Purchasing managers bought more steel in November compared with
October, according to an Institute for Supply Management (IMS)
survey, likely in anticipation of higher prices as well as
reflecting an upswing in new orders and backlogs. However,
buyers told AMM that they are cautious about placing
orders in December.
The IMS survey showed
a 15.9-point increase in the proportion of buyers who said they
would rely more on offshore sources over the next six months; a
15.9-point jump in respondents who said foreign prices are
below domestic tags; and a 4.6-point rise in those who reported
foreign mills were increasingly active and aggressive in
seeking U.S. orders.
"We are still buying
on the domestic spot market," a Mississippi Valley steel
processor source told AMM, "but we also bought foreign
(thats) coming in late February, early March."
A national flat-rolled
distributor executive said he understood the U.S.
producers main goal. "The mills are trying so hard to
break through the deals that dont make them any money,"
he said. "The extent that the mills have been successful
holding out (for higher prices) has surprised everybody."
Hot-rolled coil spot
prices ranged from $33 to $33.75 per hundredweight ($660 to
$675 per ton) during the first week of December (
amm.com, Dec. 6).
"Lead times are
stretching out a bit, depending on the gauge. Automotive
products have much longer lead times," the executive said.
He also has heard from
traders. "There are foreign offers out there ... significantly
under todays numbers if you want to place a couple
thousand tons." But he is not keen on the risk. "They start
with lower numbers, but freight differential will be there.
Will it be a good deal by the time the steel comes in?"
A southeastern Ohio
buyer downplayed the risk, noting that hed been offered
cold-rolled coil at $120 per ton below domestic prices so
hell be ahead even if U.S. producers start offering
discounts early next year.
Although steel users
were active in November, they are "sitting on their hands" in
December, the Ohio Valley source said. "Last year at this time,
customers loaded up from (a typical) 7,000 tons to 20,000 tons
on my floor. Im down to 5,000 tons right now, and that is
still dropping. There is no hedge tonnage coming in."
He said he has one
customer that usually stocks up in December for the following
year, but "he hasnt bought one pound yet. Its just
may be waiting for producers to crack before placing orders, a
Great Lakes buyer suggested, but that may be futile. "They are
giving us their best market price, which is consistently around
their book price," he said. "Theyre not negotiating too
far off that number. It is strengthening the market, but most
people are accustomed to buying cheap."