Steel Products Prices North America

Most Steel Buyers See Firm Demand, Pricing Into Q1

November 30, 2017

Except for a few flat rolled steel mills that have not yet completely filled their December order books, most steel producers are holding firm on steel pricing in anticipation of good demand in the first quarter. The result is we are seeing two distinct pricing markets – those who have December tons and are willing to deal and those who have already moved into January (or beyond) and are less willing to take “cheap” orders.

Steel Market Update’s canvass of the market this week shows most buyers optimistic about demand next year and confident that steel prices are on an upward trajectory.

Barry Zekelman, president of Zekelman Industries, a major pipe and tube manufacturer, said his business is booming. “We had the biggest November in the history of the company.”

“Demand is very strong. Most of my customers are not taking the usual two-week downtime during Christmas this year,” commented a service center executive from the mid-South. ”I expect a very strong 2018 for the first and second quarters based on my current customer ordering patterns.”

A few sources tempered their forecast. “Auto looks solid, not great. We have issues with customers moving to Mexico,” said one distributor.

With mill lead times pushing into next year and scrap prices looking up, steel prices are firm, said an executive from a large Midwestern service center. “I don’t think there is much negotiating going on.”

Observed another source: “There is a small amount of room” to negotiate, especially with mills that have not sold all their December capacity.

“I think the mills are trying to collect their recent second increase. I don’t think they have a strong position, because most of the buyers are on the sidelines due to the year-end slowdown,” said another tube manufacturer. He does predict mills will be able to collect a base of $32/cwt for hot roll beginning in January as buyers return to the market. The shortage of electrodes could add to price increases in the first quarter. He forecasts a good 2018, similar to 2017, though with continued concerns over imported OCTG from Korea, Argentina, Russia and Mexico.

The outlook varies by product. “Mills are mostly firm on HR right now, while CR and coated still show opportunity,” commented a service center. “There is absolutely a willingness to negotiate among the mills,” said another, especially on cold roll and galvanized.

The picture in the plate market varies from one observer to another. “My plate service center did not have a good October, and November is worse. Demand for plate continues to be very weak, and I don’t see that changing anytime soon,” said one distributor. “We will have our traditional strong first quarter of 2018, but pricing will collapse again in the summer,” he predicts.

Another plate mill source offered a more optimistic forecast. Low import levels and the rising costs of steelmaking materials are putting upward pressure on prices. Plate mill lead times are into the third week of February already, he said. “This looks healthy from a price increase point of view. We see no reason for anyone to indulge in Christmas deals in desperation.”

Commenting on the price trend, one service center executive said “a floor has been established and premiums to that floor are being realized. In my opinion, the mills are very satisfied collecting $620-$640 HR.”

Another service center executive points to support for higher prices in 2018 with scrap expected to increase, the cost of iron ore, coal and electrodes going up and little competition from imports. “The biggest plus is that demand is much better than anticipated, and this seems to be a theme shared by many. That will help not only keep pricing strong, but probably will result in further increases.”