Final Thoughts
Final Thoughts
Written by John Packard
April 15, 2019
I am making the following comments in my Final Thoughts section for a reason. My Final Thoughts is the area where I will sometimes provide my opinion or make comments regarding conversations that I am having about the market that I haven’t been able to totally put my finger on yet. I know that may sound a little confused, and that is what I am hearing from a number of buyers in the flat rolled market (confusion). Let me try to make the muddy waters a little less murky, but I doubt if the waters will be clear anytime soon.
I spoke with a couple of service centers this afternoon who were reporting their company was losing an excessive number of orders. This led both executives to surmise that the $40.00/cwt base number they have on coated was no longer a competitive number. The president of one of the distributors told SMU they had run the numbers and the base price had to be around $37.50/cwt. I can’t tell you if that is an accurate number or not at this point. However, I did pick up a couple of “outliers” on galvanized and Galvalume in this week’s questionnaire that concern me…
Later in the afternoon I spoke to another service center who has not seen base price numbers below $40.00/cwt on coated. However, he reported there were “foreign fighter” prices out there where extras are waived or reduced in order to compete against foreign steel, especially on light gauge.
There were a couple of mills referenced as being the most competitively priced on coated products (not integrated mills). However, there were questions being asked wondering if one or more of the integrated mills may have jumped into the market since lead times are getting into the area where automotive tends to slow down for summer shutdowns. I can’t confirm that is the case (if you have information please let me know). I will continue to work on getting answers to that question.
Hot rolled is a little easier to calculate since there are not as many extras to play with. Steel buyers were telling me that JSW continues to be aggressive as they attempt to move their tonnage above 30,000 tons per month of melt. We picked up a few price points in our survey that had HRC as low as $600 per ton, and one buyer suggested for tonnage the number may actually be $580 per ton. My price range does not reference those numbers as the low point due to the limited widths and the number of tons. Even so, the market should be aware that sink-in-water HRC can be had at numbers below our low point. How soon before the other mills respond? One large HRC buyer told me the other mills will have no choice but to respond.
There seems to be a negative sentiment growing within the service center community. I am going to spend more time this week talking to distributors to get a better sense as to what is driving sentiment and if the negative feelings are just in one region of the country.
I just returned from Orlando, Fla., where I spoke to the Air Distribution Institute. Their businesses appear to be doing very well right now, but like the service centers their questions centered on what is going to cause the steel prices to move lower. On the surface, based on the actual lead times being quoted by the mills this week, you would think coated steel prices would be quite strong…
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John Packard, President & CEO
John Packard
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