U.S. Steel Mills Attempt to Halt Sliding Steel Prices
The U.S. flat rolled steel mills are attempting to stem the slide of steel prices in North America. Spot prices on hot rolled, cold rolled, galvanized and Galvalume have declined by more than $100 per ton over the past few weeks and four mills have stepped up and are trying to stop the slide.
A few thoughts regarding the events of the past two weeks:
Severstal was the first domestic mill to actively recognize the need to stabilize flat rolled steel prices. In a letter to their customers they came out with base price levels which, according to the many buyers I speak with on a consistent basis, were a tad too high when compared to the offers being made in the spot market by Severstal competition (and perhaps even Severstal itself). Their new $42.00/cwt base price on hot rolled – it collected – would result in increases of $100 per ton for those at the lower end of the pricing spectrum. It is very rare to get increases of this magnitude – even in a good market – never mind one which has been in decline.
AK Steel was the next to move and they publically announced through their normal press release format, a price increase of $40 per ton. Many in the industry shrugged off the AK announcement – especially one large service center who confided in SMU they had cut a “better” deal than their last they day after the AK “announcement.” Many in the industry are taking the AK announcement with a grain of salt.
NLMK Group of mills – Duferco Farrell, NLMK Indiana and Sharon Coating – announced a $40 per ton price increase in a letter to their customers. What is interesting about the NLMK announcement is it impacts orders promised for July 1st shipment or beyond. Most domestic mills – and I have to assume most NLMK mills fit into this category – are still in June lead times. In other words, NLMK built themselves some time to book out June’s order book and then wait and see what the rest of the industry does.
Nucor did something completely different and not uncommon for Nucor. They began advising their customers of their intention of setting a minimum base price idea by product. Nucor did not publically announce their price adjustment and the total impact for each individual customer is not clearly known to SMU. By our estimation, if collected, those on the lower end of the pricing spectrum are looking at a $40 per ton price adjustment.
The key words here are “if collected.” The price adjustments – the mill wish list – must also take into consideration the need of each individual mill to book orders. Mills have to live in the “real” world and feed their equipment. This is where the balance of the customer need to order steel is weighed against the mills need for orders.
A number of large flat rolled buyers have confided in SMU over the past couple of days that they did book orders since the Severstal announcement – and not at new “higher” levels but at lower deals which became available over the past week to ten days. Their need to buy again has diminished. So, we may the domestic mills did get a spurt of orders over the past two weeks and now the buyers have the luxury to wait and see what happens next.
I believe it will not take too long to find out if there are cracks in the armor of the domestic mills who have already made attempts to stem the slide in prices. Watch lead times over the next week to two weeks and we should have our answer: prices will stick or not...