CHICAGO Demand for hot-rolled band may appear weak at first glance, but spot prices for coil appeared to be holding steady in the first week of the year.
Its hard to describe: The market isnt strong, but its not weak either, a buyer in the Plains states said. There is no urgency to buy. Customers are waiting to see how their business shapes up. Although the government has dealt with the tax issues, until economic certainty arrives, they are being cautious.
According to the Institute for Supply Managements latest Steel Buyers Forum survey, consumers generally boosted their tons on hand last month, and while the proportion of those deeming their steel stocks too high for current demand fell from November, more than half (54.5 percent) said that they plan to reduce inventory over the next six months.
People seemed stuck and didnt want to buy anything (last month), the operator of a Mississippi Valley coil processor said Friday. We covered our orders and sat on our hands. This week, all of our inside sales representatives are as busy as can be. We are in restart mode. (Customers) let product run down, but we do have to get back to business.
Spot pricing is laying flat at $640 per ton, he said. We are putting in small-quantity orders to the millsnothing large, 100 tons to 200 tons here or there.
An East Coast buyer agreed that spot quotes ranged from $640 to $650 but was told that minimum volume would be 500 tons per order. Prices are holding, he said, because customers trimmed their inventories in December.
Had there been a longshoremans strike, that would have been a problem. Our order books are strong. Everyone is basically optimistic. Business is there, he said.
If scrap went down $50, that would create a ripple effect, keeping customers on the fence. But that hasnt happened, so I see the market as stable for the next 30 days.
A Southern steel buyer reported that several manufacturing customers have placed orders through first quarter and that demand from coastal energy businesses is also good. Our OEM (original equipment manufacturer) customers try to keep their inventory at two to three weeks, which is good for the service centers, he noted.
The Southern buyer believes that steel pricing will stay firm for the first quarter and then struggle for the rest of the year, in part because we are still struggling with overcapacity, he said.