SMU Survey: Competitive imports, steady inventories, firm pricing

However, actual buying is softer. Only 46% of manufacturers are placing new foreign orders, down from 57% in the prior survey. Service centers are split 50/50, also down from 57% previously (Slide 51 below). “We aren’t, but we honestly should,” commented one buyer. “The pricing and lead times are right where they need to be.” Still another said, “We feel it is too late in the market cycle to place orders with a four-month lead time.”

Meanwhile, inventory positions are mostly steady. Manufacturers say 83% are maintaining flat-rolled steel inventories, while service centers show 74% maintaining. By contrast, 38% of service centers were building in the survey two weeks prior (Slides 48 and 49 below). One service center said they’re “trying to build inventory, but it’s not so easy to get all the tons” they’d like. Another commented that “foreign supply will help us build some inventory.”

Year-over-year buying is firmer. Over half (55%) of manufacturers said they’re purchasing the same amount of flat-rolled as a year ago, while 28% are buying more. Last year, half said they were buying less (Slide 44 below).

Demand signals are strong at service centers, with a majority (68%) reporting higher customer releases compared to a year earlier (Slide 46 below). A year ago, half said demand was lower. “This year is better than the last few years, but July was slower than earlier months this year,” said one buyer.

Steel buyers are broadly engaged. Eight-one percent of respondents call themselves active buyers. Last year at this time, nearly half were on the sidelines (Slide 42 below).

“We are making sure we have a good supply on hand in case there is some tight availability in the near future,” commented one active buyer. “I understand that we’re exploring all/more options and buying more foreign steel than usual and buying from vendors that we rarely buy from,” commented another. Still, another said they’re on the sidelines because they “will not place new mill orders without a firm customer PO in hand.”

Upward pricing momentum continues. Over half (56%) of manufacturers said service center prices are rising, though that share has eased from earlier surveys. Thirty-eight percent said prices are stable, a notable increase (Slide 34 below).

Service centers took a more bullish stance. Almost all of them (91%) said they’ve increased customer spot pricing over the past two weeks (Slide 36 below). None have reported lowering prices since Q1. “We are raising weekly to test market resistance. Thus far, we have not had to retreat,” one buyer said.

In our previous survey, nearly a third (31%) of respondents predicted an August peak for steel prices. There was a noticeable shift in our most recent survey, with only 12% now believing we’ll see an August peak. Many (28%) believe the peak will come in September, while a third expect it to be October. Still, 20% think it won’t happen until November or beyond (Slide 31 below).

“Appears we are close to a peak, but mills still have runway to move prices up heading into the fall,” stated one respondent. Another buyer predicting an October peak noted that “mills have been disciplined” and “will want momentum going into contract season.” Another buyer sees a September peak, commenting, “Shockingly enough, I think we’ve got a bit more run left. … I think we see $1,200 before it peters out.”

Premium subscribers can view the entire survey results here.