CHICAGO Purchasing managers indicate that the steel sheet market is inching toward recovery, with destocking reportedly on the decline and mills efforts to raise hot-rolled sheet prices said to be gaining some spotty traction.
"Business is decent. May was a very good month," a source at a Mississippi flat-rolled steel processor said. "For tons out the door, wed have to go back to 2008 to see similar per-day volumes."
An East Coast source agreed that the past six weeks of improved business is encouraging. "We think the market bottomed out and prices are heading north. Mills are not discounting like they had. That puts distributors in buying mode instead of sitting-on-the-fence mode," he said.
Hot-rolled coil spot prices reportedly touched lows of around $27.50 per hundredweight ($550 per ton) during the latest downcycle, but a $50-per-ton increase in published prices announced in late May has served to bring prices off the bottom, sources said. Buyer and seller sources last week reported spot prices of around $29.50 per cwt ($590 per ton) f.o.b. Midwest mill, with mills said to be pushing for even more of a boost where possible (amm.com, June 6).
Some mills are now discussing another round of increases as well, AMM understands.
In terms of pricing, "the mills are trying to stand firm," the Mississippi steel processor source said.
A Midwest steel buyer agreed that spot prices were on the rise, noting that his prices have moved up by $10 to $20 per ton rather that the $50 per ton initially sought, and that the "prevailing number" is still under $600 per ton.
With prices on the rise, some distributors as well as end users are choosing to buy more material, the East Coast source said. Distributors "are replenishing their own stock of standard, vanilla material. The momentum is starting to move onto the positive side."
The Institute for Supply Managements latest Steel Buyers Forum survey confirms the trend of modest restockingor at least of slower destocking. Fewer buyers surveyed kept less than one months supply on hand in May (28.6 percent compared with 44.4 percent in April), and there was a significant drop in the proportion of buyers who deemed their inventories too high compared with demand (28.6 percent compared with 38.9 percent in April).
A little more than one third of respondents (35.7 percent) said they expect to reduce inventories over the next six months compared with 50 percent in April.
But while destocking appears to have slowed and some in the sheet sector described May order and shipment levels as decent or even better than expected, market players also said some buying caution remains, especially when buying from mills with shorter lead times.
Demand is "kind of a crapshoot. Most people are still just filling holes. Were waiting on quotes (offers) out for July and the third quarter. Nobody is jumping on anything," the Midwest buyer said.
The Mississippi flat-rolled processor source agreed, noting that he usually will order a weeks worth of steel rather than a months volume. "Theres no reason to place big orders," especially with lead times remaining short, he said.