CHICAGO U.S. and Canadian service centers recorded drops in both steel shipments and inventories in May as market players questioned the ability of domestic mills to stick to their guns on recently announced price moves.
Customers continue to buy only what they need in a market characterized by intense price competition and abundant steel supplies, attendees said on the sidelines of the Steel Success Strategies XXVIII conference in New York, sponsored by AMM and Englewood Cliffs, N.J.-based World Steel Dynamics Inc.
"Customers are calling five distributors (to get the lowest price) before placing an order," a Great Lakes sheet distributor said. "Nothing has changed demand, so customers do not understand why prices are up."
On June 14, Severstal North America Inc. became the most recent major domestic steel mill to raise its minimum base prices (amm.com, June 17).
ArcelorMittal USA LLC, Chicago, announced June 13 new minimum base prices of $630 per ton for hot-rolled coil and $730 per ton for cold-rolled and galvanized product, and Pittsburgh-based U.S. Steel Corp. and Charlotte, N.C.-based Nucor Corp. reportedly made a similar move (amm.com, June 14).
Buyers also cast doubt on efforts by domestic mills to offer firm price options.
One service center operator said mills are likely offering fixed prices because they expect tags to tumble, and prices are trending downward due to weak demand and high-priced domestic steel attracting more import competition.
U.S. service centers shipped nearly 3.7 million tons of steel at a rate of 166,300 tons per day in May, down 4.8 percent from roughly 3.8 million tons at a rate of 174,600 tons per day in May 2012, according to the latest data from the Metals Service Center Institute (MSCI). In the first five months of the year, U.S. service centers shipped 17.7 million tons, off 4.6 percent from the same period last year.
In Canada, 515,000 tons of steel shipped in May at 23,400 tons per day, down 10.1 percent from 573,100 tons in May 2012 at a daily rate of 26,000 tons. In the first five months of the year, Canadian distributors shipped about 2.5 million tons, off 9.9 percent from the same year-ago period.
Meanwhile, U.S. service centers held 8.03 million tons of stock (2.2 months supply) in May, down 11.6 percent from 9..08 million tons (2.4 months supply) a year earlier, MSCI data show. Canadian distributors stocks slipped to 1.5 million tons (3.0 months supply) in May, down 7.5 percent from more than 1.6 million tons (2.9 months supply) in May 2012.
"May service center data point to soft shipments and continued inventory destocking," Morgan Stanley & Co. LLC analyst Evan Kurtz said in a research note June 18.
Declining shipments and inventories appear to be translating into weaker prices, market sources said.
"Contract buyers are paying $600 (per ton) and spot buyers are still getting (contract prices)," a Midwest processor and distributor said.
Even the possibility of higher prices isnt stimulating buying, several market sources said. "We are not building inventory," a national flat-rolled distributor and processor said. "This little blip wont last."
Still, some buyers said supplies should tighten as domestic producers take their seasonal summer maintenance outages.
Corinna Petry, New York, contributed to this story.