CHICAGO Reliance Steel & Aluminum Co. expects prices and demand to improve in 2014 and is already seeing better results, company executives said.
Such predictions may feel like déjà vu, given that the Los Angeles-based service center has predicted better times before only to be proven wrong, said chairman and chief executive officer David Hannah.
The difference this year is that "were actually seeing rather than just anticipating demand increases ... in our order books right now," Hannah said during an earnings conference call with analysts Feb. 20.
Prices are up an average of 1.5 percent in January compared with December, Hannah said. "We have probably not seen average pricing on a sequential basis go up ... in the past 12 to 14 months, so were encouraged. The demand looks better and it just feels better this year than it did last year at this time."
On the steel side, price increases announced for beams, mini-mill products and plate have held to date, Reliance president and chief operating officer Gregg Mollins said. Flat-rolled stainless steel also is seeing "very strong" demand, with prices up in part because of base price increases announced in the second half of 2013, he said.
In addition, discounting to CRU Group-indexed prices is largely out of the market after fourth-quarter contract negotiations, with the exception of two-year contracts negotiated in 2012, Mollins said. "Some of the mills have taken a very, very firm position on CRU discounts and refused to go below them," he said, adding that he would like to see discounting to CRU prices "go by the wayside and stay by the wayside for the rest of our lives."
Market sources told AMM in October that U.S. steelmakers had remained firm on their pledge to move away from index-based discounting (amm.com, Oct. 23).
Not all products have bright prospects, Reliance executives warned. Flat-rolled steel is seeing "softness" as domestic mills come back from maintenance outages in the third and fourth quarters and ramp up production at the same time that imports are increasing, Mollins said.
Domestic mills announced price increases in the second half of 2013 as well as in January, he said. "We have the highest-priced metal in the world here in the United States." He suggested that increased domestic prices were attracting imports, with carbon flat-rolled steel arriving at U.S. ports at roughly a $60- to $80-per-ton discount to domestic prices.
On the nonferrous side, spot prices for aluminum ingotLondon Metal Exchange prices plus Midwest premiumsare around 97 cents per pound compared with 90 cents in the fourth quarter, Mollins said. Common alloy sheet demand is "quite strong," with prices trending with ingot tags.
And while high Midwest premiums might benefit Reliance for now, company executives argued that high levels were unlikely to hold, noting that changes to LME warehousing policies could cause them drop.
Reliance sees current Midwest premiums at "just south of 20 cents," senior vice president of operations William K. Sales Jr. said. "We think we will see that come back down to the 10- to 12-cent range mid-year."
Midwest premiums shot up to as high as 21 cents per pound in early 2014, double levels seen just weeks earlier (amm.com, Feb. 13).