SMU Data and Models
Steel Mill Negotiations: Still a Buyer's Market
Written by Brett Linton
October 27, 2022
As steel prices ease week after week, the power position in price negotiations between steel mills and steel purchasers continues to rest with buyers, as it has since June. According to our latest check on the market, a high percentage of buyers continue to report that mills are willing to talk price to secure an order. A high willingness to negotiate has been shown in each of our market surveys since May.
Every other week, Steel Market Update asks hundreds of steel buyers the question: Do you find domestic mills are willing to negotiate spot pricing on new orders? On average this week, 82% of steel buyers reported that mills were willing to negotiate lower prices on new orders, down from a rate of 89% two weeks ago. As shown in Figure 1, negotiation rates have remained relatively high since June.
Figure 2 below shows negotiation rates broken down by product for the past year. 88% of hot rolled buyers surveyed responded that mills are willing to negotiate lower prices. This is down from 91% two weeks earlier and down from 96% one month ago (which was the highest reading seen since February). Hot rolled negotiation rates have been 76% or higher since May.
For cold rolled, 90% of buyers polled reported that mills were willing to bargain, up from 87% both two weeks ago and one month prior.
96% of galvanized buyers reported that mill prices are negotiable, the highest rate recorded since February. Galvanized negotiation rates have been relatively high for the last four months, at 85% or greater.
Galvalume negotiation rates tend to be more volatile due to the smaller market size. 60% of respondents reported that mills are negotiable on new orders this week. This is down from a 100% rate two weeks prior, but up from 50% one month ago.
Negotiations have been slightly less common in the plate market. 47% of buyers reported a willingness to negotiate this week, down from 67% two weeks earlier and down from 71% a month ago. Plate negotiation rates had been between 71–80% in September. Recall we saw plate negotiation rates between 0–18% in March and April.
SMU’s Price Momentum Indicator was adjusted from Neutral to Lower on Oct. 11 for all products, in consideration of increased supply, weaker demand, and lower raw material costs.
Note: SMU surveys active steel buyers every other week to gauge the willingness of their steel suppliers to negotiate pricing. The results reflect current steel demand and changing spot pricing trends. SMU provides our members with a number of ways to interact with current and historical data. To see an interactive history of our Steel Mill Negotiations data, visit our website here.
By Brett Linton, Brett@SteelMarketUpdate.com
Brett Linton
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