SMU Data and Models
Distributor Spot Sale Prices Suggest Price Increase Imminent
Written by John Packard
December 8, 2015
Steel Market Update (SMU) has been analyzing service center spot pricing based on reports from manufacturing and distribution respondents to our flat rolled steel market questionnaire. SMU canvassed the market last week and we believe that the results suggests an uptick in spot pricing will come soon.
Manufacturing companies responding to our survey had 90 percent of their respondents reporting lower spot prices out of their service center suppliers. Manufacturers have been reporting their distributors as lowering spot prices in each of the past four survey periods (2 months).
At the same time, 68 percent of the service centers reported that their company was lowering spot pricing to their end user customers. This is down slightly from the 76 percent reported two weeks ago as well as the 75 and 80 percent calculated over the course of the previous survey.
In the past, SMU has considered a response level at, or above, 75 percent as the level of capitulation at the distributors. At that level the pain associated with selling at continually cheaper pricing puts the industry in a mindset that would allow it to accept a price increase out of the domestic steel mills. Our opinion is we have been at that level, as we were earlier this year, and the odds of a price increase have been growing over the past week or two. This is also similar to what we saw earlier this year.
The question is if the mills do announce a public price increase (as a number of mills have indicated that they will only take new spot orders at higher prices already) will be see sideways movement, a dead cat bounce (short term bounce in prices) or a longer term rise in steel prices?
John Packard
Read more from John PackardLatest in SMU Data and Models
Steelmaking raw material prices ease in July
The majority of steelmaking raw material prices declined in June, following the same trend seen in May, according to SMU’s latest analysis.
SMU price ranges: HR declines moderate. Are we near a bottom?
SMU’s sheet price ranges slid again this week. But the declines were more pronounced on tandem products whereas prices for hot-rolled coil held roughly steady.
Some SMU Key Market Indicators improve, others remain near historic lows
SMU’s Key Market Indicators include data on the economy, raw materials, manufacturing, construction, and steel sheet and long products. They offer a snapshot of current sentiment and the near-term expected trajectory of the economy. All told, nine key indicators point lower, 16 are neutral, and 13 point higher. One thing worth noting: The nine indicators pointing lower are all lagging indicators. Many of those pointing upward are leading indicators.
SMU survey: Steel Buyers’ Sentiment Indices rebound
SMU’s Steel Buyers’ Sentiment Indices both saw improvement this week. Current sentiment ticked higher but remains near the four-year low seen earlier this month. Future Sentiment continues to indicate that buyers are optimistic for future business conditions.
SMU market survey results now available
The latest SMU market survey results are now available on our website to all premium members. After logging in at steelmarketupdate.com, visit the pricing and analysis tab and look under the “survey results” section for “latest survey results.” Historical survey results are also available under that selection. If you need help accessing the survey results, or if your […]