Based on conversations Steel Market Update has had with steel buyers over the past two days we are beginning to see a slowdown in orders being placed with the domestic mills. We are also finding the domestic mills as being more willing to negotiate pricing this week compared to one week ago. We are not seeing any further extension of lead times and buyers appear to be content with their inventory levels – even if there is a strike at either ArcelorMittal or USS for a short period of time.

One of the service center executives SMU spoke with on Tuesday afternoon told us, “The strike is the only thing that could support the pricing activity currently being asked by the domestic mills. The demand levels do not support it [price levels].” They went on to say their margins are being squeezed in the process.

A second service center executive in the Midwest told us prices are not falling at this point but price movement will “…boil down to strike or no strike.” Once the strike situation is clear this executive’s expectation is for prices to drop by as much as $60 per ton.

Our indices were mixed this week and appear to be “peaking” at current levels. According to buyers there continues to be plenty of supply – even without RG Steel in the market. The only product which may have some tightness to it is domestic Galvalume although we did not see any new strength in Galvalume pricing this week.

SMU held conversations with service centers and manufacturing companies in the past few days regarding foreign prices and we were told the spreads between domestic and foreign appear to be at a point where we could begin to see another surge in imports in the coming months.

The belief within the industry is the only two things which can affect prices in the coming days and weeks is strike or no strike at AMUSA or USS and what is going to happen to ThyssenKrupp Steel USA.

SMU is of the opinion TKS USA will continue to run and will continue to work through the qualification process for automotive and pipe & tube applications. They need to do this in order to position the mill for a future sale (our opinion).

U.S. Steel has publically stated they do not expect to take a strike and there have not been any rumblings out of the USW to indicate there will not be a settlement prior to the deadline.

This leaves us with ArcelorMittal USA which has not published an update on their website since August 6, 2012. This leads us to believe the mill is making progress in negotiations and there is no reason to poke the eyes of the union at this point in time. We are also hearing from AMUSA customers that the commercial side of the business believes there will be a settlement and no strike.

However, the USW/AMUSA negotiations are no-where near settlement, according to an article in the Chesterton Tribune quoting Burns Harbor USW Local 6787 president, Paul Gipson and the posturing for a potential AMUSA strike is beginning.

“Anyway, it looks like pricing is in flux again” (comment from a multi-location service center buyer).

Based on what we are seeing and hearing at this time we have made the decision to adjust our SMU Price Momentum Indicator to “Neutral” from Higher. This means over the next 30 days flat rolled steel prices could go in either direction (or stagnate for awhile).

with one caveat: “If Thyssen goes down or if there is a strike then it’s a whole new ballgame.” (service center buyer)

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