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Steel buyers’ sentiment up but caution remains

Keywords: Tags  Steel buyers forum survey, Institute for Supply Management, ISM, steel inventories, steel prices, new orders, backlogs, scrap steel demand

CHICAGO — Sentiment among steel buyers improved in January, even as lead times remained short and some would-be buyers continued to sit out amid plentiful inventory levels and some lingering uncertainty.

Of the Steel Buyers Forum members surveyed in January, 36.4 percent predicted their incoming orders would rise in the next three months, up from 27.3 percent in December, according to data from the Institute for Supply Management (ISM). January’s response rate marked the first time since April 2012 that no respondents forecast a drop in incoming orders during the next three months, ISM data show.

Meanwhile, 36.4 percent of respondents said shipping levels in January were up compared with three months earlier, double the 18.2 percent who said the same thing in December, while those reporting a reduction in shipments vs. three months earlier fell to 18.2 percent from 63.6 percent the previous month.

"We are not buying much but we did have a very good January. This one was extraordinarily good. I don’t know what to make of it," a Mississippi Valley processor said.

The slight pickup in market sentiment comes as some flat-rolled steel mills are pushing for a $2 to $2.50 per hundredweight ($40 to $50 per ton) increase in sheet prices (, Jan. 24). According to buyer sources, the announced sheet increases are gaining a little traction even though lead times remain short.

The producers are "doing their best to push price increases through, but it’s been slow in developing," one southern buyer said, attributing any inability to capture the full increase to the fact that "there is an awful lot of capacity."

As a result, mill books are still "not where they want them to be," he said.

Of the $40 to $50 per ton more the producers are asking for, "they are definitely not at $40 and probably in the $20 to $30 range," he added.

"The mills’ operating rates are a touch better, but they are skittish," a buyer with multiple locations in the South agreed.

And while many buyers report a modest increase in shipments compared with late last year, most say they are still keeping their inventories close to the vest.

"We are living up to our mill commitments, but we are not buying speculative tonnage," one Midwest distributor said.

"We haven’t bought anything since the most recent price increases, but we bought heavy in November and December. We’re using that steel to take care of customer needs for the first quarter," the processor reported.

Some steel buyers are also waiting for the February scrap market to settle before making their next round of buys, sources said.

"If it settles higher, we would probably buy a little extra (steel)," the second southern buyer source said.

Buyers are also watching out for a possible roadblock in Washington.

"We see a bump in the road with the debt ceiling debate in three weeks, which could temporarily unnerve the market," a Midwest steel converter said.

However, if either consumer spending or exports rise, "we expect the second half will be stronger than the first," he added.

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