure the market is strong enough to support either increase and I suspect prices will deteriorate in February.”

• “I think they will eventually collect all the $40 announced, however it may take another announcement to get it done.”

• “I believe the mills will succeed in collecting the $40 increase as inventories are fairly lean and prices historically improve this time of the year.”

• “We expect CRU to drop again this week as last call tons were placed at low prices. So, I think the +$40 from whatever the low becomes is going to happen. Interestingly, while mills are advising that the market should expect more increases to come (plural), they don’t see this current up cycle as a sustainable one, and expect prices to fall again in Jan/Feb.”

• “We’ve witnessed lead times leaping out today with many EAFs posting late December and some closed on a variety of products. Mills are reporting massive order levels. It’s very predictable and following the prior patterns this year.”

• “We fully expect a second increase announcement before Thanksgiving. But we will see the same cycle [dead cat bounce] we have seen twice already this year.”

• “Will this price increase have legs? I guess that depends on one’s definition. I think what we saw from June of this year until now will be representative of what we will see for the foreseeable future—four-month cycles where if the mills can average anything over $500, they will be happy, or at least satisfied. I find it interesting how many comments said the last round of price increases didn’t work. On June 26, 2019, the CRU was at $505 and five weeks later it was at $592. How is that not successful? If the mills have to announce four increases to collect three of them, I think they would consider that successful if they can move the average selling price up by $87/ton.” 

It’s not too soon to secure your seat for SMU’s next Steel 101 workshop set for Ontario, Calif., on Jan. 7-8. The event will include a tour of the California Steel Industries mill. For more information and to register, visit www.SteelMarketUpdate.com/Events/Steel101

As always, your business is truly appreciated by all of us here at Steel Market Update.

Tim Triplett, Executive Editor