Steel Products Prices North America

Resale, Import Prices Rise on Higher U.S. Tags, Port Congestion

Written by Michael Cowden

FOB mills prices aren’t the only thing on the rise – so too are service center resale prices, import tags and ocean freight rates.

Service centers are selling amongst each other for nearly $1,400 per ton ($70/cwt), and certain master distributors are charging that much if not more for hot band, market participants said.

coinsThat’s an approximately $100-per-ton premium to Steel Market Update’s average U.S. hot-rolled coil price of $1,300 per ton, a price that in itself is an all-time high.

And buyers have little choice but to pay such prices if they need steel. Mills have few or no spot tons available, and some are also holding consumers to the minimum volumes specified in their contracts, sources said.

So far, the steep cost inflation – U.S. hot-rolled coil prices are nearly 32% higher than $985 per ton at the start of the year – has not proven to be too high a hurdle to clear, they said.

“Demand is still there. We’re still raising prices, and no one is batting an eye,” one manufacturer source said. “At the end of the day, I just need steel – and that’s the biggest struggle.” 

No Relief From Imports

The import market was seen as a potential relief valve for buyers under pressure from high U.S. prices and long domestic mill lead times. That is no longer the case, sources said.

Canadian and Mexican mills are offering hot-rolled coil at prices similar to those in the U.S. once adjusted for currency. And lead times for that material are the same or longer than domestic lead times, they said.

European mills, meanwhile, have few tons to spare for U.S. buyers because customers on the continent are grappling with similar issues – firm demand, mill outages and snarled logistics.

Other overseas offers, meanwhile, have moved up dramatically in recent weeks. A month ago, hot-rolled coil from various sources – including Turkey, Egypt and East Asia – was available from slightly below $1,000 per ton to roughly $1,100 per ton, sources said.

Some of the same mills are now offering hot band at around $1,200 per ton, meaning that import prices have moved up approximately $150 per ton over roughly the last 30 days, they said.

Certain foreign mills have pulled offers – in some cases after agreeing to prices with U.S. buyers – because freight rates have soared on port congestion and shortages not only of vessels but also of containers and handling equipment, sources said.

Such issues are not confined to the U.S. West Coast, where port problems are expected to stretch well into the summer. They are also impacting ports in Europe, North Africa and Asia, they said.

“There are a lot of cargo issues on the water right now,” a Midwest service center source said. “I think the (domestic) mills will take advantage of this for as long as they can. And with no competition, what’s to say they can’t take it up another $100 per ton?”

The Midwest source, like others, said he never expected hot-rolled coil prices would hit $1,300 per ton. He said he is now questioning whether $1,400 per ton might be in the cards. 

Running Out of Steel?

With domestic mills running weeks or even months late on orders, kinks in the import supply chain could lead to steel shortages, some market participants said.

“On some products, the demand is booming, and by April if my imports do not come, I will be in big trouble on some items,” a second manufacturer source said.

That’s because the difference between lower-priced imports ordered a month ago and prices available from service centers – the most readily available option for buyers without established ties to domestic mills – can be as much as $400-600 per ton, he said.

But that’s not the worst case scenario – at least steel can still be had if one is willing to pay significantly higher prices to a service center or distributor.

The problem could be shortages should another round of stimulus collide with talk about infrastructure spending, especially given the potential for the latter to “create an artificial demand for the future,” the second manufacturer said.

On the import side, lead times are already well into the second half of the year for some flat-rolled products.

Just a few examples: Galvanized coil produced in Turkey and delivered to the Chicago area via the Great Lakes won’t arrive until August. And foreign sheet and plate sent upriver to the Pittsburgh area from Houston might not arrive until as late as September or October, they said.

New domestic capacity should in theory be able to relieve the supply squeeze. But SDI’s new mill in Sinton, Texas, won’t start melting until the summer and probably won’t approach its rated capacity until the fall, sources said.

Other new U.S. capacity – think expansions at North Star BlueScope in Ohio and Nucor Gallatin in Kentucky – won’t come online until late this year or early next, they said.

“No relief coming from them (domestic mills) until Q4. It’s kind of scary. Demand is so strong and everyone is so far behind that they (mills) might not catch up,” the first manufacturer source said.

By Michael Cowden,

Michael Cowden

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