CHICAGO Global oversupply, soft demand and negative sentiment continue to plague the steel market, Olympic Steel Inc. president and chief operating officer David Wolfort said during the companys quarterly earnings call Thursday.
However, steel price increases announced since October should bring "some relief" from falling tags for most of the year, he said.
While excess supply and low demand pose challenges to price hikes, Wolfort said that the last hike may gain ground as buyers whittle down inventories. He added that he believes coil prices hit their trough last month and that the latest price increase will be supported by higher scrap pricing and lower mill output.
"The price hikes were needed," he said, crediting Pittsburgh-based U.S. Steel Corp. with the leading move.
With the support of higher scrap prices in November and $50-per-ton increases announced this week by West Chester, Ohio-based AK Steel Corp., Charlotte, N.C.-based Nucor Corp. and others (amm.com, Nov. 7), "the first increase has been absorbed and part of the second increase will be absorbed, moving the price up from a very sour bottom," Wolfort said.
Sheet inventories have declined "quite a bit," so the latest increase will support "upward momentum" in the spot market due to lower inventories and "more spot market participation" by buyers than during the third quarter, he said.
The U.S. steel market was pressured by "an onslaught of imports" this year, Wolfort said. "Plate was a big part of it. There is no doubt that foreign (supply) has put pressure on plate pricing, and domestic producers have had to respond in order to maintain their market share.
"I dont see a big differential between foreign and domestic pricing," Wolfort said, adding that pressure on U.S. tags will persist "as long as the bandwidth is narrow."
The pressure on the value of steel here and abroad has been "exacerbated by too much production," he said. "Even with RG Steel not there anymore, others are still producing without curtailing supply. (Steel buyers) participation (in the market) grew, but not at the rate of supply domestically or globally. Too much supply, too little demand: Its not any more magical than that."
Olympic Steel posted third-quarter net income of nearly $1.64 million, down 73.3 percent from $6.14 million in the same period last year on sales that slipped 1.7 percent to $342.56 million. Flat-rolled product sales declined 2.8 percent, but tubular and pipe product sales increased 3.4 percent, the Bedford Heights, Ohio-based company said.