Steel Products Prices North America

Actual Steel Price Increases Higher than Announcements Being Made by US Steel Mills

Written by John Packard

May 8, 2016

On Friday, I (John Packard) was the speaker on a conference call hosted by Bank of America Merrill Lynch analyst, Timna Tanners. This is something that I try to do a couple of times per year to help the financial community and investors in the metals and mining space to better understand the flat rolled steel industry.

There were a number of questions, both being asked verbally during the conference call as well as through email, about the actual increase in pricing being collected by the domestic steel mills. I related a conversation that I had with a privately held steel service center on Thursday of this past week about the amount of the increases they had taken on galvanized steel purchased from domestic mills. I was told by the head of purchasing at this service center that their base pricing had moved from $22.00/cwt ($440 per ton) to $40.00/cwt ($800 per ton) or $360 per ton.

During the conference call I receive the following email from another service center:

Listening to your conference call now.

Agree with the comments about the buyer that was at $440 in December and $800 now.

I’d proffer that the actual increase is even more than this represents.

Many of our deals we had late last year, and were able to lock in on contracts for this year, included negotiations on extras and considerations on freight.

Any spot tons we currently have available no longer have any of those negotiated deductions included.
Some of our customers are struggling with understanding how our pricing can be increasing at a rate greater than the mill announcements and/or CRU climb.

[The] Net impact on pricing, as hard as it is to believe, might be higher than is being reported.

Steel Market Update agrees and warns buyers to stay close to their mill and service center suppliers and to do your homework to understand all of the costs associated with buying steel (base price, mill extras, freight and fuel surcharges, etc.) and what is, and is not, currently negotiable. Consistently reading Steel Market Update and communicating with us with questions that you might have is also highly recommended – remember, we don’t have a dog in this fight. We are just trying to call the market as we see it. You can reach me at: John@SteelMarketUpdate.com.

John Packard

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