Steel Products Prices North America

Distributors Predict Strong Q1 for Secondary Sales

Written by Tim Triplett

Sellers of secondary/nonprime steel are looking forward to a strong start to 2020, thanks to favorable market conditions and rising prices for prime steel products.

As with many other products, there is a market for “seconds” in steel. Some distributors specialize, and others dabble, in finding new homes for coils that buyers have rejected for one reason or another. Some may have minor surface flaws, others may have failed to meet the original spec because of an inaccurate dimension or chemistry. Either may be well suited for a variety of alternative uses—and available for quick delivery at a discount.

U.S. steelmakers raised flat rolled steel prices four times in the fourth quarter, collecting roughly $100 per ton more by year’s end. Benchmark hot rolled steel prices were at $570 per ton before the holiday break, and rising. Prices for secondary steel tend to trend up and down with prime prices.

“As the prime market has moved up, secondary has moved up with it, though not as fast,” said Lisa Goldenberg, president of Delaware Steel of Pennsylvania, Fort Washington, Pa., whose company specializes in secondary. Volume in November-December was also better than in the prior few months. “My margins certainly have improved. I have inventory now that I can sell for higher numbers.”

Delaware Steel saw a “preholiday pause” in late December, however. “I am much more optimistic than I was in October about the first two quarters of the new year,” she said, “but the slow start to this week does concern me. You don’t want things to slow down too much before the holidays.”

Goldenberg is hopeful the holiday hesitation will translate into a nice bump in the first quarter as manufacturers move to replenish their inventories for the coming new year. “If it sustains through the first quarter, the second quarter will be strong as well. After that, it will likely fall back like it usually does in June and July.”

The sustainability of the upturn lies in the market’s ability to digest the higher prices slowly over time, Goldenberg said. Too fast and, like a child who’s eaten too much sugar, a crash is inevitable. “I would have thought the mills would wait until after the first of the year to raise prices again. But in order to open their March order book, they had to set a price,” she noted.

Greg Gross, COO and director of purchasing and sales at Blackhawk Steel Corp. in Chicago, also reports some hesitation among steel buyers during the Thanksgiving-Christmas holiday period. Like Goldenberg, he expects buyers to jump back into the market in the first quarter. “I don’t know what could stop spot prices for nonprime from going up in the first 60 days of the new year, because the cupboards are too bare,” he said. “We will have a mini race for the available nonprime items and it is going to force prices up measurably. By the time we get to March, though, it could be much ado about nothing.”

Both Goldenberg and Gross characterized 2019 as a “so-so year” for secondary. Prices declined by about $30 per ton from where they were in the spring and have recovered perhaps $50 since then. “So, all we have really done is run in place,” said Gross. “At the end of the day, the majority of our nonprime transactions are traveling in a very similar band.”

Availability of the most sought-after secondary, such as light-gauge galvanized that has many alternative applications, is fairly tight. It’s supply rather than demand that’s driving the nonprime market right now, Gross said. “When everyone is chasing after those same desirable items, it sends a false message about demand.” Thus, the bump may be temporary. “These things usually last a couple of months.”

Nonprime prices would normally track to a greater degree along with increases in prime, but this has been an outlier year in terms of attitude, Gross observed. “The economy is great, but people are scared of it, and those two factors work against each other. There’s no stopping it, despite the mayhem of our political free-for-all,” he said.

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