A member of the financial community contacted me earlier today asking about rumors of a new price increase by the domestic steel mills as we move into January 2015. He stated that another steel-related publication had quoted a service center as believing price announcements would be coming soon.
First, I have not heard directly from any credible sources, with whom I have been speaking to over the past week, of steel mills beginning to warn their customers of a pending price announcement. The last announcement was on October 28th (AK Steel) or shortly thereafter and it shriveled up and died. As we mention in our pricing article above, prices have not crashed but the drift lower continues and momentum is for prices to continue to move lower.
A second “opinion” I have, as I speak to buyers and review the results of this week’s flat rolled steel market survey, is the percentage of buyers continuing to pursue foreign steel is quite large and may be growing. A price increase announcement right now would only add fuel to that fire.
Does this mean that the mills won’t announce a price increase? Listen, it is common for the mills to announce increases as lead times move into January and beyond. The mills could very well attempt to change momentum again or, they can wait a few weeks and let the market reach a point where foreign tons are less attractive (as the spread narrows) and lead times are a little further out than where they are today. The mills should have the ability to absorb slightly lower spot prices as their input costs have dropped (doesn’t mean that they like it).
What may be a little disconcerting to the mills is to have spot prices dropping at the same time they are trying to close out 2015 contracts. We are hearing that most mills are trying to “roll over” their contracts and not increase discounts from where they were in 2014. Dropping spot prices may spook buyers who are trying to cut the best deal possible for 2015.
For those of you who watch our Blog posts on our website. You may have noticed we are producing articles about world topics, economy and other topics that we have chosen not to place in our newsletters. I am trying to keep our newsletter at a reasonable length with quality articles and not a lot of “filler” type articles that you can find easily elsewhere (or on our blog).
Our flat rolled steel market survey is underway and we will begin reporting the results in our Executive and Premium level newsletters later this week. Our Premium level members should be able to access our Power Point presentation sometime on Friday afternoon of this week.
We are always looking for new clients (subscribers) and we are willing to reward those companies who make recommendations that result in new SMU members. We are offering a $100 credit which can be used on any workshop, conference, addition of people to your membership or when you renew. The credit is good for 12 months from date of issue. We issue the credit when the new customer fills out their new account form and puts your company name in the referral box. Let me know if you have any questions.
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John Packard, Publisher
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