Flat Rolled Steel Prices - Cost Push vs. Over-Supply
U.S. steel mills are on the verge of announcing a new round of price increases on hot rolled, cold rolled, galvanized and Galvalume steel sheet and coil. Steel Market Update sources are telling us the domestic mills have increased their offers for new hot rolled orders in January to as much as $600 per ton. A number of mills have already closed their order books for January and are contemplating what to do next.
Steel prices is an important issue amongst steel buyers and there is a debate as to how long will the current upward trend in pricing continue?
On Sunday evening we asked our readers to participate in a one question survey proposed by another one of our readers. We asked the question: Will the introduction of new or more mill capacity in the U.S. and Mexico prevent the domestic steel mills from collecting higher prices in 2011?
So far, 78% of the respondents believe the new capacity (ThyssenKrupp as well as capacity coming online in Mexico) will prevent the mills from collecting higher prices.
One reader sent SMU an email about the subject as well as comments about some of the survey questions we have been selecting for our larger market surveys:
John, the service center pricing question for oem is great. This is, as you mention, a great barometer on the ability of mills to pass through price changes. Service Center should be seen to be asking for increases as lead-times firm-up.
Your reader asking for arguments from the supply side should be happy with the service center price coverage you're offering. This clearly reflects the stickiness of price in an overcapacity environment.
I agree with his assessment of excess capacity, but I'm not sure what arguments he's looking to see. The issues he cites are quite prominent in coverage, especially with the ramp of TKN. And, to be fair, when the market is in an obvious excess availability situation, supply isn't much of an issue to write about. Although Paul's pieces you've published gave excellent detail to the supply situation. The reader actually makes the exact point for cost push thinking in, "pricing will only rise to the break-even point". Exactly. So the relevant issues revolve around the costs that make that break-even point. With steel mills and distributors struggling with prices very near variable costs, cost push is the short and long term issue for price levels.
CLICK HERE to participate in our blind survey.
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