Steel Price Momentum Changing?
Earlier this week Steel Market Update pointed our readers toward AK Steel and wondered out load, "AK Steel led the way this past June - will they be the leader once again?" It did not take long for our readers and the flat rolled steel industry to get the answer. AK Steel is alive and kicking and not afraid to "pull the trigger."
Late on Thursday afternoon (November 19, 2009) AK Steel came out with the following press release:
“WEST CHESTER, Ohio, Nov. 19 /PRNewswire-FirstCall/ -- AK Steel (NYSE: AKS) said today that it will increase spot market prices for its carbon steel products, effective January 1, 2010. Base prices for hot rolled products will increase by $20 per ton and base prices for cold rolled and coated products will increase by $30 per ton over the company's current spot market prices.”
Let the games begin:
SMU anticipates the rest of the domestic steel industry - at least the industry east of the Rockies - will follow AK Steel lead - either to the penny - or they may attempt to increase prices even more (as they did in June when AK Steel was the first one to pull the trigger and reverse the decline in steel prices).
Market demand is showing some signs of life here at the end of the year when prices traditionally are "negotiable". We will soon find out if "real demand" is weak as some mills believe or becoming stronger as at least one integrated mill believes. Demand will play a part in where prices go during the 1st Quarter 2010.
Another key ingredient will be steel input costs - scrap in particular. Scrap has been on the rise over the past week to ten days (see SMU Nov. 13 issue)and steel prices tend to follow scrap's lead (or is it the other way around?).
The real answer will be determined by each mill's comfort with their position in the market and if they perceive they are either losing market share or, if their capacity utilization begins to decline. What will the mills do then...?
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