Scrap trading has been slow to develop in all but the Detroit area mills. The domestic steel mills are trying to reduce the spread between shredded scrap and prime grades of scrap (busheling and bundles) which in some cases has expanded to $70 per gross ton. Scrap guru Michael Marley reported this afternoon that the domestic mills are trying to shave $30 per ton off the spread. However, prices did settle in Detroit where prime grades were down $10 per gross ton while there was no change in obsolete grades.
Scrap is important as steel buyers watch the changes and use them as a hint as to what direction steel prices should go. If the mills get reductions of $20 per gross ton or more, look for buyers to demand reductions in their base prices. A service center executive told us that one of his mill sources was positioning him for a sideways move on scrap in August. However, we were told if there is a reduction in scrap their company would be asking for relief.
During my conversations with buyers today I heard a number of times concerns about the spread between hot rolled and cold rolled and coated pricing. One of the domestic mills we spoke with reported that they were seeing more competition especially on cold rolled. The mill reported cold rolled prices from foreign sources around $600 per ton ($30.00/cwt) at a time when domestic base prices are averaging $41.00/cwt.
A couple service centers wondered if the Europeans would begin taking notice and begin shipping more cold rolled and coated to the U.S. because of these attractive spreads in the numbers. In looking at the cold rolled license data report which was updated this evening the following European countries are exporting 5,000 net tons or more of CR to the United States during the month of July: Sweden, Turkey and Germany. Also of note is the 5,500 tons of CR exported by Hong Kong during the month of June… Vietnam was the largest CR exporter during July with 36,000 tons of license requests. Vietnam was followed by Canada and Mexico.
We continue to take registrations for our 6th Steel Summit Conference and we are closing in on 400 attendees. I believe our conference will be the largest gathering of flat rolled people in North America. If you would like to add your name to the list you can do so on our website: www.SteelMarketUpdate.com or by contacting our office: 800-432-3475. There are only 26 days to go…
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What are some “Black Swans” to watch out for? With the war in Ukraine entering its third year, your mind might understandably move to conflicts overseas. Here is one closer to home to consider: US trade relations with Mexico taking a turn for the worse. I mention that because the Office of the United States Trade Representative (USTR) dropped a (virtual) bombshell earlier this month.
Domestic prices have been sliding since the beginning of the year, and I don’t see any obvious reasons why the slide might stop this week. But let’s put the timing of a bottom aside for a minute. The question among some of you seems to be whether we’ll see another price spike, or at least a “dead-cat bounce,” before the typical summer doldrums kick in.
I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.
We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?
Everyone knows the old saying that “a picture is worth a thousand words.” Just because it’s a cliché doesn’t mean that it’s wrong. A lot of inked has been spilled trying to figure out why prices are falling now. I thought it might be as simple as this: Market dynamics in the fourth quarter (UAW strike, companies buying ahead of an anticipated post-strike price spike, etc.) pulled forward restocking activity that typically happens in the first quarter.