Final Thoughts

Another parallel: Prices are nearly identical now to where they were a year ago, despite all that’s changed over the last 12 months – new capacity ramping up, AHMSA unexpectedly going down, and a steel mill diving into aluminum!

SMU’s hot-rolled coil price stands at $870 per ton ($43.50 per cwt). HRC was at $875 per ton a year ago, only a $5-per-ton difference, according to our pricing records.

Last year, prices drifted lower into late July and August. They stood at $770 per ton during the conference. Will we see another $100-per-ton decline between now and Aug. 21-23?

One factor arguing against such a repeat is lead times. HRC lead times average about 4.5 weeks now, better than the 3.9 weeks we recorded a year ago.

One that suggests continued declines: 93-94% of survey respondents a year ago told us the mills were willing to negotiate lower spot prices for sheet. We’re seeing something roughly similar this year. Our latest steel market survey indicates that most steel buyers continue to find most mills willing to negotiate lower prices for hot-rolled (84%), cold-rolled (76%), and galvanized product (90%).

In other words, the price increase announced in mid-June is looking more like one announced shortly after Steel Summit last year. That one briefly stabilized sheet prices that had been falling up until that point. That June hike definitely does not look like the increases announced in late Q4 and early Q1 that succeeded in sending prices sharply higher.

Late last year, AHMSA unexpectedly shutting down helped spur prices higher. There had been some rumors, even hope in some corners, that the unplanned outage at SDI Sinton might prove to be more disruptive than it looks to have been. Some of you speculated that the outage might stretch well past the 2-4 weeks the company said it would take to get the hot end up and running again. SDI CEO Mark Millett today poured cold water on those rumors when he said the hot mill would be running again in a matter days.

Based on those factors – middling lead times, mills willing to negotiate lower spot prices, and no lengthy unplanned outages – shouldn’t prices drift lower once again?

Here’s another one to watch: Busheling scrap prices were at $505 per gross ton a year ago. They now stand at $445 per gross ton. All else being equal, doesn’t that mean EAF mills have more room to sell steel at lower prices should they chose to? (Caveat: I know some of you think August scrap prices will be higher.)

Am I missing something? Maybe the dip we’ve seen lately is mills discounting ahead of a price hike? I haven’t heard chatter of one lately. But a lot can happen over a month. I’m looking forward to covering it, and then catching up with all of you to talk about it at Steel Summit!

By Michael Cowden, michael@steelmarketupdate.com