What a difference a single month can make. Most respondents to SMU’s questionnaire this week see the mills collecting their last price increase and expect them to hike prices again sometime this month. As one executive commented: “There’s been a complete flip in the market from just 30 days ago. We went from discussions about overcapacity, three-week lead times and $420-440 HRC to the potential for allocation, six-week lead times and $540-560 HRC. That says it all.”
Indeed, flat rolled steel prices have risen by nearly $100 per ton in the past month, supported by improving demand and rising scrap prices. SMU estimates the current benchmark price for hot rolled steel at $540 per ton, up from a low of $440 in the week of Aug. 11. Steel prices have a lot of upward momentum right now.
SMU asked: Do you expect the mills to announce another round of price increases in September? Here’s what some readers had to say:
“Yes. Given both the ongoing extension of lead times and the amount of increases in scrap prices for September, there’s clearly momentum in favor of the mills at this time. It appears many mill locations have been able to close October order books already and the remaining open space should be filled soon. The question then becomes, how fast will the November order books fill? Buyers are likely taking a breather following the torrid change of circumstances in the market over the last four weeks. The October index set price for November is quite a ways off, so buyers may be cautious in placing November contract tonnage levels until that is known.”
“We see strength until the November order book fills. How quick November fills will be an indicator of continued strength.”
“In light of further-restricted slabs from Brazil, little imports and several planned mill outages, we expect another round of increases soon.”
“I fully expect another increase for galvanized of at least $60 per ton. Galv is booked solid, and with BRS offline for 14 days and lead times over nine weeks, the mills will get the increase.”
“Buyers that didn’t buy at the bottom are stuck with large +$100/ton increases in the spot market. I have a number of competitors calling and asking to buy steel from my company. We are sitting tight in a great inventory position.”
“The market has no option but to accept the price increases as mill order books are heavy due to increased demand—primarily automotive and tin.”
“If November order books fill quickly, we will see another $40 increase. The mills won’t rest until they see $600 a ton HR.”
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
Tim TriplettRead more from Tim Triplett
Latest in Final Thoughts
I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.
We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?
Everyone knows the old saying that “a picture is worth a thousand words.” Just because it’s a cliché doesn’t mean that it’s wrong. A lot of inked has been spilled trying to figure out why prices are falling now. I thought it might be as simple as this: Market dynamics in the fourth quarter (UAW strike, companies buying ahead of an anticipated post-strike price spike, etc.) pulled forward restocking activity that typically happens in the first quarter.
What a difference a month makes. There are a few full bulls left in the room, but their numbers are dwindling. We’ll release results of our full steel market survey tomorrow afternoon. I took a sneak peak at the data on Thursday. And more people than I expected think that US hot-rolled (HR) coil prices will be in the $700s per short ton (st) two months from now. Vanishingly few think prices will be above $1,000/st in mid-April.
Sheet prices have fallen again this week on shorter lead times, higher imports, and potentially higher inventories. (We’ll see for sure when we release our service center shipment and inventory data next week.) I remember reporting almost exactly the same thing about a month ago and getting a fair amount of pushback. Not so much these days.