CHICAGO Steel buyers have become more wary and cautious in recent weeks than they had been during much of the first quarter, particularly when it comes to building inventories, an industry survey shows.
Nearly 55 percent of steel purchasing managers surveyed by the Institute for Supply Managements (ISMs) Steel Buyers Forum in March said their inventories were too high compared with demand, up from 50 percent who thought their stocks were too high in February and just 36.4 percent who deemed their inventories too large in the first month of the year. No respondents said their inventory levels were too low when surveyed in March, unlike the 7.1 percent who found themselves short material the previous month.
Similarly, no steel buyers said they plan to increase stocks in the next six months, down from the 14.3 percent of respondents who said they planned to boost stock levels when surveyed in February, the data show. Meanwhile, fewer buyers in March forecast an increase in orders and backlogs over the next three months, according to the survey.
Steel buyers hesitancy to stock up coincides with falling sheet prices and short lead times. This past week, AMMs hot-rolled band price slipped to an average of $600 per ton ($30 per hundredweight) f.o.b. Midwest mill from $610 per ton ($30.50 per cwt) a week earlier (amm.com, April 4), even as the stronger plate market bucks the trend (amm.com, April 5).
The sheet market weakness has dampened activity, and purchasers say they arent racing to stock up on metaleven if some mills are said to be hungry for orders.
"The mills are desperate. They need orders," a Mississippi Valley flat-rolled processor told AMM Friday. "We put in an order yesterday. They are going to melt it and roll it on the weekend. And it was only 400 tons."
Other buyers agreed, pegging spot prices at $600 to $605 per ton, and sometimes lower.
"The mills are quite aggressive to get orders. ... (Spot) prices are in the low-$30s (per cwt) for prime, but you can make deals. You can get anything you want within two to three weeks," an East Coast steel buyer said.
"We have got offers to buy (carbon sheet) below spot market prices," a Midwest-based national distributor confirmed. "I think the mills are getting desperate. Demand is so-so and they cannot get any traction with respect to price increases. They plateaued."
Sheet buyers across the East Coast, Midwest and Mississippi Valley all said they arent pulling in more material than they whats needed to fulfill orders.
"Everybody is fighting for the same business. There is too much production capacity, too much inventory and people dont want to get caught with high-cost inventories," the East Coast buyer said, calling the market "eerie" and a "ghost town."