SMU Data and Models
SMU Price Momentum Indicator Adjusted to Higher from Neutral
Written by John Packard
December 13, 2015
On Friday Steel Market Update (SMU) adjusted our Price Momentum Indicator from Neutral to Higher. With almost all of the major mills now walking in step with one another (at least regarding the direction of prices from here if not the exact rate of change from where they were a couple of weeks ago), we believe prices on cold rolled and coated will move higher over the next 30 days. We also believe hot rolled prices should get a bump as well – whether or not HRC is able to get sustainable momentum will depend on the determination of the mills, how much capacity is being taken out of the marketplace and, how much foreign HRC is being offered into the U.S. market (and at what price level).
Will this change in Momentum be nothing more than a Dead Cat Bounce similar to what we saw earlier this year when prices rose from $445 per ton at the end of April to $470 per ton in early July only to collapse from that point until this past week when we reported HRC at $360 per ton (down $110 from early July)?
There are two haunting questions that will determine whether or not this round of price increases (and any new rounds to come) will stick over the long term:
• Will demand improve once we get into the 1st Quarter?
• Will inventories shrink from here and will there be a break in the onslaught of foreign steel coming into the U.S.?
On the demand front, The Institute for Trend Research (ITR) is forecasting the slowing in demand to last until May 2016.
So, from our perspective all eyes should be on inventories, the antidumping/countervailing duty trade cases and the total number of tons being removed from the marketplace with the idling of Fairfield, Granite City and Ashland (at least on the hot end – the steelmaking end). We noticed a report out of Granite City that quoted one of the workers as saying they have enough slabs to keep them busy well into January…
For now we are of the opinion that there is enough acceptance by buyers (service centers in particular, end users are usually never fond of rising spot prices) to allow the mills to collect some, if not all, of the $40 per ton announced this past week.
John Packard
Read more from John PackardLatest in SMU Data and Models
SMU Survey: Buyers’ Sentiment rebounds from multi-year low
Both of SMU’s Steel Buyers’ Sentiment Indices edged higher this week. Current Sentiment rebounded from a near five-year low, while Future Sentiment rose to a two-month high
SMU flat-rolled market survey results now available
SMU’s latest steel buyers market survey results are now available on our website to all premium members.
SMU Survey: Sheet lead times pull back after early-June blip, plate holds
Following the uptick seen two weeks ago, lead times eased this week for all four sheet products tracked by SMU, while plate lead times held steady, according to this week’s market survey.
SMU Survey: Pricing power abruptly shifts to steel buyers
The majority of steel buyers responding to our latest market survey say domestic mills are more willing to talk price on sheet and plate products than they were earlier this month. Sheet negotiation rates rebounded across the board compared to early June, while our plate negotiation rate hit a full 100%.
Service centers: Mill orders down marginally in May
SMU’s Mill Order Index (MOI) declined for a third straight month in May, but only marginally.