Steel Products Prices North America

Chinese Prices Dropping, U.S. Steel Buyers Sentiment Turning Negative

Written by John Packard

Steel buyers can be fickle people. They are tasked with keeping their company in product, and that those purchases be competitively priced at the time they are used. This is a daunting task when markets ebb and flow, and even more difficult when the government decides to become a major player in determining who will be the winners and losers.

The events of the past four or five weeks have compounded the issues facing steel buyers. Nucor announced $40 per ton price increases on flat rolled. The increase was not supported by all the domestic steel mills with at least one mill SMU spoke with saying the announcement was premature. Based on our pricing index, flat rolled steel prices continued their slide through this past week. The increase has not stuck. We continue to see lower spot prices on hot rolled, cold rolled, galvanized and Galvalume steels. Over the next 30 days, our Price Momentum Indicator is pointing lower meaning we believe prices will continue to slide. A steel buyer also must take into consideration what is happening around the world and how steel prices elsewhere may impact their buying decisions here, and international steel prices are under pressure.

Steel Market Update received a note from one of our trading contacts in China late last week. He pointed out that the Chinese steel prices are plummeting and provided some examples:

“Interesting TIMES rolling back around now. China market is in a spiral. HRC in 1.8mm/2.0mm [.071”-.0787”] for SAE1006 Aluminum Killed at USD520/mt [$472/net ton] FOB ST. LSD and down almost USD50/mt in less than 3 weeks. Billets in St3sp/St5sp or ASTM A615 Gr. 40/60 (Water Quenching Grade) at USD480/mt FOB ST. LSD.

“I also visited Alliance Steel of Malaysia this week and they are now offering BOF Billets in 150mm x 150mm x 12m or 165mm x 165mm x 12m at USD475/mt FOB ST. LSD. Malaysia does not have any BORON issue additives as China does for Rebates by using ALLOY STEEL Billets, Malaysia is straight chemistries.

“Prices are starting to dive big time now. Our prices in Asia now on FOB ST. LSD levels match those of CIS/Ukraine now.”

One of our manufacturing contacts also spoke about the world markets and the impact it has begun to have from their perspective: “Foreign pricing has come under severe pressure and foreign offers have become quite aggressive. This makes sense, as it’s being widely reported that the world economy is slowing—I’m sure in no small part due to trade efforts of the current U.S. administration. The domestics are clearly under pressure. Evidence of failed efforts by the domestic mills to collect the recent price increase can be seen in CRU backing down by $15/ton in the face of the $40/ton increase announcement on Oct. 10. H1-’19 HR Futures are all now sub-$800 and Futures for H2-’19 are averaging approximately $755. Regardless of integrated mill suggestions during Q3 earnings calls of continued growth and profitability, this seems highly unlikely… it would otherwise appear that steel prices will depress by an additional $40-60/ton in the coming months.”

Changing Market Sentiment

Steel buyers are cautious and sentiment amongst buyers is increasingly growing more bearish. “There is no sense chasing a downward market,” is what one buyer told Steel Market Update late last week.

A long-time steel trader told SMU that the downward pressure on foreign and domestic steel prices “…has put a damper on the sentiment out there. The expectation is for prices to continue to fall. No one is willing to make a purchase.” He went on to tell us current foreign hot rolled offers are $720-$760 per ton ($36.00/cwt-$38.00/cwt) and no one is interested in foreign at those numbers as domestic is essentially the same (or headed that way).

Another trader told us, “I think $36-$38 import for March isn’t getting people excited because nobody wants to think that far out. But, for our January deliveries, people are comfortable and placing $38’s. Next month who knows? Domestic price is falling. I imagine that buyers will adjust their targets once they can have visibility on [the] domestic trend. Everyone is risk adverse.” This same trader reported difficulty selling cold rolled and coated products due to very competitive pricing from the domestic steel mills: “We see good demand, but domestics are doing a great job of taking share away from import.”

The general manager of a service center told SMU, “Some mills are showing a confident face and saying they’re close to closing the year out, others have room. There’s been a notable shift in sentiment and I’m hearing an increased level of concern among peers. While we may see higher scrap prices and normally solid Q1 demand, there’s a growing risk on the supply side. Increased domestic production, coupled with global steel prices falling, makes for a troubling mix. Slab prices have dropped quicker than sheet prices, which is beginning to emerge as a problem here, as re-rollers look to move higher cost inventory, jump-starting the cycle of getting ‘ahead’ of the lower price trend. Unless we see a sustained lower level of imports in the next 3+ months, I fear we’re facing the risk of a deeper drop than most anticipate at this time.”

Hard Market to Figure Out

In the Texas market, we found this: “Hot roll offers for import are $37.75/cwt from Korea fob Houston. CR is $41.65/cwt from Russia. Not seeing much from others right now. Market still very unstable; have competitors trying to still move tons at very low numbers. This one is hard to figure out.”

One service center executive told us that there may be a “silver lining” to the growing bearish sentiment amongst steel buyers. Few orders ultimately will result in less inbound foreign and a larger need for companies to buy domestic steel in the months ahead.

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