Final Thoughts

In other words, if you wait for everyone to come to a consensus, you risk missing the peaks, valleys and inflection points.

To be clear, we have not signaled that the market is heading downward. We’ve simply switched our pricing momentum indicators from upward to neutral. And they’ll stay there unless we see a more pronounced and sustained drop.

If you’ve been reading SMU and watching our data closely, this shift probably hasn’t caught you by surprise.

Yes, hot-rolled coil prices went up by triple-digit margins twice in March – including once by a record $190 per ton. But gains have moderated ever over the last few weeks. (Recall we were only up $25 per ton a week ago.)

Also, Asian prices have not followed US and European prices higher. And we are hearing from trader contacts that EU prices have stalled out and/or are falling.

“Buyers have vanished. In Europe, the market is freezing,” one trader source said. “Officially the price for HRC is 1,300 euro per metric ton. But that is a ‘fake’ price, and it seems that the mills are not full.”

There is no question that the initial shock of the war – especially when it came to supplies of raw materials such as pig iron – justified a sharply higher upward move in steel prices. Mills had to keep up with costs, and it wasn’t clear what those costs might be.

But on the finished steel side, while there has been a lot of buying, there was perhaps not the same panic buying that we saw a year ago, when prices were last above $1,400 per ton.

A key difference: People have more inventory than they did a year ago. And lead times, while they have extended, are not out nearly as far as they were in April 2021, as I noted in Final Thoughts in late March.

Are some mills still managing to push through higher prices? Yes. Are some buyers starting to resist those higher prices? Also, yes. That’s in part because they’re getting pushback from their own customers further down the supply chain.

“I’m seeing huge resistance from our customer base. … I think we’ve hit a brick wall,” one service center executive told me. And his buying strategy has shifted accordingly: “I won’t buy one pound more than I need to at these prices.”

Those of you who watch the futures markets know that prices have come down significantly in recent days. I know some of you also dismiss futures moves as driven mostly by speculators.

A mill source I contacted today shares that view of futures. But he didn’t disagree with the idea that prices might have plateaued.

“Real pricing has probably reached or is reaching its war zenith, meaning that any other increases need to be driven by another problem or unforeseen circumstances,” he said.

But beware of buying imports for delivery this summer, he added. “The current discount is not worth it.”

By Michael Cowden, Michael@SteelMarketUpdate.com