Our futures contributor, Tim Stevenson of Metal Edge Partners, raises a good question in his column this week. With the mills moving steel prices higher, have buyers restocked enough to stay out of the market? “If so, service centers and end users can step away from spot buys and wait for prices to fall again. If, on the other hand, inventory levels are still too low, people may have no choice but to keep buying higher priced steel, providing more longevity to this upward price cycle.”
Steel Market Update’s latest market survey shows that 70 percent of service centers are comfortable with their inventory levels or are looking to reduce inventories. Only 30 percent say they are in a buying mode (see chart). We’ll be looking closely to see if those percentages change in next week’s survey. If not—if the escalating prices aren’t bringing more buyers in off the sidelines—that will say something about how long and how high prices may rise.
Welcome to David Schollaert, newly hired Deputy Editor at Steel Market Update. David brings a wide range of expertise to SMU’s reporting and analysis. He is the former Editor of Ryan’s Notes, a newsletter covering the global ferroalloys market, and he transitioned to Senior Editor of the CRU Prices Service following CRU’s acquisition of Ryan’s Notes in 2012. During his career, he has been a metals buyer as well as a journalist writing for metals buyers, so he understands both sides of how steel is bought and sold. He will contribute a new perspective and a new voice to SMU’s content, and we’re excited to add David to our team.
Don’t forget, those registered for the SMU Virtual Steel Summit have until the end of next week to use the conference platform and view the recorded presentations and exhibitors’ offerings one more time. But the platform will only remain live through Sept. 18.
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
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Latest in Final Thoughts
A clear consensus has emerged among respondents to SMU’s latest steel market survey that hot-rolled (HR) coil prices will bottom this month or in April. Seventy-five percent of respondents to our latest survey think that prices will find a floor before May as the chart below shows:
I want to give a big shoutout to the good folks at the Fabricators and Manufacturers Association (FMA) for inviting me to their annual conference this week in Clearwater, Fla. I also want to give a special thanks to the FMA for awarding SMU founder John Packard with a lifetime achievement award – on that also gave me a chance to catch up with my old boss in person.
What are some “Black Swans” to watch out for? With the war in Ukraine entering its third year, your mind might understandably move to conflicts overseas. Here is one closer to home to consider: US trade relations with Mexico taking a turn for the worse. I mention that because the Office of the United States Trade Representative (USTR) dropped a (virtual) bombshell earlier this month.
Domestic prices have been sliding since the beginning of the year, and I don’t see any obvious reasons why the slide might stop this week. But let’s put the timing of a bottom aside for a minute. The question among some of you seems to be whether we’ll see another price spike, or at least a “dead-cat bounce,” before the typical summer doldrums kick in.
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.