Steel Market Update considers the next two weeks to be critical ones for the North American flat rolled steel producers as they negotiate with steel buyers about the direction of hot rolled, cold rolled, galvanized and Galvalume steel prices from here.

Steel Market Update (SMU) is conducting our second steel market survey of flat rolled steel buyers and sellers for the month of July. We currently invite 777 companies who purchase or sell hot rolled, cold rolled, galvanized or Galvalume steel sheet or coils to participate in our market survey.

Earlier this month we saw our SMU Steel Buyers Sentiment Index rise to +26 which means buyers and sellers of flat rolled steel are mildly optimistic about their company’s ability to be success in the current steel environment. Our market survey will produce our mid-month index which we expect to continue in the optimistic range even with some questions about demand erosion and over-supply of steel by the domestic steel mills.

Flat rolled steel pricing is an important part of the survey process and is something Steel Market Update explores on a daily basis. Through last week, flat rolled steel prices have been falling on virtually all of the various steel indexes albeit at a much slower rate over the past week than previously. The combination of our survey coupled with one-on-one conversations we have with active buyers will help us determine if steel prices have “bottomed” and if so, how long we believe they will remain stable before either moving higher or retreating once again.

Our Steel Market Update Price Momentum Indicator is currently at “Neutral” as we believe the market is in a state of transition and has been now for a couple of weeks. Steel Market Update is anticipating prices to be relatively stable for a week or two before beginning to move either higher or lower once again. Our opinion is prices will be forced to move lower due to weakening demand and over-supply as RG Steel, ThyssenKrupp Steel USA and Severstal Columbus bring more supply to the flat rolled steel market.

Originally, SMU (and other analysts) believed the downward pressure on prices would peak right about now as RG Steel was supposed to have had their “L” blast furnace back up and producing around 7000-8000 tons of hot melt per day by now. The “L” furnace has proven to be living up to its nickname – The Beast of the East – and the impact of the re-start of RG Steel Sparrows Point has been muted as the company struggles to bring the furnace back online.

RG Steel Sparrows Point production issues coupled with systems issues at ThyssenKrupp Steel USA (TKS) has taken some of the pressure off the market and allowed it to become relatively stable over the past week or so (stable as compared to prices moving lower by +$20/per ton each week prior to last week).

Steel Market Update considers this week and next to be critical to the North American steel mills as they need to stabilize or push prices slightly higher from here – or risk the bottom falling out of the market.