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Slow growth blamed for steel uncertainty

Keywords: Tags  Metals service center Institute, service centers, steel market, slow growth, market uncertainty, corinna petry

CHICAGO — U.S. service center operators cite slow economic growth for the uncertainty permeating the domestic steel market. Most recent price increases on hot-rolled, cold-rolled and coated coil have held, but the stickiness may be tenuous, sources told AMM.

Steel shipments by U.S. and Canadian service centers increased last month, although daily volume weakened compared with June, and inventories remained lean, especially in the United States.

"It’s just so much uncertainty," a source at a Missouri River Valley sheet distributor said. "Mills are pushing (the increases) but the market is not quite as strong as they would like."

Due to competition, service centers aren’t passing price hikes along to their customers "at the same speed" as they’re implemented by producers, he added.

"August volume is better than July’s but margins are under huge pressure," a southeastern full-line distributor owner told AMM. "We have paid up on the flat-rolled increases, but not all of them. Nor do we believe they will all stick and, if so, not for long. Business—at least in our area—is not good enough to sustain it."

A university expansion project created local steel demand, "but that’s petered out and the commercial market is spotty," he said. "What’s distressing is that the competition for these jobs is so intense. Steel margins are squeezed."

A Great Lakes coated coil buyer agreed with the others’ assessments. "The price increases have somewhat stuck. It has helped people to get off the fence and buy a little," he said. "But I’m not optimistic about it (improved volumes) continuing on more than a month-to-month basis. They are not buying long."

Spot quotes and lead times on coated sheet vary widely, he said. "There is a lot of uncertainty but it’s good that steel users are not sitting on the sidelines anymore."

U.S. and Canadian service centers shipped more than 3.92 million tons of steel products last month, up 3.2 percent from 3.8 million tons in June, according to Metals Service Center Institute data, but July had two additional shipping days than the previous month and average daily shipments fell 5.9 percent to 157,500 tons in the United States and 7.9 percent to 20,900 tons in Canada.

"Summer is never a boom time," the Missouri Valley distributor source said. "After Labor Day, we hope the picture will be clearer." Among steel distributors and their customers, "everyone is running lean. The new normal is definitely lower inventory," he added.

The southeastern source said he shed an additional 3 percent of inventory last month.

U.S. service centers held about 2.3 months’ supply in July, while Canadian distributors held 3.2 months’ supply.

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