NEW YORK 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.
Hot-rolled tags 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."
Several factors 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 life difficult."