SMU Data and Models
Service Center Spot - Pandemic Overrides Capitulation
Written by John Packard
April 19, 2020
If not for the pandemic, SMU would be calling the service centers as being at a point of capitulation. Our expectation would be for the steel mills to announce price increases in the near future. If not for the pandemic.
We have seen both manufacturing companies and service centers reporting spot prices out of the service centers as being lower than two weeks ago. When we find 75 percent or a greater percentage of the steel distributors reporting their company as offering lower spot prices, we normally peg that point as being when service centers are willing/anxious to have the domestic mills announce price increases.
However, we are not in a normal world. With COVID-19 the rules have changed.
Granted, service centers would very much like to see spot steel prices move higher, but the pandemic and the associated demand destruction is creating a market where distributors are over-inventoried and not capable of putting more steel on their floors.
We will have to wait out this market to see what happens next.
Eighty-eight percent of the manufacturing companies responding to last week’s questionnaire reported service centers as lowering spot pricing. We have not seen spot numbers at this level since late second quarter 2019.
Service centers also reported their companies as lowering spot prices to their end customers. Last week 79 percent of the distributors reported lowering prices.
John Packard
Read more from John PackardLatest in SMU Data and Models
SMU’s April at a glance
SMU’s Monthly Review provides a summary of our key steel market metrics for the previous month, with the latest data updated through April 30.
SMU Survey: Steel Buyers’ Sentiment Indices recover
SMU’s Buyers’ Sentiment Indices both improved this week, reversing the decline seen two weeks ago.
SMU Survey: Sheet and plate lead times flatten out
Sheet and plate lead times held steady this week, according to buyers responding to the latest SMU market survey. This week we saw little change from mid-April levels, with just one product (Galvalume) showing any significant movement.
SMU Survey: More mills willing to deal on sheet prices, less so on plate
Nearly two thirds of the steel buyers who responded to this week’s SMU survey say domestic mills are negotiable on spot prices. This increasing flexibility marks a significant shift from the firmer stance mills held in recent months.
SMU Survey: Sheet lead times ease further, plate hits one-year high
Steel buyers responding to this week’s SMU market survey report a continued softening in sheet lead times. Meanwhile, plate lead times have moderately extended and are at a one-year high.