A significant percentage of steel buyers continue to report that mills willing to negotiate lower prices on new order prices. But that rate has been declining since early November, according to Steel Market Update’s recent market checks. Mills’ willingness to negotiate lower prices for sheet products is at its lowest point since late April, when tags were still elevated because of the shock of war in Ukraine. Negotiation rates on plate products remain slightly higher than sheet products.
Every two weeks, SMU asks hundreds of steel buyers: Are you finding domestic mills willing to negotiate spot pricing on new orders? On average, 67% of steel buyers polled this week reported that mills were willing to talk price on new orders. This is down from an average rate of 73% two weeks ago and down from a rate of 85% one month prior. Six weeks ago, we saw an average negotiation rate of 91%, a ten-month high. As shown in Figure 1, negotiation rates continue to remain relatively high and have been so for nearly eight months.
Figure 2 below shows negotiation rates by various products. This week, 58% of hot rolled buyers responded that mills are willing to negotiate lower prices on new orders. This is down from a rate of 71% two weeks ago. Recall that in early November we saw a rate of 96%, which was one of the highest rates seen since February. The last time hot rolled negotiation rates were this low was in April.
Sixty-eight percent of cold rolled respondents reported that mills were willing to talk price this week. This is up from 61% two weeks ago but down from 88% one month prior.
For galvanized steel buyers, 70% responded that mill prices were negotiable this week, down from 83% two weeks ago. Recall that in late October our galvanized negotiation rate reached 96%, the highest rate recorded in more than eight months. As with hot rolled, the last time we saw galvanized negotiation rates this low was in April.
Galvalume negotiation rates tend to be more volatile due to the smaller market size. All of the buyers we polled this week reported that mills were negotiable on new orders. This is up from a rate of 67% two weeks ago.
Negotiations have been slightly less common in the plate market but ticked up in recent weeks: 75% of buyers reported that mills were willing to negotiate in our latest survey. This is down from 77% recorded two weeks earlier but up from 60% one month ago. Plate negotiation rates were as high as 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 Higher on Dec. 13 for sheet products, in light of recent mill price hikes and extending lead times. Our plate momentum indicator, in contrast, continues to point Lower.
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 LintonRead more from Brett Linton
Latest in Final Thoughts
I want to give a big shoutout to the good folks at the Fabricators and Manufacturers Association (FMA) for inviting me to their annual conference this week in Clearwater, Fla. I also want to give a special thanks to the FMA for awarding SMU founder John Packard with a lifetime achievement award – on that also gave me a chance to catch up with my old boss in person.
What are some “Black Swans” to watch out for? With the war in Ukraine entering its third year, your mind might understandably move to conflicts overseas. Here is one closer to home to consider: US trade relations with Mexico taking a turn for the worse. I mention that because the Office of the United States Trade Representative (USTR) dropped a (virtual) bombshell earlier this month.
Domestic prices have been sliding since the beginning of the year, and I don’t see any obvious reasons why the slide might stop this week. But let’s put the timing of a bottom aside for a minute. The question among some of you seems to be whether we’ll see another price spike, or at least a “dead-cat bounce,” before the typical summer doldrums kick in.
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.
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?