Short Term Momentum has Changed- Longer Term is a Question Mark

We struggle with transitional markets. Are the newest price increases just a “head fake” and being ignored by steel buyers or is there demand out there which has gotten some of the buyers sitting on the sidelines off and into the market. At the moment, SMU does not believe it is a head fake and we are hearing of buyers coming off the sidelines (albeit in a modest way).

Mill orders books have improved albeit at varying rates depending on the location of the mill and their customer base. There is inconsistency in the market but most of the domestic steel mills are attempting to move prices higher and we capture some of the early movement in our SMU steel market survey which we began on Monday morning of this week.

At this point in time Steel Market Update (SMU) is of the opinion the domestic steel mills have managed to temporarily put a bottom to the market and we are seeing early signs of higher prices than what SMU saw one week ago. For that reason we have adjusted our SMU Price Momentum Indicator to “Higher” from “Neutral.”

We have struggled with this decision as not all of the domestic mills have signed on to the price increases yet. So, prices could very easily move back lower should one, or more, of these suppliers decide it is not in their best interest to try to move prices higher at the expense of their order book. SMU has provided all the steel companies price increases in our latest newsletters along with which mills we expect to increase next.

We entered this calendar year with steel prices on the rise. Prices rose between the second week of November 2011 until the third and fourth week of January. A 10-week cycle of whereby prices were increasing on a weekly basis. We believe this year will see a number of “Mini-cycles” if you would like to learn more you can read SMU’s latest newsletter for pricing analysis and market guidance which we published last night.