Final Thoughts

I was asked by one of my old steel customers and an SMU member company to help him explain to his customers why prices have been rising. When I get a question like this I have to assume other people who are reading our newsletter are wanting the same information in a condensed, simple format. Here is what I sent:

The key issues driving steel prices at this time are:

1)    Supply constraints. We have US Steel Granite City and Fairfield steel making facilities closed. AK Steel Ashland hot end is also closed. In Canada we have two mills in creditor protection and for sale (Essar Steel Algoma and USS Canada).
2)    Trade Suits. There are trade suits on all flat rolled products: hot rolled, cold rolled, coated steels. We are through the preliminary stage and still have the final determinations and ITC ruling to come. This has created uncertainty among traders and many countries have stopped shipping foreign steel to the United States because they are one of the countries named and they have exposure/risk.
3)    China. Over the last few weeks prices in China have skyrocketed and China is the supplier to conversion mills around the world. The net result being countries not hit with dumping suits don’t know what their costs for substrate will be and they are pulling offers. Foreign prices are up $100-$160 per ton compared to where they were one month ago.
4)    Inventories – especially at service centers. Inventories were out of control last year and way too high. This has changed and now service centers need to reorder pushing lead times and prices.
5)    Lead Times are Extended. Lead times have moved out an average of 3-5 weeks during the past two months. As lead times extend buyers must buy more inventory (pushing lead times even further).

Demand is not part of the equation right now. This is what is causing an issue with many customers. They don’t see their business as “booming” and therefore they are holding off making commitments (and will end up paying more).

How long will this last – until at least early to mid-summer which is when the final determinations on the dumping suits will be made.

SMU will send out survey invitations first thing Monday morning. If you receive one please take a few minutes to click on the button/link which takes you to SurveyMonkey.com where our questionnaire is located. If you would like to be added to our invitee list please send me an email: John@SteelMarketUpdate.com.

As always your business is truly appreciated by all of us here at Steel Market Update.

John Packard, Publisher