Steel Products Prices North America

Flat Rolled Steel Prices Will They Surge, Float or Drop from Here?

Written by John Packard

There is a lot of interest in what direction spot flat rolled prices will move from here. It appears there is a split between some of the domestic steel mills regarding the most recent price announcements made by AK Steel and Severstal NA.

We understand that spot prices on hot rolled are hitting a bit of a wall around $680 per ton. On coated products the wall appears to be at $40.00/cwt base with one mill telling us that their view of the Galvalume market has most customers in the $38’s versus the higher numbers being toted.

The question in everyone’s mind is what is going to happen to steel prices in the future, and there is no simple answer to this question.  The opinions within the steel market are quite diverse depending on how people feel regarding supply and demand issues, imports (both volume and price), the sale of ThyssenKrupp, where scrap prices are forecast to be in the coming months, etc.

Here is a good example taken from an email received from a manufacturing company purchasing executive earlier today:

“Another thing I have noticed going into next year is a wider divergence of opinion on what prices will be in 2014.  Even my staff, who are pretty savvy folks when it comes to the market, are all over the board. So there’s a lot of moving parts for next year, different from the last two years, and I’m finding it harder to predict prices.  Even the TK thing is a bit of a mystery.  It can’t help to run it full out and put another 1.5 to 2 million tons on the market, so will Mittal shutter some of their other operations?  That’s what Nucor thinks (or wishes) but I’m not sure.  Maybe they just want a piece of the southern market and to keep the those (unproven) auto assets out of the hands of CSN or another new competitor.”  

The is much speculation about what happens when the ThyssenKrupp Steel USA sale is announced. A large service center told us:

“I think the market will see AM/Nippon Sumitomo purchase as a positive, given their collective focuses on value-added products. If reports are accurate that a deal would close in mid-year, I don’t think there will be any short-term impact in the market.”

Other buyers believe the potential sale of ThyssenKrupp Steel USA to a company like ArcelorMittal with an existing footprint in the United States would provide the market with stability having reduced the number of competitors in the market by one. There is also the psychological impact of the sale which many believe will create a firming of prices and potentially could create a bit of a herd mentality flocking toward higher prices (and a steeper cliff).

Spot prices have begun to flatten out and we are hearing that a number of the domestic mills have not followed along with the Severstal and AK Steel announcements. Here is how one steel buyer put it to us earlier today:

“Spot offers have stagnated for now in the $34/cwt range. I haven’t heard of any further increase announcements. We seem to have gone into a more “quiet” period. I’m getting the sense this week that this market may have run its course for now. We, and most players I’ve spoken to have their 1st Qtr covered. This is being done by a variety of means: some Long-term contract, some Qtr/Spot deals. Our mix for 2014 at the moment is: 1/3 Long term contract 2/3 Qtr/Spot, which is an exact opposite mix from this year. Regardless, I don’t need to buy again until lead-times reach March, for my April arrival. There’re a lot of tons booked for the Dec-Feb time frame, plus, lots of sheet imports due in Feb/Mar. This will lead to higher inventories, and thus lower prices ahead. I certainly hope it’s a gentle ride down…

SMU anticipates there will be a higher degree of volatility in the coming weeks and months due to the number of factors which have the potential to impact the market. Opinions range from a low of $550 per ton to a high of $800 per ton for 1st Quarter 2014.  Quite the spread.

Steel Market Update is concerned about the potential for supply and demand to move out of balance. We are also concerned about the psychological impact of a ThyssenKrupp sale. The biggest area which needs to be analyzed over the coming weeks is the status of contract negotiations. Just how many companies are moving out of the contract markets into the spot markets instead and how will the domestic mills react to the additional spot tons which will be floating with the market? 

There also continues to be a growing concern about imports which some believe will be flooding into the U.S. in January, February and March.  There are others in the industry who are not believers. Steel Market Update will have more on this subject in our next issue as we have been polling the marketplace about foreign steel, price spread and order rates.

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