Final thoughts

The gains aren’t huge. SMU’s hot-rolled (HR) coil price is at $655 per short ton (st) on average. That’s up $15/st from last week and up $20/st from two weeks ago. (You follow can follow along with our archives here.)

That’s nothing compared to past price cycles. But it marks the first time since early April that we’ve seen consecutive gains.

We’ve heard that activity has picked up over the last approximately two weeks. Some of you tell us that last-minute deals are still being negotiated (see the low end of our prices) and are driving that activity. But we’re also hearing from more and more of you that mills are indeed collecting higher prices.

I’m not going to predict how long our momentum indicator will remain pointed upward. We saw it stay there for only seven days in early April before Nucor published its first weekly spot price, which was lower than many had expected. It was telling that that move alone took a lot of momentum out of the market.

The market isn’t exactly strong now. As I’ve noted in prior Final Thoughts, demand remains a concern. And so the current upswing could prove as fragile as the one we saw in April. That said, mills were trying to collect a lot more then. Cliffs was seeking $900/st for HR.

It was a very different story before this latest round of hikes. Mills had gotten to or below breakeven for very large orders and some contract deals priced at a discount to spot indices. ArcelorMittal, for example, noted in its Q2 earnings report that steel prices in the US and Europe were “below the marginal cost.”

In other words, mills have real reason to dig their heels in and push for higher prices in the weeks ahead. Especially if scrap at least holds steady this month and as lead times press into the typically busier fall months.

Another data point to watch: Approximately 75-80% of buyers responding to our steel market survey last week said that mills were willing to negotiate lower prices. That might not sound like much, but it was down from as high as 100% in mid-July. And I would not be surprised if we see that number move lower still when we conduct our next full survey next week.

Plate momentum still down

It’s a different story for plate, of course. We saw plate prices decline this week. SMU’s plate price is $1,005/st on average, down $15/st from a week ago.

Nucor surprised some in the market by announcing that it would keep plate prices flat rather than decreasing them. Many had expected another decrease. We would like to see plate prices stabilize before we consider changing our momentum indicator for that product.

A friendly wager

Early on Monday, before Nucor announced that it had raised prices for the second consecutive week, we made some friendly bets on where the company’s weekly HR number would land. (Only pride was wagered.)

Educated guesses ranged from a modest cut, to flat at $675/st, to matching Cliffs at $700/st. Nucor, as we all know now, posted $690/st.

Why $690/st? I know a lot probably goes into that price. And I don’t want to oversimplify it. But here are a few theories that we came up with:

• Nucor wanted to increase prices but didn’t want to grant market leadership to Cliffs,
• $690/st leaves the door open for an additional increase to or above Cliffs’ $700/st,
• A more modest increase didn’t fly in the face of huge declines in stock markets around the world on Monday. Of course, the two are not directly related. But trouble on Wall St. doesn’t exactly help sentiment anywhere, including in steel. (It’s part of the reason we were initially leery about changing our sheet momentum indicators to upward.)

Where do you think Nucor will land next week: A big increase, a modest increase, or flat? Or are you going to take the long odds on a decrease? We welcome all opinions. Let us now what you think at info@steelmarketupdate.com.

SMU Steel Summit

There are less than three weeks until the SMU Steel Summit on Aug. 26-28 at the Georgia International Convention Center (GICC) in Atlanta. Nearly 1,300 people have already registered to attend. Join us! You can see the agenda and register here.