Domestic Mills Ignoring US Steel Price Announcement (So Far)

Now, one week ago US Steel announced a $40 per ton and the other mills, who are very well aware that the second price increase didn’t exactly stir the hearts and souls of their customers are waiting to see what, if anything, they should do.

The owner of a medium sized service center told us earlier today, “No one has attempted to match US Steel. That speaks volumes. It’s not like they don’t need it….”

We then spoke about momentum and the items that could possibly move pricing. “This strike thing seems to be a yawn,” is what he had to say about the USW and USS/ArcelorMittal labor negotiations. At the same time the market seems to be prepared for a cold rolled trade case but, “There is a lot of steel in the system. Lots of warehouses are full of steel. We are running out of space…” The result being, “There is not a lot of buying activity.”

Another large service center told us, “Labor; I think customers would like assurances that they are protected, but I don’t have any indication of anyone paying for this protection (with inventory).  In general, I think majority view in the market is no stoppage, with a scenario like what is playing out at ATI being likely if no agreement is found.  Labor might be harder on the auto business – there, they have targets who have been making money!”

Iron ore prices are down, the dollar is strengthening once again, scrap prices are moving lower and all of this will put pressure on steel prices. The domestic mills know it is tough to go for higher prices when their input costs are going in the opposite direction.

From a large national service center we learned, “For what it’s worth, check out the forecasted prices for IO at the bottom, by this publication [This comes from the bottom of the publication referenced: The MB iron ore price outlook is $35, $30 and $25 for ’16, ’17 and ’18…]. Can you imagine the impact on steel products (globally and US) should this scenario come to pass? And, while these figures seem highly unlikely sitting here in today’s world, just go back over the various bank and analyst forecasts for IO over the last 18 months. They have constantly been revised lower all of the time, so there has been a pattern in place for some time now…”

We have heard from a number of buyers that at least one mill (and we assume others) have brought their prices back in line with the competition where they have over-reached. Without some form of inducement (say another trade case) the market appears convinced that steel prices will remain as they are or only move slightly higher in the weeks ahead.