Steel Products Prices North America

Flat Rolled Mills Seek $40 Increase; Second Time’s the Charm?

Written by Tim Triplett

Major domestic steelmakers have announced a $40 per ton ($2/cwt) hike in the price of hot rolled, cold rolled and galvanized steel products, fueling the debate over whether current market conditions can support an increase or if the latest announcement is bound to flop like the last one in October.

West Coast mills California Steel Industries and USS-POSCO Industries were the first to announce last week. They were followed by Nucor’s Sheet Mill Group and U.S. Steel on Monday. NLMK USA made its announcement today of a $40 per ton increase on spot orders of all its products, effective immediately. SMU has been advised by various sources that ArcelorMittal has verbally informed customers of its intention to raise prices by a comparable $40, although SMU had not seen written confirmation as of our deadline this evening. The notice from U.S. Steel was a bit out of the ordinary as the mill does not typically announce its price changes.

When the mills announced a similar $40 increase last October, the average price for hot rolled steel was around $835 per ton, according to Steel Market Update data. Instead of increasing, the market price for steel continued to slide to its current average around $670 per ton, a 20 percent decline in the past three months. Steel prices have dipped by over 25 percent since peaking at more than $900 per ton last summer. But this time around the outcome could be different, depending on how demand and raw material costs play out in the first quarter.

Atlas Tube lent some support to higher steel prices with its announcement today, Jan. 29, of a $40 per ton increase in its pipe and tube products. Atlas said it is raising prices on all new orders of HSS, Mechanical and Piling products due to the announced increases in the price of hot rolled coil, from which it produces its tubular goods. The $40 per ton increase at Atlas applies to all Mechanical and HSS Shapes up through 16-inch SQ (Square and Equivalent Rectangles), and to all Mechanical and HSS Rounds up through 20-inch OD, effective immediately on all new orders.

Steel Market Update canvassed the market over the past two days, soliciting buyers’ opinions on the “body language” being relayed by the mill salespeople and the likelihood that the mills will succeed in collecting higher prices. Their comments fall into two distinct camps: the hopeful who give the announcement a chance of at least stopping the downtrend in steel prices and the skeptics who feel current market conditions will simply not support higher prices. See some of their insightful comments below:

View from the Hopefuls:

  • “CSI and UPI started the Me-Too Movement east of the Mississippi. It should get some of the buyers off the fence by defining that the bottom has been hit for now. Buyers will scramble to lock down any good pending deals since the pressure is now on to move the bar higher. We will have to watch how the rest of the market plays follow the leader!”
  • “I believe the other mills will follow, and hopefully someone puts an actual number to it so we know what it really means. I believe the mills cut a few deals last week and we will see lead times move out some this week and next, which should allow the mills some success, in the near term, to garner a bit more for their steel. What this looks like in 60 or 90 days, no one knows. Unless the mills pull off some production or imports drop materially, we will be headed south again in the coming months.”
  • “January is that time of the year. UPI announced an increase on 1/24/18 and then again on 1/20/19. Nucor announced an increase on 1/26/18 and then again on 1/28/19. These increases are no small coincidence; it’s part of their general marketing plan and should have been expected.”
  • “My suspicion is that this will stop the slide.”
  • “Obviously, as a service center, we would love to see the increases hold and stop the downward momentum.” 
  • “I assume we’ll see a price flattening or uptick in the near term (3-4 weeks) arising out of this announcement. And, given that the spread between domestic and foreign prices is already below ‘parity,’ there may be some room for limited upside movement. I’m doubtful, however, that we’ll see any sustained upside movement in price. At this point, mills would likely see price stability, more or less at today’s level, as a victory.”
  • “My general feeling is that they will try hard to stick to their guns on this one. The price has been dropping rapidly over recent weeks and with the first sign of firming orders or lead times, we thought they’d go for it. There is still a lack of volume out there, but it seems to be firming up somewhat. Until the mills are filled for February orders on HR, there will always be a weak link that dives on the price to garner big tons. That never changes. But I think with Nucor’s announcement and with U.S. Steel following suit, the rest of the market will follow to at least stop the bleeding.”
  • “I think it stops the bleeding. Maybe it will spur some to come off the sidelines and buy some steel. Until lead times extend, it is difficult for prices to rise. Imports are no cheaper than domestic, which is a good sign. Also, with scrap and iron ore strengthening, the mills should strengthen their positions. Thankfully, demand remains strong.”
  • “The price will stick, I believe. Worse case, it will stop the slide. Quotes have deadlines and no extensions are being given. Lead times are stable. Their body language is cautiously opportunistic.”
  • “It’s too early to tell if it will stick, but iron ore, coke and scrap seem to be supportive. Also, I expect import arrivals to be slower and create a lower supply. However, distribution still seems set on lowering inventory. Stronger shipments at service centers would be a better catalyst for a change in direction for pricing. We need to see what new asking prices come out following the increase, and if mills are willing to lose business. There is plenty of February rolling time still available.”
  • “Import is more than domestic in the Midwest. There’s not much willingness to go lower on the import side. I believe in March/April there will be a shift to domestic, which will extend lead times and move domestic back up into the low to mid $700s. I am hearing that big buyers are starting to play ‘let’s make a deal.’ What is the ‘body language’ being relayed by the mill salespeople? Slow in Jan/Feb, but very strong in March/April. Line pipe and OCTG will be very strong this spring.”
  • “Order intake at the mills is increasing on flat rolled, but exactly where spot prices will be in April is still up in the air. I do not expect that the $40 will all be passed on in April, but believe we have reached the bottom. On plate, I think there is some softening in the market, nothing major yet, but they are willing to listen.”
  • “The mills feel like we have hit a bottom. They took large orders well below spot to start pushing lead times out. CRU will still drop due to that for a week or two, then start to rebound, I bet. We’ll see.”

View from the Skeptics

  • “What is the ‘body language’ being relayed by the steel salespeople? Insecure.”
  • “I hope it sticks, but I doubt it.”
  • “They want to raise the price, but they don’t want to miss an order. Overall, lead times are still short.”
  • “I laughed when I saw the announcement. This is their second attempt at trying to stop the slide. What they need to do is look in the mirror. We would not be in this spiral if they were not dropping their price all along. Tell me what in the market substantiates a price increase? Answer: Nothing! I am getting hurt from the price slide just like everyone else. The difference is, I did not cause it, they did.”
  • “I do not feel it will stick. They may get $20/ton of the $40/ton. Demand is still good, but nobody is anxious to make a move to book orders just yet.”
  • “I don’t think any of the mills are expecting this to stick. They will be thrilled to just stop further erosion, which is the bigger question. This increase will likely be ignored, but I don’t think anyone in the market expected it to even partially stick.”
  • “The new price will not stick right now. Look at scrap, iron ore, coking coal, etc. They have no reason whatsoever to raise the price. They just want the prices to stabilize? Well, too bad. They should have thought of that last year. Instead of going up 25 percent on coated in the spring, they should have gone up maybe 15 percent. This would have kept more offshore at bay in the second half. The situation now is that most buyers were heavy on inventory going into December due to the panic of possible shortages. Then the desperate mills made of a lot of year-end deals, which had to be pretty good to get folks to bite. So now we come into the new year still heavy on inventory. What will happen is that when the mills start getting April orders, they will appear huge compared to orders they got Oct’18-Mar’19. They will perceive this as increased demand and the market taking off when it is really just folks back to ordering normally. Then the increases will have a chance to stick.”
  • “While I think the market was waiting for an announcement, it’s interesting that the mill comes out with an increase on the heels of really ugly index-price references out last week. Looking over the last two weeks combined, it’s even worse. Some might think prices should rise in a strong market, with the supply-demand balance beginning to lean more toward the demand side. Based on the persistent pricing slide and the abundance of offers out there in recent weeks from various mills, dealers, traders, etc., this really hints at desperation to me. Seasonality might help, but in recent months there is simply too much steel chasing the level of actionable orders. Has that situation really changed in the last several days?
  • “What is the ‘body language’ being relayed by the steel salespeople? Their optimism is much less than it was two or three months ago. Although they try to hold to their mills’ ‘party line,’ they acknowledge the shorter- than-normal lead times and, privately, see demand as being flat to down in 2019. The additional capacity coming on line will only add to the price pressures. Scrap will be sideways (vs. down) in February due to the weather. The Nucor and USS increases will not firm prices—only an increase in demand will.”
  • “The market is still unstable with the shark tooth effect. Hopefully the increase will not stick. No one likes increases. We have to pass it along on our quoting like everyone else.”
  • “Half the people you talk to are positive and the other half are negative on current conditions. Personally, I really don’t know what to think anymore or who to believe. Only the negative ever gets reported and negative breeds negative results.”

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