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Steel sheet hikes fizzle on overcapacity woes

WASHINGTON — Just weeks after the latest round of steel sheet price hikes were announced, service centers said that deals are inching back into the market, which could cause another possible slide in prices in the near term.

"There are thousands and thousands of tons in the market right now, and we just have too much capacity," a Southeast service center source said. "These increases just aren’t holding. The mills tried very hard to establish higher numbers, but buying hot-rolled black is just like buying a box of crayons. Everyone is making it. I don’t have faith in it anymore."

Mills have tried to boost sheet prices twice since the start of the year, resulting in a perceived $90- to $100-per-ton ($4.50- to $5-per-hundredweight) increase. While market participants quickly expressed doubt about the first increase, they said the second appeared to have momentum, especially as it underscored rising raw material costs and an expected seasonal uptick in the spring.

But those sentiments have given way to skepticism in the past week, with service center sources telling AMM that lower deals were being made, resulting in no change in price from before the increases.

"Things are OK, but there’s no pickup in business. I’m not sure there is anyone who is going to convince me it’s going to change," an East Coast service center source said. "The problem in the marketplace right now is that mills are so hungry for any order they can get—and I don’t blame them. Unfortunately, none of the perceived pricing is being held. I don’t believe a single price announcement (since January) has stuck."

Hot-rolled band prices were steady last week at $620 per ton ($31 per cwt) f.o.b. Midwest mill, but this week prices have inched down to $610 per ton ($30.50 per cwt), with some reporting that deals around $600 per ton ($30 per cwt) were starting to become possible at certain mills for larger tonnages.

Much of that sentiment, sources said, is due to continued short lead times, causing buyers to doubt any pickup in activity. Sources also continued to emphasize that overcapacity in the marketplace needs to fundamentally change before prices can stabilize.

"The only way things will get better is if someone takes off capacity. There’s just too much steel," a Midwest service center source said. "Lead times refuse to extend. No one believes in keeping an inventory anymore. We don’t think prices will go up from where they are now."

Looking forward, some sources said mill prices will face continued downward pressure.

"Any little bump we had is pretty much gone now. I don’t think the mills could hold it up with lead times being so short," a second Midwest service center source said. "Thank God scrap went up this month, or there would’ve been zero momentum behind the last increase. But now people are talking about scrap being down again in April."


Latest Pricing Trends Year Over Year

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After witnessing the pace of steel plant idlings and worker layoffs during the first half of the year, what is your view of the second half of 2015? (choose one)

No matter what else happens, layoffs and shutdowns, etc., have nearly or essentially stopped for the year.
The environment will change little and the pace of layoffs will continue at a similar rate as the first half of 2015.
The environment will change little yet the pace of layoffs will begin to slow slightly to moderately.
The environment will change little yet the pace of layoffs could exceed the rate seen thus far.
The environment will improve slightly to moderately yet hiring and plant restarts will not resume this year.
The environment will improve slightly to moderately, with hiring and plant restarts commencing.
The environment will improve dramatically yet hiring and plant restarts will still be negligible in comparison.
The environment will improve dramatically yet hiring and plant restarts will only be slight to moderate.
The environment will improve dramatically, with hiring and plant restarts occurring nearly in tandem.


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