SMU Data and Models

Industry to Soon be Over-Supplied and Prices Forecast to Drop
Written by John Packard
September 8, 2013
This past week, Steel Market Update (SMU) conducted our beginning of September steel market survey. Of those responding to last week’s survey 52 percent were manufacturing companies, 35 percent steel service centers and the balance were composed of steel mills (4 percent), trading companies (4 percent), toll processors (3 percent) and suppliers to the industry (2 percent).
By wide margins, our respondents believe that the flat rolled steel market will be in over-supply due to the return of the Middletown blast furnace, the resolution of the ThyssenKrupp slab issues and the union returning to work at Lake Erie Works. When our question was put to manufacturing companies and services centers independently the results were the same. Close to 90 percent of service centers and over 90 percent of manufacturing companies believe there will soon be an over-supply of steel.
So the question becomes at what point will spot prices begin to be impacted by the return of supply to the marketplace? Twenty seven percent of the manufacturing companies believe prices have either already begun to decline (8 percent) or will during the month of September (19 percent). Service centers did not pick up on declining prices prior to September as their first response was 26 percent during the current month.
By the time we reach October the majority believes prices will have begun to fall by the end of that month. Sixty eight percent of manufacturing companies couple with fifty nine percent of service centers reported prices will drop by the end of October. As you can see by the graphic provided the next most popular month was November.
According to our survey respondents, by October 1st benchmark hot rolled prices are forecast to be much lower than the $645 average reported by Steel Market Update last Tuesday. In fact only 17 percent of the respondents believe prices will be above our current average. The average of the respondents was $627 per ton which would be $18 per ton below existing levels.

John Packard
Read more from John PackardLatest in SMU Data and Models

Apparent steel supply remains elevated in July
Apparent supply totaled 8.88 million short tons (st) in July, down 38,000 st from June and 6% higher than the same month last year

HRC vs. prime scrap spread narrows slightly
The price spread between prime scrap and hot-rolled coil (HRC) narrowed by a hair this month, according to SMU’s most recent pricing data.

SMU Scrap Survey: Current Sentiment rises as Future Sentiment falls
SMU’s current Scrap sentiment index increased this month while future sentiment declined, according to our latest ferrous scrap survey data.

SMU scrap market survey results now available
SMU’s September ferrous scrap market survey results are now available on our website to all premium members.

SMU Survey: Sentiment inches up from low levels
SMU’s Steel Buyers’ Sentiment Indices ticked higher this week, according to the latest data from our flat-rolled steel survey.