Steel Market Update (SMU) believes flat rolled steel prices will continue to erode over the next 30 days and perhaps longer.

“No concrete mill strategy or discipline. As always when the order books are slow pricing gives. Mills know this and so buyers use it against them whether it is happening or not.” Quote from a U.S. manufacturer made during the SMU steel market survey conducted earlier this week.

From Steel Market Update’s perspective the short term weakness continues to exist in the flat rolled steel market. Even the domestic mills are beginning to note the impact on new supply on their margins – which is another way to say prices are heading lower.

Nucor, in their earnings press release from earlier today stated, “…new domestic supply in the sheet market and increases in imports of sheet steel have begun to put significant pressure on prices and margins. Unless the supply/demand/pricing dynamics reverse themselves, the sheet market will be the most challenging for the industry in the third quarter.”

The new supply Nucor is speaking about is out of RG Steel Sparrows Point, Severstal Columbus and ThyssenKrupp Steel USA. However, there have been issues with production and systems which have prevented at least two of the three mills from having as large an impact as they could present if they were running smoothly.

SMU expects the supply issue to become a bigger factor over the next month to two months as these issues are resolved and more supply is actually put into the marketplace.

The domestic mills – at least those in the Midwest and East Coast – are counting on the low service center inventories as being a catalyst to future heavy buying. SMU is not a believer in this concept at this time. The service centers with whom we communicate on a regular basis, combined with our SMU steel market survey results, show service centers as either maintaining or reducing inventory levels. There is very little hedging or speculation of prices being at the bottom and with short lead times there is no need to purchase more than a few weeks out into the future. If a service center has 2.0 or more inventory there is very little need to add more inventory when steel can be delivered in less than 8 weeks…

Our SMU Price Momentum Indicator will remain in the “Lower” (as in heading lower) position and we expect it to remain there over the next 30 days.