Final Thoughts

Final thoughts

Written by David Schollaert

To the surprise of few if any, prices are in a holding pattern – a trend not seen since late December. The pause comes largely in response to a pricing notice blitz from mills late last week.

While market sentiment is still mixed and the initial response from many of you varies, a few questions remain unanswered:

Is this price pause just a temporary pitstop in the downward journey?

Are prices indeed inflecting?

Is another round of mill pricing notices imminent?

Reviews are in and they’re still mixed

For many, the move by mills was not just an effort to “stop the bleeding” or “hold the line,” but its timing ahead of planned outages was indeed to push prices back up.

“Mills are positioning themselves for some increases,” said an OEM executive, adding that the move wouldn’t just have an impact on hot band, but that it would ultimately set a floor for tandem products and potentially even plate.

Demand fundamentals don’t appear to have shifted significantly, but we’ve seen this trend a good bit. Prices are moving down and at a given point mills announce a price floor and plan for a rebound. The move hasn’t always been successful, but it’s often been helped when big volumes at discounted levels are moved just before a price notice.

That’s something we saw again this time around.

But there are still some that aren’t sure if increases can be sustained because demand is still lagging expectations.

“If demand doesn’t get better, we’ll see how far anything can run,” said a source. “At the end of the day, it always comes back to Econ 101: supply vs. demand.”

Groundhog Day or The Twilight Zone

But could it be that the reaction from the market may have played right into the mills’ hands? We’ve heard that buyers were keen to secure “pre-announcement” volumes and that some service centers are reportedly covering inventory gaps after buying little since October.

That coincided with mill sales, and the buying frenzy that immediately followed the announcements may have helped some mills fill Q2 order books. It could all move lead times out and shift sentiment. This is something my colleague Josh Spoores, principal analyst at CRU, believes could lead to increased prices.  

“Any reading of lead times or sentiment prior to this week is now old data that is not relevant to a forward-looking view,” he noted.

Several sources told SMU that it was hard to pin a price this week, even more so pricing and availability for April shipment.

“Some mills are not quoting yet,” said a service center executive. “It would not be a surprise to see a new round of price increase announcements very soon.”

And the move also plays well for EAFs, especially with “slumping” scrap prices. It could help mills accommodate huge volumes of hot band recently sold around $700 per short ton (st).

For most, it may just feel like Groundhog Day with some solid comedic relief, but after talking to others, I get the sense that for some it’s more like The Twilight Zone – just a big strange mix of horror, science-fiction, drama, and comedy, but most of all superstition.

At SMU we don’t forecast, so we’ll just watch and let it all play out. We’ll soon find out if prices are indeed inflecting up or just a momentary break before the downtrend resumes.

Let me know what you think? Are prices inflecting, with a new round of increases on their way? Or will prices start to slip again still waiting on stronger demand?

SMU Community Chat

Barry Zekelman, chairman and CEO of Zekelman Industries will be the featured guest for our next next Community Chat.

It’s this coming Wednesday, March 20, at 11 a.m. ET. You can register here.

I’m sure it will be one you won’t want to miss. But if you do, a replay of the chat, once available, for subscribers can be found here.

And, as always, thanks to all of you for your continued support of SMU!

David Schollaert

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