Service Center Spot Price Index Anticipates Acceptance of Mill Increases

Capitulation is the point when there are so many service centers lowering prices over an extended period of time, which in the process lowers the value of their inventories and squeezes their margins, that something has to give. As the pain of ever-lower spot prices grows, the distributors get to a point where they are anxious for the cycle to turn. The only way that happens is when steel mills announce price increases, and then the domestic steel distributors in turn support those increases by raising prices to their customers.

SMU conducted one of our flat rolled and plate steel market trends surveys this week. The survey was closed earlier today. We found 75 percent of the manufacturing companies who responded to our questionnaire reporting their service center suppliers as offering lower spot prices than what they were seeing two weeks earlier. As you can see by the graphic, below this is the third survey at or above 73 percent.

We saw 76 percent of the distributors reporting lowering spot prices to their end customers in this week’s analysis. At the beginning of October, we saw the highest percentage (89 percent) of service centers reporting lowering spot prices for the past couple of years. The red circles above the bar graph indicate Nucor price increase announcements. As of this writing, Nucor had not yet notified their customers of their intention to raise prices in line with ArcelorMittal USA and NLMK USA.