Steel Products Prices North America

SMU Q&A: Mills Have Price Momentum, But How Much?

Written by Tim Triplett

Service center executives polled by Steel Market Update on Monday and Tuesday reported spot prices firming up, though perhaps not enough for the mills to collect both $40 increases they have announced in the past month. Below are some of their comments on the current price momentum for flat rolled and plate steel, as well as their views on pricing if the tariffs on Canada and Mexico are removed.

SMU: On flat rolled, how much of the $80 per ton of announced increases has your company paid to date? Do you consider the mill reps to be “firm” or “negotiable” at this time?

A: “On flat rolled, our company has paid about $50 of the $80 per ton. Price is negotiable for large tonnage only.”

A: “We’ve paid about $30 per ton. We think another $20-30 will be achievable by the end of next week. Whether prices are negotiable depends on the mill and product. Galvanized seems to be firming quickly. Hot rolled is getting more firm. Many contract buyers see March as potentially the low-cost month for the foreseeable future, so many are booking max volumes for March. This will leave less spot, which in turn should lead to higher prices.”

A: “On flat rolled, we anticipate paying about $20 of the $80 per ton. On sheet, mills say they are holding the line, but if things don’t strengthen, they will react. Plate remains a firmer product.”

SMU: Do you expect base spot prices on flat rolled to reach $730 on HRC and $860 on CR and coated anytime soon?

 A: “Yes, but not much more than that. I think the domestic mills have the momentum for one more nudge higher, then a plateau before losing steam.”

A: “There is a 50-50 chance of flat rolled spot prices reaching $730 on HRC and $860 on CR and coated. The mills have some level of momentum, but it feels measured at the moment, more than likely driven by higher seasonality. There does exist the possibility that we will see stronger momentum ahead, if lead times move out more uniformly.”

A: “Spot prices on flat rolled could reach $730 on HRC and $860 on CR and coated for a short time (March-April), but I can’t see continued strength to support those numbers. The mills have the best buying atmosphere they have had for five months. The market needs to digest the increases before any more are attempted. I think the market actually wants some stability, at least short term.”

SMU: Do you think the domestic mills have momentum (flat rolled or plate) and will prices continue to move higher over the next month?

A: “The domestic mills are definitely more confident than service centers and end users. Recent mill strategy is similar to the past – the first announcement stops the bleeding and the second turns momentum. The question will be how much can the mills successfully collect and for how long will the upward trajectory last? We see a much shorter cycle and are warning customers about going long.”

A: “All mills have increased their asking prices since last week, but we have not placed one pound at the new numbers. My gut tells me the mills will struggle to achieve widespread collections at these higher ($730/$860) levels. We will see.”

SMU: What impact would taking the tariffs off of Canada and Mexico have on spot steel prices?

A: I believe most of that [removal of the Canada/Mexico tariffs] is already baked into today’s pricing. There may be a short term backslide, but little effect at this point.”

A: “Removing the Canada/Mexico tariffs would press prices a bit lower.”

A: “Taking the tariffs off of Canada and Mexico would create much more competition across the three countries and therefore would put a lid on prices, if not outright cause a drop as mills compete for volumes.”

SMU: What is the sentiment in the plate market?

A: “Uncertainty seems to be the key word in the plate market these days. Demand remains decent for plate—we are off 2018 levels—but otherwise happy if you take 2018 out of the equation. Prices at the distribution level are steady for now. However, there are some acting irresponsibly, in my book. Trade cases (tariffs) pending are impacting some from making commitments. Foreign offers (albeit not huge tons) are on the table and some are biting for Q3 arrival. Uncertainty from several directions has everyone nervous.” 

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