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Steel buyers on sidelines despite coming hikes

Keywords: Tags  flat rolled demand, supply, mill price increases, steel buyers forum survey, orders, backlog, inventory planning

CHICAGO — Announced price increases and small pockets of improved demand have not been enough to pull many steel buyers off the sidelines, sources have told AMM, with most distributors maintaining the high levels of caution—and low levels of inventory—that became the new norm in recent down cycles.

"Our purchases won’t hit the peaks we hit in the strongest part of last year," one Midwest sheet and plate buyer told AMM, noting that while "inventories and finished goods are still getting worked through," stock levels are still at relative lows.

A Southern steel buyer agreed, adding that he was moving steel but not taking many risks.

"We’re not loading the boat, but we made some deals and brought in some imports," he said.

Members of the Institute for Supply Management’s (ISM’s) Steel Buyers Forum confirmed the trend. In a February survey, 57.1 percent of surveyed members said they expect to decrease inventory levels in the next six months, up from 36.4 percent of respondents who said the same thing in January. At the same time, 28.6 percent expect to hold inventories flat in the next six months, while just 14.3 percent intend to increase stock levels, the data show.

Steel buyers’ hesitancy to build stocks comes despite announced price increases across a number of products. In mid-February, major steel plate mills announced price hikes of between $30 and $60 per ton (, Feb. 22), while in late February, most domestic sheet mills said they were boosting base prices by about $50 per ton (, Feb. 27).

Meanwhile, in the long products market, speculation that scrap prices could rise in March has some rebar buyers in particular expecting a price hike (, Feb. 28), with at least one mill—Byer Steel Corp.—already announcing a $10-a-ton hike for some grades.

But while price increases often serve to attract buyers, some steel purchasers said they weren’t biting this time around because they weren’t optimistic the increases would stick.

"Regarding the (hot-rolled coil) price increase, I would guess this is not going to fly," one Mississippi Valley flat-rolled processor said. "Just judging from the demand side of it, I can’t see how it would fly. What circumstances other than increased demand would reinforce the increase? I was shocked when (the announcements) came out."

Given that there is excess supply throughout the supply chain, he said, he doesn’t see big buyers getting rid of inventory fast enough. Only if March scrap prices settle significantly higher will steel producers gain any traction with their price increases, he predicted.

"I’m not making any changes based on price increases," a lower Great Lakes sheet distributor agreed. "I’m certainly not trying to hedge."

The mills are trying to bring the base price back to where it was in January, he said, but the "demand is not out there to justify it."

The distributor conceded he has seen more inquiries come in for second-quarter deliveries, "meaning they are going after tons before any price increase might stick. But these orders would have been placed anyway."

This time around, he said, the mills have "a little more solidarity, but there’s plenty of inventory all around, so there is no basis for all of it to stick. This is nothing more than normal propaganda," he added.

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