North American Flat Rolled Steel Prices Either Have to Go Up or Capacity Has to Shut Down
In last evening’s Steel Market Update newsletter we published an article about the precipitous decline in flat rolled steel prices since the end of January. We are hearing in the marketplace from both buyers and sellers of hot rolled, cold rolled and coated products that something has to give – either prices reverse course or the domestic mills must take capacity out of the market.
Our article prompted a number of responses. One was from a trading company located in the United States who wrote:
“I understand that it is not easy to turn blast furnaces off and on. This was especially true before consolidation when so many individual companies had blast furnaces dedicated to a BOF and caster. Since consolidation I don't understand why companies with multiple furnaces are not quicker to shut one or more down… To me it just continues to come down to simple supply and demand. The mills cannot control or effect demand but they can obviously control supply. Why don't the mills with multiple blast furnaces at multiple locations shut one or two down sooner and be slower to bring them back on line? Is the alternative of running at higher rates but lower prices better than reducing supply and getting higher prices? That must mean they have very high fixed costs that need to be covered and makes it impossible for them to compete against the electric furnace non union mills of Nucor & SDI.
Just can't figure this industry out after being in it for 40 years. Can you?”
Steel Market Update (SMU) will publish the full contents of the letter to the editor we referenced above in our newsletter tomorrow evening (Thursday).
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