Both manufacturing companies and flat rolled steel service centers reported near unanimous support for higher spot pricing. In the process, it is Steel Market Update’s opinion the higher flat rolled and plate spot prices provided by the distributors also support the most recent steel price increase announcements by the flat rolled steel mills.
Last week, Steel Market Update issued invitations to 640 individuals involved in the flat rolled and plate steel markets to participate in our early February flat rolled steel market trends analysis. As part of that process, we surveyed manufacturing companies and service centers and asked them to comment on distributor spot pricing as compared to the time of our last survey (about two weeks prior).
Ninety-two percent of the manufacturing companies responding reported service centers as raising spot pricing. The remaining 8 percent reported spot pricing as being stable. No manufacturing companies reported seeing any price decreases from their service center suppliers.
The manufacturers’ responses were similar to what we reported in the middle of January when 89 percent reported higher spot prices and 11 percent saw stable prices from their distributor suppliers.
The distributors reported similar results as the manufacturers with 96 percent of the service centers reporting their company raising spot pricing. The remaining 4 percent reported prices as being stable compared to mid-January.
In the graphic shown below, the green bars represent the distributors raising spot prices while the blue is “stable” pricing and red lines are for those times when distributors were lowering their spot prices to their customers. The red circles above the graph represent price increase announcements made by AK Steel. We use AK Steel announcements as they can be easily tracked at www.AKSteel.com in the news section of their website.
The last AK Steel price announcement was made on Jan. 29, 2018, and was for $30 per ton on all spot flat rolled products. This was the second increase announcement made during the month of January. A $40 per ton announcement was made on Jan. 3 on all sheet products.
Historically, it is rare for steel distributors to keep increasing prices to their customers over a prolonged period of time. Once inventories rise to an uncomfortable level, we tend to see distributors break ranks to try to eliminate excesses, and thus begins the downward pricing cycle. When that happens, it is SMU’s opinion that steel mills are unable to capture higher prices and erosion in mill pricing occurs.
For those who are curious to know what this graphic looked like last year (date on graphic was Feb. 19, 2017), see below. The black circles represent AK Steel price announcements. When you compare the graphic below, you will notice a “smoother” flow of pricing compared to what we saw during full-year 2017 when uncertainty about government trade action impacted the flow of imports and pricing.
This information is available to our Premium level members who can access last week’s survey results and past surveys on our website under the Analysis tab. If you would like information about Premium membership, please contact us at info@SteelMarketUpdate.com
John PackardRead more from John Packard
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