Final Thoughts

Final Thoughts

Written by Tim Triplett

Whether they believe steel prices are in for a sharp or a gradual correction, most of the service center and manufacturing executives responding to SMU’s latest survey agree the market is at a turning point. Here are a few of their recent observations:


“Yes, I think we are at the inflection point. The market appears to be slowing down, yet I feel this is a short-sighted view. Mill maintenance in the fourth quarter along with strong demand and delayed imports at the docks all point to continued support for prices. I expect a gradual decline initially and a more rapid decline later. I expect the planned maintenance outages to hit a few snags before the mills get back to normal operations. And it will take months for the new capacity to ramp up. I do expect domestic steel prices to fall near the global level by the second half of 2022.” 

“If the industry has learned one thing, it should be that making money is better than chasing volume. But we have little evidence of how mills will react to a softening market. If the market falls $400 a ton by January as forecast by CME futures, we are toast. If mills accept fewer 4Q orders and allow for a more modest adjustment while inventories balance, we will have a good first half of 2022.” 

“The new normal for service center inventories at these price-risk levels is not 2.5-3.0 months. It’s far less. So mills’ expectations are disconnected from reality. The mills are catching up and want a big fourth quarter to close out their year, but inventory is now at the highest level it’s been all year – going into the seasonally softer 4Q. I surmise that 4Q purchases will be substantially less.” 

“The market is changing in that the rapid mill increases have gone away. Likewise, the panic buying at the service center and OEM levels has subsided. But the fundamentals are still intact. Demand is still good enough, imports are still hit-or-miss due to the unreliability of ocean freight, and new domestic steelmaking capacity is still a ways off. So I think we’ll see a plateauing effect and then a gradual correction to still very lofty levels.” 

“I expect a moderate downturn in the January/February time frame, followed by a second moderate downturn in March/April, and then a third in May/June. (There is) potential for a correction of 21-24 cents a pound ($420-$480 per ton) January through June. I think this will happen due to a couple of shortterm factors: Ports will be unable to unload in a timely manner, in particular with holiday freight competition. Thus the full impact of foreign pricing will not be felt until 30-60 days later than expected. Demand is still good, and supplies are still tight in some of the supplier/service center inventories. Bottom line: I expect a correction on prices, just not a one-time drop. It will be gradual over a 45-120 day timeframe.” 

“The market is changing in a couple of ways: Domestic mills are faced with some headwinds. There’s an increased volume of foreign imports. Domestics will soon face pricing pressure due to the lower cost of imports and the typical winter demand slowdown. Section 232 is under a microscope and only has about 12-18 months before its demise. It will be replaced by a carbon tax and quotas – details just not yet worked out.”

Weak Jobs Report

The U.S. Bureau of Labor Statistics issued a disappointing report on Friday, with the U.S. economy adding far fewer jobs than expected in September at just 194,000. Job growth slowed dramatically in August and September. Analysts attribute the weakness to the surge in the Delta variant, which stalled hiring, particularly in the leisure and hospitality sectors. With the latest wave of COVID infections and hospitalizations receding, most expect a better jobs report in October. The weak labor market and the shortage of qualified workers – which is impeding the economic recovery – is one of the biggest complaints we hear from steel suppliers and their customers.

Top Service Centers

As it does every September, Metal Center News ranked the Top 50 Service Centers in North America based on company revenues in the last completed fiscal year. No surprise, Reliance Steel & Aluminum remains No. 1 by a wide margin. Rounding out the Top 10 were Ryerson, ThyssenKrupp Materials NA, Kloeckner Metals, Toyota Tsusho America, Russel Metals, Alro Steel, O’Neal Industries, Steel Technologies and Worthington Industries (Samuel, Son & Co. was a nonrespondent). Total sales by the Top 50 saw a 20.9% decline versus 2019 due to pandemic-related disruptions last year. If projections by the companies responding to MCN’s survey hold true for the entire industry, the trade journal said, service center revenues could jump by more than 50% this year.

China: So Far and Yet So Near

As if our supply chain woes aren’t bad enough, an energy crisis now being reported in China threatens to slow the world economy’s recovery from COVID. Sources tell CRU and SMU there is a serious power shortage in China caused by soaring prices for coal. Combined with efforts to reduce harmful air emissions in many parts of the country, factories are experiencing forced outages and production cuts that could translate into delayed exports of vital components for automotive, appliances and electronics in other parts of the world, including the United States.

Question on Questions 

Steel Market Update surveys the market every week to keep a finger on the pulse of the industry. In addition to gathering data on steel prices, we solicit opinions on market conditions and changing trends ranging from supply and demand to imports and inventories. We are open to suggestions. What questions would you like us to ask your peers in our upcoming questionnaires? Send your questions to

SMU Events

There’s still time to register for SMU’s popular Steel Hedging 101 workshop. The COVID-safe virtual event will be held on Nov. 2-3 with instructor Spencer Johnson of StoneX Financial Inc. You can sign up by clicking here.

SMU is also taking registrations for the Tampa Steel Conference on Feb. 14-16, 2022, at Marriott’s Water Street Hotel in Tampa, Fla. This will be a live and in-person event. You can learn more by clicking here

As always, we appreciate your business.

Tim Triplett, SMU Executive Editor,

Latest in Final Thoughts

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.

Final thoughts

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?