PITTSBURGH Domestic steel
sheet prices appear to have hit a bottom, sources said, but an
oversupply of material continues to stymie any upside despite
what distributors and mills report to be stable demand.
"People are all busy.
Everyones business is good, but its just that
everyone is struggling with margins," one Midwest service
center source said. "The mills are drawing the line in the sand
that were at the bottom. No one is coming out and
predicting a price increase, but no one is budging for lower
Sources said hot-rolled band
prices remained steady this past week, with most buyers and
sellers pegging spot prices at $29 per hundredweight ($580 per
ton) f.o.b. Midwest mill, although a number of sources reported
larger-tonnage transactions at closer to $28.50 per cwt ($570
The issue, many said, isnt
necessarily that business conditions are terrible or that
demand itself isnt steady. Instead, squeezed margins are
a top concern for many service centers and mills, sources
"The margins are what sucks.
When we all add extra capacity, we all knock each others
margins down," said a second Midwest service center source.
Others agreed, citing too many
suppliers chasing too few orders. "Too many people are too
desperate. And too many guys arent making enough money,"
said a third Midwest service center source. "There are plenty
of people out there who are putting out tons of steel and
taking a loss."
Oversupply in the steel sheet
market has been cited as the markets Achilles heel
for some time, contributing to a multimonth pricing slide. Last
month, Severstal North America Inc. announced that it intended
to push sheet prices higher and end the slide, but buyers said
the hike did not stick due to the capacity concerns.
"If you cry wolf too many times,
it has a negative impact on the people you sell to. It looks to
me the mills cried wolf one too many times," the second Midwest
service center source said of the attempted hike.
There are, however, a number of
positive signs on the horizon, sources said. A combination of
planned outages at various mills, the lockout at U.S. Steel
Corp.s Lake Erie Works and an expected deal this month
for ThyssenKrupp AGs Calvert, Ala., facility could help
solidify steel prices, sources said. With residential
construction activity picking up, the horizon could look even
brighter, sources added.
"If we see a pickup in
commercial construction, I think that will be enough to
kickstart this business," said a service center source in the
West. "Im really anticipating a pickup in the first
quarter of 2014. Right now, places like Arizona, Colorado,
those areas are where residential has been kicking in high gear
for the last six to eight months. Now, commercial is starting
to follow it."
Yet downward pressure remains,
particularly with scrap prices in major markets, such as
Detroit and Chicago, down about $20 per ton in May (
amm.com, May 3).
"The supply-demand situation still seems to be in
overcapacity. Prices are fairly stable right now; I dont
anticipate pricing moving at all," said a fourth Midwest
service center source. "Theres no more room to give on
the mill side of things. But with scrap falling, its only
going to weaken their ability to get a stronger, high number.
With that said, it certainly shouldnt push the price