Final Thoughts

Final Thoughts

Written by John Packard

I was at the Cowen & Company Global Metals, Mining and Materials Conference in New York City earlier this week. I always find it interesting when meeting with members of the financial community as their questions and concerns can many times be much different than those of the steel community. The constant question was how could steel prices avoid gravity – with gravity being defined as the pull of iron ore and scrap prices lower.

Then the next question is how low can prices go?

My opinion has been that iron ore and scrap prices influence the psychology of the market but not necessarily prices from month to month (unless the mills are on a roll and prices are rising, for some reason at that point in time the increasing scrap prices mean a lot…).

The announced price increases have not taken hold. Mostly because a number of mills need orders. A give-a-way is when the president of a service center tells me that one of the steel mills that they do not do business with is all of a sudden calling looking for orders. Those of you who have taken our Steel 101: Introduction to Steel Making & Market Fundamentals know that one of the early signs of a weakening market is the steel sales person is calling looking for business (promising to be price competitive) as opposed to when markets are rising (and the sales person can’t be found anywhere).

Another sign is whether service centers are supporting higher prices. We capture this during the survey process. When prices are truly changing service centers will raise their spot prices. Right now we are hearing complaints about the lack of margins and the competitiveness of the service center industry.

So, how far can prices go from here…?

I am in Savannah at the AWMI International Conference for the balance of the week.

We will begin our next survey on Monday of next week.

As always your business is truly appreciated by all of us here at Steel Market Update.

John Packard, Publisher


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