Distributors Supporting Higher Steel Spot Prices

Going back to mid-fourth quarter 2017, there has been a building wave of support for higher spot prices by steel distributors to their customers. This support is related to price increases being collected and, in SMU’s opinion, the mills’ ability to collect these price increases in part due to the support provided by the service centers.

Flat rolled and plate steel service centers are almost universally asking for higher spot pricing from their customers. The percentage of manufacturing companies reporting that their service center suppliers were raising prices increased from 86 percent in mid-February to 94 percent this past week.

We saw 98 percent of the service centers responding to our questionnaire reporting their company as raising spot prices to their customers.

With the president announcing tariffs against foreign steel, there is no question that in the short-term steel distributors will continue to ask for higher spot pricing. The expectation is for prices to remain high and move even higher, which would mean that this “up” market cycle could extend for some time to come. For this reason, we are keeping our SMU Price Momentum Indicator pointing toward higher steel prices over the next 30-60 days.