Flat-rolled steel buyers are welcoming the latest price
increases because they said it provides a better base from
which to negotiate 2014 fixed-price supply contracts.
On the spot market,
however, lead times are short, the majority of service centers
are keeping inventories in a tight range of between 30 and 60
days supply, and several buyers said their customers have
"We are buying just
what we need; nothing has changed in that regard," a source at
a Mississippi Valley processor and distributor said. "I have a
45-day inventory. Lead times are short so theres no
reason to keep more."
A few producers have
begun "to mention what they want to do with firm, index-based
pricing and weve received requests from customers to
quote them with an index-discounted fixed price for three, six
and 12 months," he told AMM. "At least one large
manufacturer has mill quotes that actually do include
index-based less a percentage. (Producers) said they wont
do it, but they are doing it for end-users."
Supply deals won by
large original equipment manufacturers likely wont be
extended to service centers any longer, he believes, because
producers lost money discounting steel on orders of virtually
"The fourth quarter is
quoting time for new and existing automotive business in 2014,"
an upper Great Lakes distributor source said. As for the latest
announcements of $30- to $40-per-ton increases, "were not
sure how much will be absorbed in the spot market, but it
creates a stronger environment for us to quote."
A Midwest buyer of
heavy-gauge steel said equipment builders have slowed down and
"pulled back their forecasts. We have a very large inventory so
I dont think well be purchasing much in the fourth
quarter. There is an overabundance of plate, which will keep
prices low and competitive."
A second Great Lakes
buyer noticed a firming of spot tags. "It seems prices defied
all the rules lately. There was a wide disparity between mills;
a gap had opened in the market," but that meant customers moved
their orders around, he said. Immediately before the announced
hikes, "the low end was $620 and the high end was $660 (per
An Institute for
Supply Management Steel Buyers Forum survey shows the
proportion of steel buyers who reported having more than two
months of inventories jumped to 26.7 percent last month from
17.6 percent in August, its highest level since December. Sixty
percent of buyers said theyll maintain current inventory
levels over the next six months while the rest plan to reduce