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Surge in steel purchases dips, but tags stick

Keywords: Tags  steel, steel buyers survey, hot-rolled coil, cold-rolled coil, Institute for Supply Management, new orders, backlog, Corinna Petry

CHICAGO — 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 (that’s) 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 don’t 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 (, 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 today’s 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 he’d been offered cold-rolled coil at $120 per ton below domestic prices so he’ll 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. I’m 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 hasn’t bought one pound yet. It’s just crazy."

Purchasing managers 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. "They’re not negotiating too far off that number. It is strengthening the market, but most people are accustomed to buying cheap."

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