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Oversupply sinks steel sheet prices

Keywords: Tags  steel sheet, hot-rolled, cold-rolled, Severstal, Nucor, Dearborn, price hike, CRU Catherine Ngai


NEW YORK — Weaker-than-expected market conditions, continued oversupply and barrel-scraping prices continue to plague the steel sheet market, sources say, with some wondering if a recovery is anywhere in sight despite at least one major mill’s recent push to turn the market around.

"There isn’t enough (demand) to raise prices right now. The fact of the matter is there ain’t nothing out there," one Midwest service center source said. "I don’t know how anyone thinks things will get better."

This past week, Severstal North America Inc. issued new minimum base prices of $32 per hundredweight ($640 per ton) for hot-rolled bands and $37 per cwt ($740 per ton) for cold-rolled and galvanized coils effective April 22 (amm.com, April 18). The move by the Dearborn, Mich.-based steelmaker comes amid a multiweek fall in domestic sheet prices, with most transactions reportedly now below the $600-per-ton level.

But market sources say they aren’t optimistic the new minimum base prices will stick, particularly as spot prices continued to soften in recent days.

AMM’s published hot-rolled coil price fell to $29 per cwt ($580 per ton) this past week, down from the previous week’s price of $29.50 per cwt ($590 per ton) f.o.b. Midwest mill. AMM’s cold-rolled sheet price stayed in the $34.50-per-cwt ($690-per-ton) range, although market participants said that orders in the $34-per-cwt ($680-per-ton) range were possible.

Much of the reason for the current softness in prices is that mills and service centers said they did not experience the typical seasonal uptick in the first quarter, with some worrying that the second quarter will continue to be depressed.

"First quarter nine times out of ten is an up quarter and people are swamped. It didn’t happen this year," a second Midwest distributor said.

Nucor Corp. and Steel Dynamics Inc. executives said during earnings calls this past week that the outlook for the sheet market remains grim, particularly as oversupplied markets, short lead times and economic uncertainty appear likely to continue (amm.com, April 17 and April 18).

"Things are slow. We’re doing OK, but we’re fighting tooth and nail for business," one mill source told AMM. "Prices are depressed to the point where a lot of business doesn’t make sense. There’s a very negative sentiment among buyers right now because everyone is so afraid to buy. You add it all together, and there’s a lot of capacity."

Others also cited overcapacity as the primary barrier to mills’ efforts to raise prices.

"My new philosophy is that you can put 50 things up on your blackboard as to why prices should go up. But if you have one thing on the other—which is too much capacity—that will override the other side of the blackboard," said the second Midwest service center source. "The mills are too afraid to cut capacity because they might lose market share. The last increases didn’t have enough strength. Without lead times pushing forward, (Severstal’s increase) isn’t going to stick (either)."

Some wondered if recent moves by some U.S. mills to back away from discounting off the CRU index will enforce stability on the spot market (amm.com, April 18). In particular, some said that getting rid of discounts would give mills better margins. Others added that larger service centers have been putting pressure on mills to bring spot prices closer to discounted contract prices because mills are hungry for new orders.

"I think the move away from CRU discounting will have an immediate impact on the spot market pricing from the mills," said a third Midwest service center source. "Part of the problem was that CRU discounting was apparently leaking into the spot market. My instincts tell me the move away from CRU discounting may mean an increase in spot numbers."

Others said that with mills looking to fill order books, any upward momentum in pricing will likely be short-lived.

"There’s no reason to think anyone will buy at the new price," the first source said. "I guarantee that if you give the mills a thousand tons, I would bet anyone a hamburger they’ll take the old price."


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