SMU Data and Models

SMU Sources Discuss: Lead Times, Inventories, Foreign Steel and More

Written by John Packard

When we go out for flat rolled and plate steel spot pricing, we do so in a number of ways in order to maximize the number of responses. This week SMU sent out an email inquiry requesting information on pricing, but also on lead times, inventories and foreign steel offers, and we solicited general open topic comments. Instead of SMU interpreting what was sent to us, we thought it better to share the original comments.

coilsLead Times & Inventories

“As for lead times, we are seeing typical deliveries and quote times (6 – 8 weeks depending on mill for cold rolled and coated). I don’t get a sense of desperation or arrogance from any of our mill suppliers. I do believe they are in a wait-and-hold period to watch for signs in the market as to what direction they will go concerning pricing. I am not expecting any large moves in either direction. Stay tuned!” Service Center

“Inventory – We are buying to replace shipments only. Our inventory level is equal to two months of shipments and we are now focused on moving aged material, taking the hit now and replacing with lower priced material. We are not speculating on inventory, we are taking a ‘dollar cost averaging’ approach of maintaining a six-turn inventory and then buy every month to replenish shipments.” Service Center

“It appears that the mill lead time is moving out a tad this week. We had January ship tons available last week. Most of the mills we spoke to are reporting middle of February ship date [hot rolled]. The integrated mills are reporting about one to two weeks later for spot tons. We are only purchasing steel for projects we have been awarded. Based on our backlog, we should be in the market to purchase more steel in the upcoming weeks.” End-user 

“Would say lead times are very short.” End-user

“Demand on PLATE is very strong (very) and inventory in certain grades and sizes is getting wiped out daily. It’s all over the board on what is getting used out in the field as what is hot and what is not changes daily. Overall, PLATE in general is hot!” Plate Service Center

“We still feel we have too much inventory considering daily sales are dropping.” Service Center

“HRC lead times still 2-3 weeks. Yes, we’re starting to increase our purchases.” Service Center  

“Lead times remain short allowing us to run inventories lean. Demand is steady, but concern of further price erosion has us in a balanced inventory position, not significantly above or below average levels.” Wholesaler

“Our inventories are pretty balanced, not looking to change much in 1Q19. Will probably look to lean out a little as we go through April and May, maybe take almost a month out of our position.” Plate Service Center

“Lead times are very short, HR early February,  CR February or early March. I have worked my inventory levels down to be able to take advantage of a low market and build it up again.” End-user

“I was told yesterday there’s still some HR available in the South. Mills are saying GALV and CR books are starting to push out, but not HR. We continue to run lean on inventory and spot buy as needed. Significantly less contract tons this year due to uncertainty.” End-user

ship coilsForeign Steel

“What are you seeing for foreign offers on the above products? Are those offers at price levels that are attractive enough to prompt orders? Some, Yes. We look at when and where the offer comes from and if it makes quality (first) sense and lead-time sense and price sense, we are buyers. Otherwise, it’s domestic.” Plate Service Center

“We are not seeing foreign offers yet that are attractive enough to provide the insurance to take the plunge. We have been significant buyers in the foreign market, but compression of spread to domestic pricing along with unusually long lead times has proven too risky. We currently have limited cold roll tons due in March / April that I wouldn’t be disappointed if the boat sank (as long as the people were ok)! We are being told by the importer that they are still booking some tons, but I would guess it is hot roll. If it is cold roll or galvanized, I hope it is my competitors’! The big elephant in the room on foreign is when and how do the tariffs come off and how does the industry adapt?” Service Center

“CR/Galv in the $38-$41 base range mostly Asian countries, May/June arrivals. Not attractive. Haven’t seen much in the way of HR offers.” Service Center

“We see limited foreign offers. What we have seen was not at a significant enough spread (to domestic numbers) to purchase.” Wholesaler

“Plate is $50.00-$51.50 delivered, lead times are into March at all [domestic] mills. Import offers are almost $45.00/cwt ‘upriver’ with the $1.50 in freight from Gulf port to Midwest barge dock.” Plate Service Center

“In February, Midwest domestic price will be at or below arriving import. I believe this will help the domestics book February quickly and try for a price increase.” End-user

“Not seeing anything that interests me [foreign steel offers], with our discounted contracted tons with the U.S. mills.” End-user

“Foreign offers are not attractive especially with 3-4 month lead times. Not placing foreign offers at this time. Russian $39/cwt CR FOB Port and Vietnamese real close. Too much risk to place orders at those prices currently especially with lead time.” End-user

Alfred NewmanOther Comments

“Margins – After 47 years in the service center industry and owning my own service center for the past 24 years, I still don’t understand why this industry settles for such low returns no matter how you measure it. None of us would make it past the first 60 seconds on Shark Tank before Mr. Wonderful would say ‘you’re dead to me!’ For all the risk, invested capital, inventories, employees, regulation, etc., why we can’t generate a better return versus chasing volume only is still a mystery to me. I know the broker segment of the business plays a role in keeping returns low and the mills’ decision years ago to sell whomever had credit versus ‘bricks and mortar’ plays a part, but those of us with much more skin in the game should be able to expect and require more return from our organizations.” Service Center

“FREIGHT – it continues to be a BIG factor from the mill and distribution side of the world.” Service Center

“Given the current spreads (or lack thereof) between foreign and domestic sheet prices, one would assume that forward import arrivals will be declining on a sustained basis. Because slabs have been the big swing import tons in the last year, we’ll need to see a sustained reduction in slab imports in order to see a meaningful impact on supply levels. Without having the government data, we remain in the dark, and this could be contributing to a ‘freeze’ in the negative market sentiment at this time.” Service Center

“Service centers are not behaving like believers – resale market on base gauge A36 is $50.50 – $52.00/cwt, so there is no money to be made selling base gauge. [Name removed] is consistently lowest price and least knowledgeable spot plate seller in Ohio / Pa.  They do a pretty good job with their contracts, but their spot efforts are just ridiculous. In the Chicago market, [name removed] and their inventory spinning model are typically lowest price, and [name removed] has been a little more aggressive on price lately. Given inventory levels, the SCs will need to decide pretty soon whether they are going to try to raise prices to create margin, or whether they think they can take the margin out of mill pricing and get it on the buy side. I think the big SCs are two months too early if they try to extract margin from the mills. Lead times are too long and project tons too strong for any mill to have to capitulate on plate pricing.” Plate Service Center

“I hope we hold the course with China until they get some agreements in place. Short term it hurts, but should be good for manufacturing in the long term….imo!” End-user

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