SMU Data and Models

Service Center Spot Pricing: Some Staying Power
Written by John Packard
August 15, 2019
The upturn in steel prices appears to have some staying power as both service centers and their manufacturer customers reported rising prices in the first half of July, according to findings from Steel Market Update’s latest market trends questionnaire.
As seen in the chart below, the majority of service centers (54 percent) said they are raising prices to their customers, up from just 18 percent last month. Nearly all the rest are holding the line on prices. Only 2 percent admit they continue to discount to secure sales.
Steelmakers have announced three $40-per-ton increases on flat rolled products since late June, and two $40 hikes in plate prices this month, managing to reverse the downward slide in steel prices. The benchmark price for hot rolled began 2019 around $730 per ton and slid by more than 25 percent in the first half to a low around $520. Since then, following the mill price increases, hot rolled has rebounded to $585 per ton.
The mill price hikes are clearly receiving some support from the service centers. As the chart shows, service centers passed what SMU calls the “point of capitulation” in June when 82 percent reported lowering prices. While it may seem counterintuitive, when the number of service centers lowering prices reaches 75 percent, that historically has signaled a tipping point at which distributors begin to raise prices to protect the value of their inventories.
Corroborating the trend, just 7 percent of the manufacturers responding to SMU’s questionnaire said they are still seeing lower prices from their service center suppliers. That’s down from 70 percent at the beginning of the third quarter. Thirty-six percent said they are now seeing higher prices from service centers. The biggest group, 57 percent of the manufacturers, characterize service center prices as stable, neither increasing nor decreasing.
With a small majority of service centers raising prices, but the majority of their customers saying prices are stable rather than rising, that brings into question how much momentum the uptrend can sustain, absent further price increase announcements.

John Packard
Read more from John PackardLatest in SMU Data and Models

SMU Scrap Survey: Current and Future Sentiment tick down
SMU’s Current Sentiment Index for scrap decreased this month, a move mirrored by our Future Sentiment Index, according to the latest data from our ferrous scrap survey.

SMU Survey: Buyers’ Sentiment slips again, future outlook improves
Each of our Sentiment Indices continues to reflect that steel buyers are positive about their present and future business prospects, though that confidence has eased considerably compared to the beginning of the year.

SMU scrap market survey results now available
SMU’s October ferrous scrap market survey results are now available on our website to all premium members.

SMU flat-rolled market survey results now available
SMU’s latest steel buyers market survey results are now available on our website to all premium members.

SMU Survey: Sheet and plate lead times stabilize
Sheet and plate lead times saw minor shifts this week, according to SMU’s latest market survey. Sheet times have inched up over the last month but remain within days of multi-year lows, as they have since May. Plate lead times have bobbed within a tight range for months, hovering roughly a week longer than this time last year.