Final Thoughts

John Packard is traveling…

Steel Market Update changed its Price Momentum Indicator from Higher to Neutral today. Not that steel prices couldn’t start inching upward once again in the coming weeks. It’s just that the direction is unclear and we need to wait and watch for the next trend to reveal itself. Lead times aren’t offering much help.

Steel prices were on the rise in November and December, with the benchmark price for hot rolled hitting $610 per ton in early January. Since then the price has backtracked by about $25 to the current average price of $585 per ton, based on SMU’s canvass of the market this week. As reported in this issue, ferrous scrap prices for February are also down by about $20-30/GT for obsolete grades and $10-20/GT for prime grades, which will only add to the downward pressure on finished steel prices.

Mill lead times are usually useful in gauging price direction. When lead times are extending and it’s taking mills longer to deliver their products, that suggests they have lots of orders to process and demand must be fairly good. The current average lead time for hot rolled orders is right around 4.8 weeks, more than a week longer than in the fourth quarter and at the highest level it has been since mid-2018. But that figure has barely moved since mid-December. Some say prices are either moving up or they’re moving down, they rarely stay the same, but you can’t really tell much by looking at today’s lead times.

Around 44 percent of the executives responding to SMU’s questionnaire this week said they expect steel prices to remain the same over the next 30 days. Or, viewed another way, 44 percent don’t know if prices will move up or down in the next 30 days. A small number, 18 percent, expect prices to resume an upward track in the next month. The remaining 38 percent predict prices will move lower. Here’s a few of their more insightful observations:

• “Input costs for Asian mills are falling fast—iron ore in particular. Even with the virus situation, BOF’s in China and Japan will continue to produce steel looking for a home. Domestic sales will be impacted and the mills will be slashing export prices to move product. Expect ripple effects across the globe.” Manufacturer/OEM

• “There are lots of headwinds facing increased prices—uncertainty, trade risk, the China virus, lower input costs, potential decreased demand, higher inventories, etc. Prices are poised to move lower.” Trading Company

• “It really depends on when people have to go back into the market to buy steel. For my company, we will not have to buy again before May. So, we have until then to find a good deal to cover the third quarter.” Manufacturer/OEM

• “I think prices have peaked. They should bounce around this level for a couple of months. We have to watch the scrap number carefully though.” Service Center

• “I think prices will go a bit higher based on decent demand and the high mill utilization rates, although scrap prices look to be falling a bit, so I could see another decrease coming soon.” Manufacturer/OEM

• “Within the next week or so, we would expect pricing to drop. But if demand holds, we could see a minor rebound by the end of the month.” Service Center

• “Sentiment has shifted from optimism to negativity. We’re hoping for lateral moves until the uncertainty sorts itself out.” Steel Mill

The factors influencing steel prices will be explored at great depth during the 2020 SMU Steel Summit Conference. For more information about the conference, Aug. 24-26 in Atlanta, go to www.SteelMarketUpdate.com/Events/Steel-Summit

Registration is also still open for the March 31-April 1 Steel 101: Introduction to Steel Making & Market Fundamentals Workshop in Merrillville, Ind., to include a tour of the NLMK Indiana mill. To learn more, visit www.SteelMarketUpdate.com/Events/Steel101

As always, your business is truly appreciated by all of us here at Steel Market Update.

Tim Triplett, Executive Editor