Mills seen battling odds to hike flat-rolled tags

NEW YORK — Efforts by at least four major mills to boost flat-rolled steel prices could be foiled by a number of downward pressures, including sliding raw material costs, oversupplied markets and lackluster demand.

U.S. Steel Corp., Pittsburgh, told customers May 22 it would immediately raise spot prices for all flat-rolled steel products by a minimum of $50 per ton (amm.com, May 22).

A day later, ArcelorMittal USA LLC, Chicago, raised minimum base prices to $610 per ton ($30.50 per hundredweight) for hot-rolled coil and $710 per ton ($35.50 per cwt) for cold-rolled and galvanized product, it said in a May 23 letter to customers.

On May 23, Dearborn, Mich.-based Severstal North America Inc. separately set new minimum base prices for its sheet products as well. According to an e-mail to customers, effective with all new inquiries, new base prices are $610 per ton for hot-rolled sheet and $710 per ton for cold-rolled and galvanized products, Severstal said.

AK Steel Corp., West Chester, Ohio, also raised spot market base prices for all flat-rolled products by a minimum of $50 per ton effective immediately with new orders, it said May 23.

Other mills are expected to follow, sources said, although some said the odds don’t seem to be in their favor.

"You can want a price increase and you can deserve a price increase, but it only matters if the market will allow it," one Midwest service center source said. "There are still too many tons chasing too few orders. Scrap prices are drifting down and so are iron ore prices. I don’t see an increasing trend in demand, and this whole thing is becoming a game of smoke."

Hot-rolled band prices fell this past week to $560 per ton ($28 per cwt) f.o.b. Midwest mill, down from $570 per ton ($28.50 per cwt) the prior week.

The hike by U.S. Steel was the first in more than a month, after Severstal North America Inc. told customers in April that it was raising hot-band tags (amm.com, April 18).

But with the typical summer slowdown approaching, which also indicates softer scrap tags, some said that any upward momentum will become increasingly difficult.

"I think that when we hit that transition point—once we hit the bottom and demand picks up—prices will move up very quickly," a western service center source said. "The mills have been struggling for a long time now just trying to make ends meet. At that point, this increase will have some teeth. Until that moment, we’re in malaise."

Others suggested that a number of other factors—U.S. Steel’s union lockout in Nanticoke, Ontario; planned blast furnace outages at other major mills; and the impending sale of ThyssenKrupp AG’s Steel Americas division—might work favorably for the market in the coming months.

"I don’t think we’re going to see prices heading up in a major way, but I think this will at least stop prices from going down further," a second Midwest service center source said. "There’s no way in hell that anyone will go up $50, but I can see maybe $20 or so. The biggest trump will be lead times, and only extended lead times will get prices going up."

And short lead times, coupled with oversupply, could stymie any upside in real pricing in the long run, others sources said.

"Oversupply remains a concern, and could limit price upside despite positive demand outlook," Morgan Stanley Research analysts wrote recently. "While the bankruptcy of RG Steel (LLC) in 2012 was an important first (for) steel in rationalizing domestic capacity, remaining global overcapacity continues to be a constraint on U.S. steel prices despite our favorable domestic demand expectations."

Lean inventories from service centers show further hesitancy by customers to buy steel. According to recent Metals Service Center Institute (MSCI) data, U.S. distributors held 5 million tons (2.3 months’ supply) of flat-rolled carbon inventory in April, down from 5.2 million tons (2.4 months’ supply) in March.

"Looking at the MSCI numbers, they’re really low. People are trying to sit out as long as they can. No one is keeping stock," a third Midwest service center source said.

While it’s unclear if the price hikes will stick, some are hoping for a brighter outlook.

"This announcement, I’m skeptical on. But something has got to give in the next 60 days or so because we can’t continue this mucky muck we’re in," a source in the South said. "I don’t know what the tipping point will be, but something’s gotta give. Maybe this could be a game-changer."


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