Steel Business - Giving the Little Guy a Chance
Steel Market Update (SMU) originally started as a way to compliment my direct sales efforts and to communicate with my customers during my active sales career. I felt everyone – small, medium and large companies with whom I did business deserved to be treated fairly and they were entitled to the best information about the flat rolled steel market I could muster – as a representative of a company (not yet on my own and not yet able to move away from the “company line”).
When the choice was made to take this newsletter into the market as a product – one of my goals was to offer smaller and medium companies an opportunity to get information that wasn’t necessarily accessible to them due to their size. I felt my experience as a service center salesman, manager, trading company salesman and mill agent – along with 31 years of contacts could be best put to use by helping those involved in all sides of the North American steel industry.
Size Does Matter
Steel Market Update and other companies publish price indexes. We publish indexes on hot rolled coil (base gauge/no extras), cold rolled coil (base gauge/no extras), galvanized coil (.060” X 48” G90, large coils) and Galvalume coil (.0142” X 40.875” AZ50, Grade 80, large coils). Our indexes are published with a price range (low to high) which is where we are finding most medium and larger sized companies purchasing their steel. We then produce an average based on a mathematical calculation.
Our ranges are meant as a guideline and do not include all of the information (high and low) we discover in the marketplace. Over the years SMU has learned certain industries receive special pricing or may have negotiated special slab rollings putting them at (or below) the lower end of the range while small companies (buying small volumes) and those with difficult (or sporadic) orders may find themselves outside our range on the upper end. We take these unusual circumstances into account and do not publish the extremes we may uncover at both ends of the range. Everyone needs to understand the steel business historically has been an industry where size does matter.
Indexing – “east of the Rockies” vs. Regional Numbers
What we haven’t done - yet – is regionalize our indexes. This is one reason why our price ranges tend to be wider than others you might see in the marketplace. Weakness (or tightness) may be felt in one area of the country (or at one mill) before it is felt elsewhere. Specific products may react to market conditions differently than another product – we saw this earlier this year with Galvalume and again with galvanized. One due to a shortage of production capacity and a spurt of light gauge Galvalume orders and the other due to a renewed/revived automotive industry. The impact on lead times and pricing varied from steel mill to steel mill depending on their unique situation. What tended not to change is the trend or momentum of pricing as it moved down during the first two quarters 2009, up during the summer months and now down again. There may be individual mills resisting the lower ends of the range but the trend in pricing appears to be the same from mill to mill.
Another reason why our ranges are wider than the others we have seen in the market is that we allow companies of various sizes to participate in our surveys – manufacturers, service centers, mill buyers, secondary steel buyers and those who purchase from service centers only. This is because SMU is attempting to track trends (not just specific product pricing) and you can’t do that if you are ignoring large pieces of the steel buying community.
Look at the Research Section of SMU Website
SMU has attempted to provide tools to help level the playing field. This includes information about billing methods, weights and suggestions to help smaller companies purchase their steel be it from service centers or steel mills. We have a research section on our website – www.steelmarketupdate.com and we recommend you occasionally peruse the items contained there.
Not Everyone is Happy
From time to time SMU is approached – generally by a service center – and we get into a discussion about “giving away the secrets” of the steel business. My response is always the same – with a level playing field the company which treats its customer’s right, has an educated and fine tuned sales forces and provides the products and services as requested by their customers ethically – they will beat out any company which has information but lacks the tools, smarts or ethics to do the rest of the job.
A Note to Service Center Only Buyers
For those of you who purchase your steel needs from the service centers across North America – our indexes follow prime prices for material purchased directly out of the domestic steel mills (fob the mill). If you are purchasing your prime flat rolled steel needs from a service center the pricing trend will continue to be of importance to your business but you need to take into consideration lead times. Right now hot rolled lead times are 3-5 weeks and cold rolled and coated average 6-8 weeks. As prices move on the mill side within a “reasonable” point in time we will see service centers begin trending in the same direction as mill prime prices. “Reasonable” is a negotiable item between you and your supplier(s)….
Buyers of secondary steel may find the pricing trends don’t necessarily work for your steel needs as secondary pricing tends to follow the laws of supply and demand (short supply items are higher priced than those readily in supply). Again, being aware of pricing trends puts you and your company in a better position to negotiate. Not knowing prices are moving higher or lower could cost you money.
A New Sales Tool for SMU & You
Last week, during the HARDI conference, I spoke with a salesman for a large steel service center who confided in me he read my newsletter as one of the tools in his sales arsenal. It seems as the SMU newsletter has grown this salesman discovered a number of his buyers were referencing information from our publication. He found by reading our newsletter he was able to relate better with his customers (whether he agreed with what we had to say or not becomes irrelevant) and maintain a supportive position which has improved his sales position. SMU as a sales tool for the service center industry – I would think the same thought process might work for steel mills and trading companies as well…for that matter end users might find more common ground with their service center and mill suppliers who read SMU…Just a thought….
Please take advantage of our free trial offer by going to www.steelmarketupdate.com and registering. This will give you access to both the private and public sections of our website as well as our newsletter which is published three times per week.