Final Thoughts: Is the spot ton an endangered species?

“The last spot tons I bought were a month ago, and it’s not for a lack of trying – there just isn’t much available,” one Midwest service center executive told me.

An East Coast service center executive echoed that sentiment. He said he was leery of building inventory at current price levels. But that’s mostly an academic question with spot tons scarce and some mills holding customers to the lower end of their min-max contracts.

“You can’t really build inventory right now. Almost all of the mills are having issues and running late,” he said.

And let’s say you need a higher-end product, say certain API grades or high-strength items. Good luck finding them!

“Go away” lead times?

I’ve heard of mills quoting a “go away” price in past hot markets. Basically, a number that seemed unreasonably high and that might send buyers somewhere else. Or, if the buyer really wanted the tons, they could be squeezed in at that number.

Is September a “go away” lead time? And how do you price something now that might not deliver for another three months? Maybe if you ask a mill, you’ll get something along the lines of “It would be ~$1,200 if we had spot tons, but we don’t.”

How did I arrive at $1,200 per short ton (st) for a theoretical price for September HR? It’s very back of the napkin. I took $7.5/st – because Nucor typically goes up $5-10 per week in any given week – and multiplied it by the 12 weeks between now and September 1. That’s $90/st. And our HR price as of today is at $1,115/st.

Prices still climbing…

I wrote earlier this week about the signs to watch for if you’re looking for a peak. Because we all know that once the supply-demand balance tips, prices can reverse course quickly.

But this week definitely doesn’t look like a tipping point. It’s another week of the same trends we’ve seen for a little while now. HR prices continue to grind slowly upward. Galvanized has more recently notched bigger gains. Plate is up too following another round of mill price hikes.

We often see galvanized prices follow HR on a bit of a lag. And mills were keen to re-establish a wider spread between HR and galv. That said, what seems to be driving galv now is stronger demand – maybe especially for heavy-gauge material, which was weak earlier this year. That makes sense. I hear from some of you that demand from infrastructure, solar, and data centers are strong – all of which benefits galvanized.

Of course it’s not just sheet that’s up. Tubing prices continue to follow HR prices higher. And, while SMU doesn’t price beams, I’m told those numbers are getting stratospheric.

Actually, “slowly upward” might not be the right word for what we’re seeing in HR. I looked at our pricing archives just now. (You can find them here.) And since about mid-March, a week-over-week (w/w) gain of $10/st has been more common than a $5/st w/w increase. Has up $10/st become the new up $5/st?

Are mills talking down prices and lead times?

Here’s another trend I’ve noticed. In the past, when people spoke about “mill discipline,” it referred to mills’ ability to increase prices or to hold the line in a declining market. Now, when people use the term, it tends to refer to mills gradually increasing prices in a market in which they could announce far steeper price hikes.

It’s almost like mills, which typically talk up prices and lead times, are instead talking them down. Maybe that’s to be expected. Some have been explicit about trying to avoid the kind of price spikes that have invited imports in the past. I’ve heard others are worried about attracting unwanted political attention. Tariffs have been a gift for domestic producers. Why risk them by going too high, too fast with prices?

But pricing discipline is one thing. How do mills find discipline when it comes to lead times?

Contract negotiations

Here’s something else I’m wondering. How will contract negotiations shape up this year?

It’s been a strong year for steel. And my understanding is that mills will try to trim contract discounts. I don’t know how well those efforts will be received by buyers, especially those that have been grappling with late deliveries for months.

It’s also worth keeping an eye on negotiations between U.S. Steel and the United Steelworkers (USW) union as well as Cleveland-Cliffs and the USW. Those labor contracts expire on Sept. 1. And some lead times are already out that far.

Not everyone is partying like it’s ’21

Also, I know the bullish tone of some of our columns and market reports might not sit well with everyone. As we all know, demand for data centers and anything related to them is strong. But that’s not to say all of construction is hot.

Let’s say you’re in metal building products. Maybe making roofing and other metal components for folks in commercial construction – warehouses, mini-mills, and such. Your demand might be flat versus a year ago or maybe a little weaker. “Overall, it’s good,” one industry source said. “But the people who are nervous are nervous for a reason.”