between ferrous scrap prices and service center orders and
inventories isnt always the first factor market
participants consider when assessing steel sales, but recent
pricing activity has highlighted the important role that it
As scrap prices fell in
September and early October, distributors kept a close eye on
raw material negotiations, looking for signs of how steel
prices and overall steel demand could be affected.
During that period, steel prices
did not rise, despite some manufacturer statements that hikes
were on the way, and steel shipments fell in both August and
But then, amidst a market
consensus that scrap prices had bottomed out in October, NLMK
USA, Nucor Corp. and AK Steel Corp. increased prices mid-month
for all sheet products by $40 per ton. Those decisions to raise
prices followed an apparently leading move by U.S. Steel.
The moves immediately prompted
some ordering, mill and distributor sources said.
No one can believe
it, one Midwest service center source said.
Everybody were buying for, they know the price is
going up so theyre trying to beat the price.
But some buyers werent
able to get in and place orders ahead of the hike, a mill
Its interesting that
this (price rise) has occurred a couple weeks earlier than last
year. I think its caught some distributors and OEMs
(original equipment manufacturers) off guard, which from a mill
perspective is a good thing, he said.
Some distributors reported
buying large quantities following warnings from mill sales
representatives that hikes were on the way. The belief is
that prices wont go down anymore, and theyll see
how much of the $40 will stick, a second Midwest service
center source said.
Prior to the October increases,
the market had looked rocky. U.S. steel plate prices had
resumed their downward trend in late September as scrap input
costs fell and minimal spot orders exacerbated a sense of
oversupply in the market, sources told AMM. The
announced increasesÑnone of that stuck, one
service center source said at the time. With scrap
sliding, prices stayed the same or came down in some
The price decline came as spot
buying hit a lull. Sources had told AMM that
inventories were more than meeting demand. The service
centers, the big chains, are the drivers of the spot market,
and many of them are in a no-buy mode, one
mill source said in September.
Mills efforts to capture
price increases often had been undermined not just by depressed
demand, but also by downward scrap markets in September and
early October, sources said.
marginally--that does not help, a mill source said.
Steel prices had maintained
strength throughout the traditionally slower summer season as
the market awaited a possible strike at Chicago-based
ArcelorMittal USA Inc. or Pittsburgh-based U.S. Steel Corp.,
where labor agreements were set to expire Sept. 1. However,
with both integrated steelmakers successfully negotiating new
deals with the United Steelworkers union, sources said the
sheet markets run-up had little staying power.
There (was) just not a lot
out there to support (the price), one mill source told
AMM, noting that falling scrap prices and lower-priced
imports of cold-rolled and galvanized sheet in particular
started to eat into the mills price-hike efforts.
buying price for shredded automotive scrap in the Chicago
market--a key component in many steel mills raw material
surcharges--fell more than 18 percent to $335 per ton in
October from $410 two months earlier.
Everyone knows scrap is
going down, one Midwest service center source said. Both
mill and service center sources agreed that they saw little on
the horizon to support the summers price increases into
the fall. Its dead and over now, one southern
service center source said of the rising hot-rolled prices seen
previously. Its petered out.
Our customers are all
busy, another Midwest service center source said.
Theyre not setting the world on fire, but they are
doing fine. Nonetheless, the source noted that
mills lead times are shrinking. Falling steel product
prices will keep people from buying unless they absolutely
must, he added.
I will only fill (orders)
when I need to fill the pot, a source at an East Coast
Although North American service
centers expected to see little change in steel shipments
following summer levels that were down from a year earlier,
September steel shipments decreased again, another sign of the
fragile state of the scrap and steel sectors.
Were not seeing a
whole lot (of demand) other than the energy side of the
business, which continues to be fairly strong, while
theres a lot of uncertainty in the other markets, a
source at one national steel distributor told AMM.
Service center sources said that
overall demand has remained relatively unchanged so far, even
as a few segments experienced slight upticks in recent
Automotive used to drive
the steel industry, and now its recovered. Weve
seen production at pre-crash levels, one northern service
center source said. Still, automotive growth is not
enough to pull up the slack for construction.
The slowdown in shipments from
2011 levels, which began in August, continued in September.
Steel shipments declined approximately 10 percent in the United
States compared with the 1-percent fall in August.
U.S. service centers shipped
nearly 3.08 million tons of steel products in September, a
decrease of 9.5 percent from September 2011. For the year to
date, steel shipments totaled more than 32.11 million tons, an
inacrease of 3.3 percent from the same period last year.
Steel product inventories
totaled nearly 8.77 million tons at the end of September (2.8
months supply at current shipping rates), according to
the Metals Service Center Institute (MSCI), down 2.1 percent
from more than 8.95 millions tons (2.5 months supply) the
previous month although up 3.1 percent from 8.5 millions tons
(also 2.5 months supply) a year earlier.
Shipments by U.S. steel
distributors totaled more than 3.65 million tons in August, up
11.1 percent from nearly 3.29 million tons in July but down 1
percent from 3.69 million tons in August last year. Meanwhile,
domestic distributors inventories were on the rise in
August, according to MSCI data. Steel inventories held by U.S.
service centers totaled more than 8.95 million tons (2.5
months supply at current shipping levels), up 0.2 percent
from 8.93 million tons (2.7 months supply) in July and
5.8 percent above 8.46 million tons (2.3 months supply)
in August 2011.
Its not just a domestic
issue. Japanese steel distributors have joined the growing
number of voices warning that steel demand likely will slow
significantly in the fourth quarter.
There is evidence that
distributors are focusing on reducing stockpiles. Tokyo Steel
Manufacturing Co. Ltd. said that steel inventories have already
begun to fall, and it left October selling prices unchanged
from the previous month despite a sharp drop in scrap prices.
While construction demand will continue to improve as
reconstruction work moves ahead, the level is lower than had
been expected, distributors said during the latest quarterly
meeting between Japans Ministry of Economy, Trade and
Industry and the Steel Products Distributors Association.
Japanese distributors also expressed concern over a likely drop
in demand from other sectors.