U.S. Steel Mill Price Increase Announcements
Jun / 05 / 2009 -
U.S. Steel Mill Price Increase Announcements
U.S. steel mill price increase announcements on hot rolled, cold rolled, galvanized and Galvalume steel
AK Set Up the Pins – the Rest of the Mills are Knocking ‘em Down
SMU Mill Scorecard
There’s are reason why I love the steel business – its times like these when one mill (AK Steel) comes out with a modest price increase (probably just to make a statement or to put a bottom to the decline in prices) and then the rest follow along behind pushing the number higher and higher in the process. At the same time, you have a weak economy as most company’s business is down 25%-50% compared to this time last year and the steel mills are running at 46% of capacity. Doesn’t sound like the best time to go for an increase – or is it…?
Let’s recap what Steel Market Update has been able to gather so far:
AK Steel – led the way with a base price increase of $20 per ton ($1.00/cwt) effective July 1, 2009. AK did not discuss specific base prices or any discounting of extras which may be happening at their mill.
Severstal NA – was the next to “officially” move with a 6% price increase. In an email to Steel Market Update the Severstal spokesperson made the following statements, “Severstal North America, Inc., today announced that it is raising non-contract transaction prices by six percent effective with orders scheduled for delivery July 1, 2009 and later. This action reflects, in part, the continued high costs of raw materials in view of weak pricing in the marketplace and allows Severstal North America to recover some of its costs.” In a separate statement the mill spokesperson went on to state, "We expect that, as a result of these changes, that the spot market average price for hot-rolled bands will be more than $400 per ton." Severstal was then the first mill to talk about specific pricing and to put a base to HR pricing.
Steel Market Update didn’t leave Severstal alone – through conversations with Severstal customers and other steel mills, there appears to be some confusion as to what 6% actually means (6% of what? Base price? Fully priced product? with full extras, half extras?). So, I asked the mill spokesperson to be more specific – especially regarding gauge and width extras as they have been discounted by this mill and many others. The response straight from their commercial department was, “Pricing extras reflect production costs and should apply in all cases.” I don’t know about you but that clears that subject up for me (not!).
Nucor – next up was Nucor which came out with their price announcement in a letter released late in the day on Wednesday. The Nucor letter said, “In the past few months, flat rolled pricing has reached unsustainably low levels when compared to the cost of raw materials inputs and other industrial commodity products. Further, we continue to match the output of our production facilities to the strength of our orderbook.”
For those reasons, effective with orders promised for shipment July 5th and beyond. The Nucor Sheet Mill Group will increase transactional spot prices by a minimum of $30 per ton. Additionally, we will restore the collection of all published price extras immediately.”
It is the last line of the price announcement which makes an old coated guy like me stand up and take notice. It has been well known in the galvanized marketplace that Nucor (and others) were discounting (or not charging at all) their gauge and width and other extras which are used to calculate a final fob mill price. Nucor was not charging other extras for other products as well. So, this could be a big number – more about that later.
Lead times – according to SMU sources Nucor’s lead times on coated steel is moving into the week of July 25th (7-8 week lead time as opposed to 4-6 week previously).
ArcelorMittal – At about the same time as Nucor’s letter – ArcelorMittal came out with instructions to their “Commercial Team Members”:
Although the economy is still fragile, the following positive activities indicate that our market has bottomed and we expect improvement for our flat roll business going forward:
U.S. manufacturing appears to have stabilized, although at a lower level.
The end of the inventory reduction cycle is complete and at record low levels.
Recent inquiry and order bookings have been steadily increasing.
Pent up demand continues to grow.
Steel demand has already improved in China, India and other parts of the world positively impacting the global market.
As you know, the recession has had a severe and serious impact on our business in many ways. Certainly, one of the most significant consequences to our performance is the dramatic erosion of pricing that has occurred. Much of this price erosion is a result of the marketplace turning inventory into cash and customers trading and selling among themselves. As a result, current transaction pricing has little relationship to the cost of manufacturing.
Now that the inventory adjustment period is behind us, it is imperative that we reestablish a starting point to begin the process of steadily recouping the value for our products that has been lost in the recent past.
As a result, effective with all new non-contractual orders placed for shipments July 1, 2009 through July 31, 2009 the following Base Prices will apply:
Hot Rolled Bands = $410/ton
Cold Rolled = $490/ton
Hot Dipped Galvanized = $490/ton
All appropriate extras will also be applicable.
Now we have a domestic mill who has spelled it out for everyone – HR base is $20.50/cwt, Cold Rolled base is $24.50/cwt + full extras where applicable and the Galvanized base is $24.50/cwt + full extras. I will discuss more about what this means a little later in this newsletter.
U.S. Steel – They used to be a leader and the largest mill in North America – they have since abdicated both positions and, as the U.S. Steel spokesperson put it to me, “U.S. Steel only discusses pricing with our customers.” At the moment, both the market and U.S. Steel customers are without guidance from the mill.
U.S. Steel - (June 10) - here is an update on the U.S. Steel pricing situation according to SMU sources - USS prices will rise $20-$30 per ton. No information yet on whether they will charge full extras.
California Steel - came out with a price increase announcement for the West Coast customers on June 4th – the letter to their customers contained the following, “Due to changing market conditions in addition to continued rising operating and raw material costs, California Steel Industries is increasing prices for all flat rolled products. Effective immediately with new orders placed and accepted for availability June 28th and later, the transaction price will increase by a minimum of $30.00/net ton.
I am trying to gather information as to how this will impact West Coast selling prices and how they compare to the mills east of the Rockies. California Steel customers are advising SMU their lead times are 4-6 weeks at this time.
CSN – market sources are telling Steel Market Update the Terre Haute, Indiana mill is raising prices by $30 per ton effective July 1st. Current lead time out of CSN according to our sources is the week of July 13th - 6 weeks.
The Techs – market sources are telling Steel Market Update The Techs (MetalTech, NexTech and GalvTech) are increasing their pricing by $30 per ton. There was no mention of any changes to gauge and width extras at this time. Lead times out of The Techs are the week of July 5th (5 weeks) as of Thursday afternoon.
USS/Posco (UPI) – market sources are telling Steel Market Update, USS/Posco (West Coast) verbally is telling their customers the mill is raising prices $20 per ton effective as of Thursday, June 4th I(I understand a letter was sent out confirming this late in the day ET). SMU will attempt to get more specific pricing information as soon as possible. UPI customers are advising SMU the mill’s lead times are currently 4-6 weeks.
Steel Dynamics (SDI) – market sources are telling SMU the booking rate (new orders) has increased fairly dramatically at SDI and the mill is currently running at approximately 60% of capacity (I am being told they are booking at more than 60% of capacity). Our sources have told us SDI is discussing higher prices with their customers but as of late Thursday afternoon were still in the process of reviewing all of the other mill announcements.
Duferco Farrell – market sources are telling SMU the order book has improved at Duferco Farrell and their mill may be running for the next two weeks where previously it was a week on then a week off. Duferco Farrell’s largest customer – Wheatland Tube – has hurt their order book due to the “Buy America” provisions but, the mill is doing better recently.
The mill announced late in the day on Thursday, June 4th the following, “The current price levels are unsustainable for Duferco Farrell and Sharon Coating given the current cost for our raw materials. Therefore, effective with new orders placed for July 1st and beyond we will increase the price a minimum of $30/ton.”
Sharon Coatings – Sharon Coatings announcement came very late in the day with Duferco Farrell’s, “The current price levels are unsustainable for Duferco Farrell and Sharon Coating given the current cost for our raw materials. Therefore, effective with new orders placed for July 1st and beyond we will increase the price a minimum of $30/ton”.
Market sources are telling SMU the conversion mills (Sharon Coatings, The Techs, Wheeling-Nisshin and CSN) are being squeezed by the lack of spread between cold rolled base prices and galvanized and their margins are being squeezed by the high cost of zinc and the fact that all of the light gauge mills have been discounting their coating extras. My understanding is their existing quotes are null and void at the end of this week. Lead times out of Sharon Coatings (as of Thursday afternoon) were the last week of July according to our sources (8 weeks).
Our Sharon Coating sources pointed out to SMU they are a light gauge galvanizing facility and compete with Severstal, US Steel, Steel Dynamics (SDI) and the other converters. The larger mills – Severstal, USS and SDI – will ultimately dictate what the conversion mills will be able to charge in the month of July.
Essar Steel Algoma - our sources have told us Algoma has increased their prices by $30 per ton.
Gallatin Steel – A market source advised SMU that Gallatin Steel is supportive of the industry’s efforts to increase the price of flat rolled steel products. The mill has seen an improvement in orders recently and has been at, or above 50% of capacity for some time. Lead times are starting to extend at Gallatin although my sources believe the mill is just about to close out June production. Our sources understand the Gallatin sales people are communicating with their customers and anticipate having a former price announcement out by no later than Monday of next week.
Wheeling Nisshin – market sources are telling SMU Wheeling Nisshin is reviewing the announcements made by the other domestic mills and will support a price increase. WN does not have a good handle on their input costs for the month of July so it is anticipated they will take a day or two to make a final pricing decision. Bookings have been stronger at WN and it was reported to SMU by our sources line #2 is booked solid for the month of June. Lead times as of Thursday were the week of July 17th on Galvanized and Galvalume and the 24th for Galvannealed.
Northstar/Bluescope – The mill did not return my calls. Other mills I am still working on gathering information include Ternium (LA) and Steelscape (WA).
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Sincerely,
John Packard
