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Supply-demand divide weighs down steel sheet

Keywords: Tags  steel sheet, SteelBenchmarker, lead times, flat rolled, hot-rolled, catherine ngai

NEW YORK — Participants in the domestic and imported steel sheet markets are hoping that the second quarter will fare better than the first, but most agree that prices are unlikely to gain much upward momentum unless capacity is taken offline.

"The big picture is that (prices are) based on demand and supply, and the gap between the two is too big," a Midwest service center source said. "There’s too much supply availability and there’s too much ability to make new tons, which keeps lead times short and puts pressure on prices."

A steel trader agreed, noting that foreign sheet has continued to remain uncompetitive except in major importing hubs due to continued oversupply. Some domestic mills are matching import prices on the East Coast and freight equalizing, some traders said, making it increasingly difficult to sell foreign material into the U.S. market at a viable margin.

"Things are about the same. There’s just too much steel out there," one steel trader said. "The supply-demand balance has been such a thin line, and foreign pricing isn’t all that good. There is no (foreign) hot-rolled cheaper than what you could get from a domestic mill. The U.S. prices are cheap. You just can’t compete."

Earlier in the first quarter, sheet mills attempted to move prices up some $90 to $100 per ton in an effort to stop price deterioration, with a portion of those announced hikes holding and average prices rising to about $630 per ton ($31.50 per hundredweight) f.o.b. Midwest mill in early February.

But prices subsequently lost speed, with average prices dropping to $610 per ton ($30.50 per cwt) last week as market participants said momentum had effectively disappeared, citing lower deals in the marketplace and widespread discounting (, March 21).

SteelBenchmarker’s latest report, released March 27, also shows a recent softening, with U.S. hot-rolled band prices down 0.9 percent to $678 per tonne ($615 per ton) from $684 per tonne ($620 per ton) two weeks earlier.

Certain mills have been particularly hungry for business, sources said, with major deals reported from a handful of suppliers throughout the Midwest and Southeast.

"Not much has happened (this week) other than my sense that things are sliding a bit," a northern service center source said. "We’re seeing a slight bit of seasonal uptick right now, but it’s just not typical. It’s not seasonally normal; it’s below that.

"Every order is a good order for a steel mill," he added. "There’s just too many people facing too few orders in the whole supply chain. It’s the mills, the service centers, the tubers—it’s everyone."

But while market participants report too much supply to meet steady but not robust demand, some short-term relief could be in sight. A number of domestic mills are rumored to be planning spring outages, although market sources said that meaningful supply taken offline would require significant unplanned outages.

Meanwhile, earlier rumors of another round of price increases appear to have fizzled for the time being, given uncertainty in the market.

"There were rumors that mills might come out with another run of increases, but it seems like they’ll hold off on that," a second Midwest service center source said. "Things have been pretty steady, and demand has been solid, but it isn’t great. Margins are tight. And things just keep bumping around in this short range of $30 to $31 (per hundredweight)."

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