Steel Products

Final Thoughts

Written by John Packard

Our SMU Price Momentum Indicator continues to be at Neutral and has been for 14 weeks. We do not yet see enough momentum to cause prices to rise or fall quickly.  The market appears to be in a slightly over-supplied basis and demand – at the moment – is flat.  Not dead by any means, but many service centers are noting that some customers are doing OK while others appear to be struggling a bit.

Inventories appear to be balanced to slightly higher than needed. Our survey from last week found both service centers and manufacturing companies as reporting their buying patterns as “maintaining” existing inventory levels (manufacturers = 72 percent, service centers = 62 percent) or reducing inventories (manufacturers = 25 percent, service centers = 33 percent). These results are consistent with what we found during the middle of February.  We do not believe there will be any rush by either service centers or manufacturing companies to book out orders.

One service center executive told us late this afternoon that he believes the bottom of this cycle will only last three weeks – about the length of HR lead times. He surmised that within three weeks the mills will need orders.

Many buyers told us over the past two days that the increase in scrap prices for March are not enough to move prices much higher from here. The expectation by many of the steel buyers with whom we spoke is that April scrap prices will ease. They also pointed to the international markets where iron ore prices have dropped.

We continue to take a neutral position as there are some maintenance outages planned and maybe some capacity might be removed from the marketplace if orders don’t flow as expected over the next few weeks.  We also have negotiations at USS Lake Erie works in Canada on a contract which expires in the middle of April. USS has stated they expect the contract to be settled.

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