Hot-rolled steel tags stayed steady this past week as buyers
continued to report mills have been holding the line on higher
pricing levels. But, while mills have successfully pushed for
higher pricing, the full impact of the increases has yet to be
felt by endmarket customers, sources said.
"Business has been
steady, and pretty flat, but service center pricing has been
rather aggressive," one Midwest service center source said.
"The price that were having to sell at is incredibly
aggressive and nowhere near reflects what the mills have raised
their pricing to. Its pretty aggressive out there."
Since the end of May,
U.S. mills have lifted prices from a transactional base of $28
per hundredweight ($560 per ton) for hot-rolled bands up to a
published price of $33.50 to $33.75 per cwt ($670 to $675 per
ton), which is effectively a $110 to $115 per ton increase in
the span of nine weeks.
remained steady at $33 per cwt ($660 per ton) this week, with
buyers citing larger orders transacting closer to $32.75 per
cwt ($655 per ton).
While a number of
supply-side disruptions lent momentum to the mills push
for higher tags, service centers said they cant continue
passing on higher prices to customers.
"The pie is small and
everyone is going after it," one Southwest service center
source said. "Recently, our margins have become so skinny I
wonder if its really worth taking the job."
account for the margin squeeze. While U.S. mills have
consolidated quickly, including the outright closure by some,
the service center sector remains oversupplied. In addition,
larger service centers with CRU discount contracts and certain
tonnage obligations have entered new end markets in a move to
battle lackluster demand and gain market share, heightening
competition for players already in that end market.
"The big guys that
have to replenish inventory cause theyre in a
contract are in a lot of trouble. They have to keep the fire
burning and push into new business areas," a second Midwest
service center source said. "Things have picked up a little
bit, but I dont know if it was because everyone is busy
or if no one was buying for a while and trying not to bring
material in at these higher prices."
Others agreed, saying
spot deals done with the mill cant compete with contract
deals done with the mill. And while many expect sheet pricing
by U.S. mills to carry strength at least through the end of
September, some wonder when things will turn around.
"Activity has been
good lately. The challenge that Im facing is competing
with players on a contract CRU program," a third Midwest
service center source said. "For example, on the cold-rolled
side, people are still using a $35 (per cwt) base when
cold-rolled in the spot market is $38 (per cwt). That makes