Steel Products
Service Center Spot Prices Still Don't Reflect Confidence in Price Increases
Written by John Packard
February 10, 2019
Flat rolled steel distributors have been slowly backing away from offering spot prices to their end customers at lower numbers than what was seen a couple of weeks ago. At the same time, these same service centers are reporting difficulties getting those same end user customers to pay higher prices, despite the price increase announcements led by the West Coast mills and then Nucor in the East over the past few weeks. This is part of what we learned from the flat rolled and plate steel market trends analysis done last week (week ending Feb. 8, 2019).
Fewer manufacturing companies reported their service center suppliers as lowering spot prices. During the middle of January, 86 percent of the manufacturing companies responding to our invitation reported distributor spot prices as being lower than what they were seeing at the beginning of January. Now, two weeks later, only 59 percent reported spot prices as still in decline.
We need to be careful here not to infer that the flat rolled price increases announced by the mills located east of the Rocky Mountains are thus “sticking.” As you look at the data contained in the below graphic, note the last time manufacturing companies saw a sharp reversal of spot pricing fortunes was in early fourth-quarter 2018. Or, to put it a little more bluntly, the last time Nucor announced a price increase there was a blip in quoting for a couple of weeks before going right back to distributors dumping spot prices (and inventories) into their customers.
Service centers, who had not yet reached capitulation using the SMU formula which requires 75 percent or more of steel service centers responding to our survey reporting their company as dropping their spot pricing to their customers, are providing some stability to the market. Our most recent analysis has 28 percent of the steel distributors lowering spot prices this past week, down from 59 percent during the middle of January.
What is missing for that support is those service centers who believe higher prices will be supported by the market, and thus are raising spot prices. Only 5 percent of the steel distributors reported reaching out and raising prices to their customers. There will need to be a huge move in this percentage if the price increase is going to actively “stick” and be collected across the market.
In the graphic shown above, this question was asked of the service centers only and the red ovals above the bars represents AK Steel price increase announcements. As of today, Feb. 10, 2019, AK Steel has not followed the other domestic steel mills with an official price increase announcement of their own (based on the lack of an announcement on the AK Steel website: www.aksteel.com).
John Packard
Read more from John PackardLatest in Steel Products
Market says cutting interest rates will spur stalled domestic plate demand
Market sources say demand for domestic plate refuses to budge despite stagnating prices.
U.S. Steel to halt slab conversion at Granite City Works
U.S. Steel said it plans to reduce slab consumption at its Granite City Works near St. Louis, a company spokesperson said on Monday. The Pittsburgh-based steelmaker will shift the production and processing of steel slabs to its Mon Valley Works near Pittsburgh and its Gary Works near Chicago. Citing a United Steelworkers (USW) union memo, […]
SMU Week in Review: September 1-5
Here are highlights of what’s happened this past week and a few upcoming things to keep an eye on.
HR Futures: Market finds footing on supply-side mechanics
As Labor Day marks the transition into fall, the steel market enters September with a similar sense of change. Supply-side fundamentals are beginning to show signs of restraint: imports are limited, outages loom, and production is capped, setting the stage for a market that feels steady on the surface but still unsettled underneath.
Beige Book: US markets remain cautious amidst volatile pricing environment
Sluggish economic activity across the US was largely attributed to uncertainty caused by tariff policies and growing cost pressures, according to the US Federal Reserve’s (The Fed) latest Beige Book report. The Fed’s latest economic report, posted on Sept. 3, consists of economic findings from the six weeks preceding Aug. 25 throughout 12 districts. Economic […]