SMU Channel Check: Market Divided - Gradual Decline or Collapse?

SMU asked: When steel prices eventually begin to normalize, do you expect a sharp downturn or a gradual correction?

“I see a gradual correction. Demand is too strong, and pent-up auto demand due to the chip shortage will keep prices elevated well into 2022.”

“Demand is still too good, imports are still too risky, and mill consolidation (and the resulting discipline) is a major factor. We’ll see a gradual plateauing and softness downward, but prices will reset at unbelievably lofty levels.”

“Raw materials costs are too high for a sharp downturn.”

“Define sharp. I think the price will settle $200 per ton above European pricing in Q1.”

“The 5% drop we saw last month will most likely continue until we reach the new equilibrium point.”

“There will be a sharp downturn. Warehouses have too much steel and not enough customers. They need cash to pay their bills. Mills can still make money at much lower prices because their cost of production never went up anywhere close to selling prices.”

“New mills need orders. Imports on the water will eventually arrive. There’s no need to keep buying. All this will lead to a dramatic price correction.”

SMU also asked: Do you sense that the market is changing?

“I see the beginning of a downtrend in pricing.”

“The market is changing fast. Only the best items are still moving at premium prices. Most items are on the verge of a price collapse.

“The market has changed just based on more spot ton availability and less panic buying up and down the steel supply chain.”

“The buyers strike continues at all levels of supply.”

“The market is softer than it has been for the past 17 months.”

“I believe the market is softening due to automotive production decreases. I also believe the mills will compensate by limiting production (i.e., pulling forward maintenance outages).”

“More consolidation by the mills should prevent a historical price collapse.”

By Tim Triplett, Tim@SteelMarketUpdate.com