SMU Data and Models

All Eyes on Steel Mill Lead Times

Written by John Packard

With all of the domestic steel mills announcing $30 per ton price increases either late last week or early this week, the industry is waiting to see if there was a surge of orders and how those orders have impacted lead times. Everyone knows if lead times begin to extend then buyers will have no choice but to come off the sidelines and place orders.

We did a quick spot check of a number of the flat rolled steel mills to see what their customers are reporting for lead times on new orders placed at this point in time. What we found is a number of mills scrambling to make adjustments to account for the order flow from late last week and so far this week. Many mills allowed orders to be booked at the previously quoted prices before withdrawing those offers from those who did not book in time. Here is what we found as of this afternoon (Thursday, October 27th):

US Steel was the first mill to announce the price increase. They are not a huge spot seller as most of their business is tied to contracts but none-the-less we are hearing their lead times are somewhat extended. We understand spot hot rolled lead times have moved into December. Cold rolled spot is mid-December while coated products range from the last week of December into early January. This would put their hot rolled lead times at approximately 6 weeks, cold rolled at approximately 8 weeks and coated at 9+ weeks.

At the beginning of this week Steel Dynamics (SDI) Butler was reporting lead times on hot rolled coil as being the week of November 7th (2-3 weeks). As the week progressed SDI adjusted their HRC lead times to be the week of 11/28 (5-6 weeks). This means that since the price announcement SDI Butler HRC lead times have move out 2-3 weeks.

SMU sources reported North Star BlueScope as having a 5 week lead time on hot rolled coil for new orders placed with the mill this week.

One of our sources reported Essar Steel Algoma lead times on hot rolled as slipping into the first week of January with cold rolled out an additional week. Other than on the west coast and Ternium out of Mexico this is the longest lead time we have seen on HRC into the U.S. market.

We are hearing that Ternium Shreveport (galvanized/Galvalume conversion mill) lead times are approximately 4 weeks however they have booked an impressive number of tons for late December and there is already a great deal of interest in January production. So, they have a potential “hole” in the late November/early December time frame.

Nucor Berkeley lead times on hot rolled run from the week ending 11/12 (2-3 weeks) with most products being the week ending 11/19 (3-4 weeks). On cold rolled fully annealed their lead times are the last week of November for non-tension leveled 48”-54” (5-6 weeks) to week ending 12/3 and 12/10 for wider materials (6-8 weeks).  Galvanized 48” to 54” is the week ending 12/10 (6-7 weeks) while wider widths are out one more week (7-8 weeks).

We have heard other Nucor plants have seen their lead times jump with Nucor Arkansas reported to have galvanized lead times out to the week ending December 24th (8-9 weeks).

Nucor Decatur is quoting hot rolled lead times for the week ending November 26th (4-5 weeks), cold rolled (fully annealed) for the week ending December 10th (6-7 weeks) and galvanized/galvanneal the week of December 10th (6-7 weeks).

We heard from one of our NLMK USA sources who advised that even though the mill shows an early December lead time, in actuality, the mill is already 70 percent full for the month of December and the mill’s expectation is for GI to close out the month of December very quickly. They also advised us that the hot strip mill at Portage can always outrun the melt shop, so if they have slabs on the ground they are able to turn them over within 2 to 3 weeks. Farrell runs with foreign slabs and they can always run short lead times on hot rolled off of their hot strip mill.

We also heard from an AM/NS Calvert customer that their lead times are mid-December on cold rolled and galvanized (7 weeks).

So, from our perspective lead times have begun to move and the mills are asking for higher spot pricing. Most buyers (not all) think the prices will stick. As one mill told us this afternoon, “Pricing gaining some traction. Ten to fifteen bucks thus far. Two out of three are willing to move. But the third customer is tending to battle hard to actually reduce!”

For the moment we are keeping our Price Momentum Indicator at Neutral and we will revisit our indicator over the coming days to see if Momentum has indeed turned in favor of the steel mills.

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