Steel Products Prices North America

SMU Price Ranges & Indices: CR and Coated Adjust to Lower HR Numbers

March 31, 2015

Last week Steel Market Update adjusted our Price Momentum Indicator from Lower to Neutral. We believe that change is coming and the wholesale slide we have seen in flat rolled steel prices will come to an end. We have not yet come to the conclusion that prices will reverse direction, rather that prices on hot rolled, cold rolled, galvanized and Galvalume should come back into their historical spread (hot rolled to cold rolled and coated base prices plus $100 to $120 per ton).

We also reported last week that we anticipated prices would level off when hot rolled coil hit $440 per ton on the low side. We are now seeing the low end of our range as being $440 per ton and our average has dropped another $10 per ton to $460 per ton. There may be further price erosion from here but if there is it will be self inflicted as opposed to responding to foreign steel pricing pressures. Steel buyers are telling SMU that domestic prices are very competitive against foreign and in many cases lower than foreign.

The bug in the ointment are mill lead times which have not improved at all from one week ago (one month ago, etc.). We need to see buyers come back into the fold and based on both our survey results (next one begins next Monday) and what we learned from our channel checks it will be at least another month before we start to see any volume of service centers coming back into the spot markets. For that to happen we need price stability as distributors have been burned as prices slid during 1st quarter.

Service centers are beginning to beg for a bottom to the slide and at least get to a point where prices stabilize. We received the following comments from a large service center executive who pointed out one of the reasons why distributors are ready for a change:

“We’ve been hearing about a “Bottom” for what seems like forever. I think it’s because the effect of the continuous drop in price on service centers is really taking its toll: The 1st Qtr HR CRU average price was $530/ton. The last week of the quarter (last week) was $471, or a whopping $59/ton (11%), below the average for the same Qtr. So, even assuming a service center did a decent job controlling inventory, and assuming they bought fairly evenly in the quarter, they are sitting on inventory which has an average cost which is $60/ton higher vs. the current market. We all know that many are sitting on more tonnage than that, and likely at worse price spreads to the current market, than I just mentioned. It’s no wonder everyone wants a Bottom!”

We expect cold rolled and coated (galvanized and Galvalume) prices to return to normal spreads and that is one of the reasons why we saw a large adjustment to the three products in this week’s price report. If hot rolled is averaging $460 per ton ($23.00/cwt), cold rolled and coated should be $560 to $580 per ton ($28.00/cwt-$29.00/cwt) with some minor adjustments based on geography, tonnage and mill relationships.

Here is how we see spot flat rolled prices this week (all prices shown are in net tons which are equal to 2,000 pounds):

Hot Rolled Coil: SMU Range is $440-$480 per net ton ($22.00/cwt- $24.00/cwt) with an average of $460 per ton ($23.00/cwt) FOB mill, east of the Rockies. The lower end of our range declined $10 per ton compared to last week as did the the upper end of our range. Our average is now $10 per ton lower compared to one week ago. SMU price momentum for hot rolled steel is for prices to remain steady over the next 30 days.

Hot Rolled Lead Times: 1-4 weeks.

Cold Rolled Coil: SMU Range is $540-$620 per net ton ($27.00/cwt- $31.00/cwt) with an average of $580 per ton ($29.00/cwt) FOB mill, east of the Rockies. The lower end of our range declined $50 per ton compared to one week ago while the upper end remained the same. Our average is now $25 per ton lower compared to last week. SMU price momentum on cold rolled steel is for prices to remain steady over the next 30 days.

Cold Rolled Lead Times: 2-6 weeks.

Galvanized Coil: SMU Base Price Range is $27.00/cwt-$30.50/cwt ($540-$610 per net ton) with an average of $28.75/cwt ($575 per ton) FOB mill, east of the Rockies. The lower end of our range declined $30 per ton compared to last week while the upper end decreased $20 per ton. Our average is now $25 per ton lower compared to one week ago. SMU anticipates galvanized prices will remain steady over the next 30 days.

Galvanized .060” G90 Benchmark: SMU Range is $609-$679 per net ton with an average of $644 per ton FOB mill, east of the Rockies.

Galvanized Lead Times: 3-6 weeks.

Galvalume Coil: SMU Base Price Range is $28.50/cwt-$30.50/cwt ($570-$610 per net ton) with an average of $29.50/cwt ($590 per ton) FOB mill, east of the Rockies. The lower end of our range declined $10 per ton compared to one week ago while the upper end decreased $30 per ton. Our average is now $20 per ton lower compared to last week. Our expectation is for Galvalume prices to remain steady over the next 30 days.

Galvalume .0142” AZ50, Grade 80 Benchmark: SMU Range is $861-$901 per net ton with an average of $881 per ton FOB mill, east of the Rockies.

Galvalume Lead Times: 4-6 weeks.

SMU Note: Below is an interactive graphic showing our hot rolled, cold rolled, galvanized, and Galvalume price history. You can only view this interactive graphic when you are logged into the website and reading the newsletter there. If you need help navigating the website or need to know your login information, contact us at info@SteelMarketUpdate.com or by calling 800-432-3475.

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