Steel Products Prices North America

Steel Buyers See Short-Term Price Peak, Await May 1 Deadline

Written by John Packard

As a group, flat rolled steel buyers are of the opinion that prices on hot rolled, cold rolled and coated products have plateaued over the near term. However, to a person, the buyers are waiting for May 1st to arrive and then see how President Trump, USTR Robert Lighthizer and the Department of Commerce handle the Section 232 tariff exclusion process, especially on Europe, Mexico, Brazil, Argentina, Australia and Canada (South Korea has a long-term agreement).

Plate products are perhaps a bit tighter. We got mixed reactions from buyers as to whether plate prices are at their high.

Have steel prices peaked or is there still room for prices to move higher? Steel Market Update collected the following observations from buyers:

• “The coil market is not as tight as plate. While coil lead times are a bit mixed and there is more flexibility to find the volume you would like, prices remain pretty firm. My view is that your current range is reflective. Plate has seen some media coverage and volatility in the main index that is suggesting a softening that I don’t see at all. Here I think closely managed order books and folks waiting for the July opening – meaning not many transactions – potentially introduced some thinking the market is moving backwards. The perspective here is that plate demand remains very good and is even picking up some steam as several major OEMs are recovering from a slower start against pretty large growth expectations for 2018. Plate was already in a better position coming into 2018 with imports dropping to 50k a month and less, and energy business recovering. I continue to think the HRC to plate spread will be widening.” Service Center

• “In order to answer [have prices peaked?] there needs to be a much clearer understanding of the fundamentals driving this market. Absent a very clear definition of the supply and demand fundamentals, we’ll simply be on a rollercoaster ride. A case in point is the nuttiness occurring in the aluminum market. Like steel, the aluminum market drove up on the rumor of Section 232, both on the LME and the MWP. Then 232 was announced and aluminum was only hit at a tariff rate of 10 percent, which had an immediately correcting effect on the market. Then a mushroom cloud erupted over the market on April 6 in the form of sanctions on the Russian Oligarch connected to Rusal. The Rusal effect quickly showed the tentacles that connect it all over the world and within two weeks, the MW Transaction market skyrocketed by 35 percent. This weekend, there was a signal from Washington to indicate that the specific sanctions pertaining to Rusal could be lifted if Oleg Deripaska sold his controlling shares in the company. The effect was an about-face in the aluminum market resulting in an immediate 10 percent correction. What a crazy rollercoaster ride that absolutely no one could have predicted.” Manufacturing Company

• “So, you are asking about the steel market and whether or not it has peaked? The question will be impossible to answer until we can return to a market driven by sound fundamentals, as opposed to this daily dose of absurdity.” Manufacturing Company

• “Hard to say until May 1st comes and goes. A lot hinges on the position the U.S. administration takes with Canada regarding NAFTA and 232. With lead times out into August on new orders, the mills still have some sway and are holding out on price.” Manufacturing Company

• “Problem now is that everyone, including the end users, bought too much in anticipation of higher pricing. There’s not enough moving to keep prices going up and no gluts in the market. Should be interesting to see what happens when navigation opens.” Service Center

• “I think prices have peaked, but do not expect a significant pullback. There are still supply constraints, and I expect that to keep prices firm. I do, however, expect there to be a general ‘softening’ sentiment bolstered by the lower scrap numbers and the general mindset of buyers when the market is at the perceived ‘peak.’  It all boils down to supply and demand, though, so we’ll see.” Service Center

• “For now, prices seem to have plateaued. While the small volume mills keep trying to up the ante, the other players aren’t buying in on the game. On May 1st, the game will take another direction depending on what happens with the exemptions.” Service Center

• “We are still in a tight supply market in the South with demand very strong. With limited HR imports and oil continuing to climb, I feel there is room for more movement higher. Oil is at $69 a barrel today with projections to reach over $80 or $90 by mid-summer. That will continue to put a strain on HR well into the summer. Import offers including the 25 percent tariff are not very attractive for HR compared to the futures market. I’m seeing HR offers for August arrival in the $41.50/cwt range [foreign].” Manufacturing Company

• “Depending on trade barriers (232, circumvention, quotas, etc.), we believe prices have paused as increased imports have fattened inventories and service centers in the transactional world have not had to purchase significant volumes. As imports recede and inventories dwindle, we think there may be a resurgence in pricing as restocking begins to take place, but not at extreme levels as the mills are trying to keep imports at bay. Expect pricing to plateau for the next couple of weeks minimum. and then we’ll see. We don’t see a major correction till 4Q at the earliest.” Service Center

• “Prices have peaked for the short term. Based on outcomes of exclusion requests, quotas, etc., there may be another rise before year end, if demand is pinched due to availability (a combination of strong energy, fewer imports, and possible circumvention issues with OCTG from countries like South Korea).” Service Center

• “Currently, flat rolled prices have settled. Exemptions and foreign participation levels going forward are the ones to watch. Scrap looks flat and demand is steady. Added domestic capacity may just tip the scale. Too close to call right now.” Service Center

• “As you know the mills are quoting $900 flat rolled, so based on that the indexes have chance to move higher. That said, I believe the market will not absorb any higher prices.” Service Center

• “Considering the significantly disrupted domestic supply environment, I think plate has a reason to move higher. However, the plate mills do seem to be more disciplined regarding market pricing. They are better at understanding the importance of disciplined pricing as a means to create sustainability by keeping import offers down. More of a world market perspective.” Service Center

• “I think for now, yes [prices have peaked], but I think there’s a decent chance we see a resurgence in the fall.” Service Center

• “Tons are a bit limited, but like most buyers we bought ahead, and we don’t need much right now. Mills are interested in selling us more than what we need to the point of being somewhat negotiable. If this scenario is widespread, we have certainly seen the peak.” Service Center 

• “Yes, plate pricing has peaked for 2018. For the first time this year, OEMs and large fab shops are passing on our offers.” Service Center

• “Plate is very close [to a peak], but it’s still tough to say as supply remains tight, allocation is real, mills are running late and there’s no competitive imports.” Service Center 

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