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Flat-rolled buyers seeing mixed signals

Keywords: Tags  Flat-rolled steel, steel prices, steel distributors, steel supply, steel demand, foreign offers, Corinna Petry


CHICAGO — Flat-rolled distributors are relaying mixed signals on both the buy and sell sides of their businesses.

An Institute for Supply Management Steel Buyers Forum survey shows forward order trends up, backlogs up slightly, improved shipments vs. the previous quarter and a 13-point jump in the percentage of respondents expecting an upturn in sales and production in their industries over the next six months.

Yet some sources told AMM that lower scrap pricing, returning capacity at AK Steel Corp., West Chester, Ohio, and Pittsburgh-based U.S. Steel Corp.’s Lake Erie Works in Nanticoke, Ontario, and imports will pressure domestic hot-rolled and cold-rolled coil prices into lower realms this fall.

Others aren’t so sure. "I think people came back from the holiday to see that their inventories are low. There are lots of whispers of another price increase to shore up demand," one Mid-Atlantic distributor said. "It’s too late to bring in imports. If your boats haven’t left the docks of Asia, they won’t be here until Thanksgiving. So you have a window of opportunity—if you did purchase imports—to beat the domestic increase. But if the domestic price falls apart, that’s not good."

A third argument for stable domestic flat-rolled pricing is that mills are standing tough, sources said.

"We are not seeing any side deals being made. People are buying for today’s business and not going further out. They don’t have the cash to (buy large volumes and) keep inventory high. Banks are not lending much money," an eastern Great Lakes service center operator said, noting that both the consuming markets and steel pricing are stable.

The Mid-Atlantic distributor said that while she hasn’t heard of any low-ball sales, "we assume there are side deals" for orders at or above 5,000 tons. For a common grade at the right volume, "I guarantee I could buy it extremely cheap. But who needs 5,000 tons?"

Demand "has been status quo," a Detroit-area sheet buyer said. "Nobody is overwhelmingly optimistic or pessimistic. Some products are selling better than others. Defense work tailed off quite a bit, but the solar business is coming on strong. Automotive is the same."

Foreign material is due to arrive in September and October, landing along the East Coast and Houston. "A lot of brokers are offering material," he said, adding that softer scrap pricing will drive steel prices down. "We are already seeing it, by about $20 per ton. And that’s on only a 1,000-ton order."

Lead times have lengthened, the Detroit-area buyer said, but returning capacity in Ontario and Ohio will add to the availability of material.

A Chicago-area buyer put hot-rolled coil offers at $650 per ton, down $5 per ton from the f.o.b. Midwest mill price before the holiday weekend (amm.com, Aug. 29).

"The mills are still trying to hold their ground but prices remain negotiable," he said. "We expect pricing to start dropping any day. If there is a demand increase, we are not seeing it."

A Great Plains buyer said he still hopes second-half economic activity will pick up. "That’s important," he said.


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