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‘Political games’ weigh down service centers

Keywords: Tags  Steel distributors, steel products, end-market demand, mill offers, foreign supply, confidence, Congress, risk aversion service centers


CHICAGO — Service centers are buying and selling steel—not a lot, but some—as a general malaise settles over the sector, with distributors of bar, tubing and flat-rolled products unhappy about how this season is shaping up compared with past ones.

"We’ve been looking for the ‘new normal’" for four years, a Midwest sheet distributor source told AMM. "But what we’ve got is slow economic growth and slow demand improvement. That is normal."

"Within the markets we service, our customers are saying things are OK but slow," a source at a national full-line distributor said.

"If we place orders, it won’t be until March," a Mississippi Valley coil processor executive said. "We think a lot of our peers ... placed orders in November and December and don’t need to place new ones."

Several executives cited the seemingly insurmountable partisanship in Washington as a cause of the market’s morass.

"The federal government has put a wet blanket on everything," said a source at a lower Great Lakes distributor. "This is year five of the malaise. It doesn’t engender confidence. Everyone is holding the reins very tightly, which is what you get when the country and people are overleveraged."

A southern long products distributor source said that he, too, is staying on the sidelines. "How much Washington has diminished sales is anybody’s guess. It isn’t increasing business—that’s clear," he said. "And the next round of political games don’t look too encouraging." He said he "made some good buys" at the end of the year. "We built up our A and B products to three months’ supply. We didn’t buy other products, as we’re satisfied with a lower stock
list on those."

A specialty bar distributor source said that people often ask him why special bar quality (SBQ) is suffering when automotive is
doing so well. "It’s difficult to answer," he said. "The mills are looking for business. No one wants to talk the market down. We are optimistic things will be better. But what has to happen is capital spending. Customers don’t know what to do. They are risk-averse." He predicted that the market "will be in for a tough year" even if heavy equipment, energy and construction demand do pick up.

A Great Lakes SBQ distributor source reported having seen more quotes on foreign special bar quality products slated to land in New Orleans and along the East Coast primarily from European mills. "That’s where you’ll see (downward) pressure on the domestic price," he said.

However, bar producers and warehouses are seeing "up-and-steady" demand from Tier I and Tier II automotive suppliers, "both in schedules and what they’re taking for delivery," he said.


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