Final Thoughts

Each of these issues will help tell the tale as to whether steel prices are peaking and about to tip over or if the market still has room to move higher.

Here is what we learned today from our emails, texts and phone conversations with steel buyers:

Price Cycle Nearing End? Mixed Signals…

“SDI is catching up on our late orders. Also their offer to us, in terms of tons for July, was greater than the June offer–$94.00/cwt base [galvanized], which was $10.00/cwt greater than June. Yesterday I made the comment to [business owner name removed] that I felt this was a double-edged sword.  Availability opening up allows us to support more orders, but it also marks a nearing of the end of this price cycle.” Distributor

“I am seeing more spot ton availability being offered for July. I even had one supplier who called and had 1,500 tons available on galv CS-type B. That probably was coming from one of the new start-up mills. Generally, suppliers call and offer 200 tons +/- when they do call. My sense is the mills are catching up. Just haven’t seen it in the pricing yet.” Manufacturing company

“There’s evidence that the auto-heavy northern mills are chewing down their late positions from the extremes. There’s also evidence that the production cutbacks in auto due to chip shortages are becoming more meaningful and apparent to the steel suppliers. However, I’m hearing that the mills are using this opportunity to rebuild their own auto supply inventory chains, which became obliterated following the sudden recovery. The mills are also advising that the large auto companies are already warning them to be prepared for what they are saying will be very strong production for H2. When you throw in these factors along with delayed maintenance projects that still have to take place in Q3 and after, nobody seems to believe any of these short-term changes will cause the market to correct.

“I’ve not heard of push-back on prices for spot tons as of yet that have led to buyers walking away from buying. I think everyone should be cautious about making conclusions that we’re close to a peak at this time, and they should back that up with facts. The truth is, we’re sitting at record low inventories in March and April, and I’d think we’d need to see inventories growing again before buyers are in a position where they have choices once again. The other thing to consider is the mills, to a larger degree than we’ve seen historically, have the ability to use maintenance or other outages any time they see conditions changing, to keep control of supply and therefore pricing. I expect conditions to remain more or less the same in the coming months, with perhaps a head fake or dead-cat bounce occurring along the way for good measure.” Service center  

“From where I sit, things are about the same as earlier this month. We are still on very limited allocation from our mills, orders are still late from the mills, and customers may complain but they are more concerned with availability than price. There simply is no more steel being offered on a spot basis than before. The canary in the coal mine is CSI; when they opened July and then August, they only filled tons from existing customers at an extremely high base number. That leaves the mini’s with a clear path to follow any offerings with high prices for their limited tons. No doubt as mills catch up we’ll see stable or even slowly falling prices, but we don’t see this happening until Q4.” Service center

“While some mills have suggested to us they are getting a little caught up, we’re not really seeing it yet in terms of shipments and new availability. One case in point this week: we’ve been after [mill name removed] for some spot tons for weeks now. They just yesterday allocated us 100 tons max. We appealed for a little more; they said no. Base price is $94.00/cwt. We would literally buy 2,000 tons at this price, if they had the availability – based on strong customer interest and inquiries. As of today, we feel this market has another leg higher…. Of course, we do not talk to all of the mills, and I’m always focused on the SMU for a broader perspective!” Service center

“We are absolutely sensing a shift in the market as it relates to the ability to continue to push increases through to the end user. Mills are making progress on catching up, but it’s not significant, and on-time delivery is still a real issue – especially with the trucking shortage. But we (and likely others) are planning better assuming some sort of late orders. The mills’ ability to continue to raise prices at will appears to be over. We will certainly be cutting back on our buy and I suspect others will as well.” Service center

“Looks like most of the mills in the South are starting to catch up. Calvert is two weeks behind but closing; BRS and Nucor are essentially caught up now. We’re getting offers for June production, so spot availability is loosening up. Import numbers are surprisingly higher than I predicted. I’m starting to think July may be the top of the market now; changing my tune somewhat. Our customers/dealers are starting to push back on price. We struggled to push another much-needed price increase to our customers with only limited success eating away at our margins while steel mills enjoy their largest margins in history. When we are approaching the price of stainless, something is wrong and will need some correction. I have a family member in the A/C repair business, and customers are putting off replacing units if possible due to the large increases he has had to pass on. None of us is getting 300+% increases in pay to deal with steel/lumber/plastics/etc. price increases, so this is especially short lived. Who wants to pay $800 for a grill that cost $300 last summer? Who wants to pay $250 for a farm gate that cost $90 last summer? Who wants to build a metal building that cost 240% less last summer? The tide is turning….   More and more it appears this correction may not be gradual.” Manufacturing company

“I would agree that the mills are catching up on late orders. I haven’t seen any more spot availability.  It is still just here and there, and the mills want to know everything before they will quote – meaning grades and sizes. They won’t just say you can have 100 tons of HR and enter whatever you want.” Service center

As I said above, our Price Momentum Indicator continues to point toward higher steel prices in the next 30 days. We will continue to monitor the market closely for signs of cracks in pricing.

Steel Market Update Events

The next workshop we will conduct is our Steel Hedging 101: Introduction to Managing Price Risk, which will be held virtually next week (June 2 & 3). You can learn more about the agenda, instructors, costs and how to register by clicking here.

We will host Phil Bell, president of the Steel Manufacturers Association (SMA) on Wednesday morning of this week (11 a.m. ET) for one of our free SMU Community Chat Webinars. We believe this will be an entertaining and informative program. You can learn more and register for this free event by clicking here.

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

John Packard, President & CEO, John@SteelMarketUpdate.com