Steel Products Prices North America

SMU Q&A on Price Negotiations and Direction

Written by Tim Triplett

What are the issues affecting price negotiations? What is the direction of spot pricing? Steel Market Update canvassed the market this week to gather executives’ perspectives. Following are some insightful comments:

Q:  What are you seeing as the biggest issue affecting price negotiations with your suppliers?

A: “Supply is constrained. That is the biggest issue.”

A: “It’s a very odd market. The disparity between import, domestics and Mexico is vast.”

A: “Uncertainty continues to reign: 1) What will actual import volumes be in the next 3-6 months? 2). Will the tariffs on Mexico, Canada and the EU stay in place for more than 60 days? 3). Will we see increased shifting by manufacturers of production offshore or purchases offshore to mitigate the tariff impacts? It’s difficult to say where we are in this particular cycle. I think there’s more upside price risk in the near-term, but a strong likelihood of a harder fall once things stabilize. For the first time in a long while, I’m starting to get concerned about lower demand in the second half.”

A: “The perceived tightness in the market is the issue. Hot rolled is tight, but CR and galvanized both have space available at the right price, depending on the particular mill you’re talking with at the time. Confusion on tariffs has also added to the anxiety.”

A: “Supply and trucking/rail. Supply is still very tight, and many mills are very selective on which companies they offer spot tons. Trucking is the worst I have seen it in my career, and rail is having the same issues. Getting steel is becoming a challenge, further driving input costs much higher than the rise in steel prices.”

Q: What are your expectations regarding the direction of spot prices over the next few months?

A: “Spot prices from the domestics will be flat to rising over the next 30-90 days.”

A: “I see prices stable to up $20 over the next 60 days.”

A: “Spot prices will continue to rise, getting closer to $950 per ton.”

A: “I would expect prices to stay elevated through October.”

A: “Stable to higher prices, especially for HR and plate. I continue to be concerned about a shorter-term supply availability problem this fall, depending on imports.”

A: “Hot rolled prices will go up to maybe $930 a ton, then start tapering down and will soften in 4Q.”

A: “Spot pricing will be under rising pressure for the next couple of months as foreign offerings sort out the risks vs. rewards of importing. But as demand declines in the fourth quarter, expect things to loosen a bit.”

A: “It appears we are at the peak of this cycle given the recent statement from Commerce Secretary Ross about a possible investigation into profiteering. I suspect the Senate hearing, 21,000 requests for exemptions and just a tiny fraction of the cases processed, and the fact steel prices have already increased by more than 25 percent, will put downward pressure on prices in the upcoming months.”

A: “Domestically, there isn’t much to negotiate. The number is the number. For imports, it’s all about the continued uncertainty of what the next tweet could be and how to do business without knowing the rules. There has NEVER been a time when having good business partners, not just vendors but true business partners, has been more important.” 

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