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Steel sheet prices dip as lead times stay short

Keywords: Tags  steel sheet, steel buyers, hot-rolled, cold-rolled, Midwest service center, catherine ngai

NEW YORK — Steel sheet prices continued to slide this week as domestic overcapacity and widespread discounting more than offset continued stability in demand.

Although end-use demand remains fairly steady, sources said there are still too many suppliers chasing too few orders, and there appears to be little ahead that will fundamentally correct that imbalance.

"I don’t think there is room (for mill prices) to fall, but I think they will anyway. We’re at the point that if one mill doesn’t reduce their price, another will," one Midwest service center source said. "If we were desperate for steel, we would pay higher for it. But we don’t need it that desperately. The story is getting old: demand is short and availability is long."

As a result, domestic hot-rolled band prices inched down this week to an average of $600 per ton ($30 per hundredweight) f.o.b. Midwest mill from $610 per ton ($30.50 per cwt) last week, with some deals even being reported around $580 per ton ($29 per cwt). Others noted that there seems to be a slight squeeze on the traditional $100-per-ton ($5-per-cwt) differential between hot-rolled and cold-rolled prices.

Sources pointed out that continued short lead times of two to three weeks for hot band remain an issue. With such short lead times, many service centers are unwilling to place large-tonnage orders, since a quick turnaround is still easy to come by.

"Business is tough right now. There hasn’t been much going on in the last couple of weeks," one mill source said. "We’re struggling to meet our numbers. As long as lead times are short, there’s no reason for people to buy if they can go hand to mouth and buy what they need."

Others agreed, adding that the recent declining price trend is problematic for those holding larger inventories. In addition, ferrous scrap prices appear to be down about $20 per ton in most major regions in April, which could translate to lower finished steel prices down the road.

"The problem is that no one is investing in steel right now. You just can’t buy steel today with the confidence that it’s going to be worth more tomorrow," a second Midwest service center source said. "Everything is so flat (and) it’s the same story every week."

Despite the price erosion, sources maintain that business conditions remain fairly stable, even if activity and margins aren’t stellar. Some say that demand on the end-user level remains good, especially with the start of spring and an expected pickup in the construction and agriculture sectors.

"We’ve actually seen orders pick up slightly. Maybe it’s in relation to moving into a new month ... or because of the seasonality construction," a third Midwest service center source said. "Things look a little busier this week, and we’re seeing an increase in spot orders. But we’re not seeing any better pricing (from the mills)."

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