Steel Buyers Weigh in on Domestic Spot Price Increase Announcements

AK Steel and NLMK USA raised flat rolled steel prices by $40 per ton ($2.00/cwt) on all new spot sales of flat rolled steels (hot rolled, cold rolled, galvanized). At the same time, SMU understands that Steel Dynamics has opened their order books for February and are quoting prices that are approximately $40 per ton higher than what they were looking to collect for January production (Galvanized being reported at $43.00/cwt for cold rolled substrate).

Nucor increased steel prices by $40 on hot rolled and $30 on cold rolled and coated. We heard from one service center general manager today that their company was a little confused as they had just gotten new spot pricing from Nucor lower than their increase announcement (at the lower end of our price range for this week).

We understand CSN (Terre Haute) is asking $43.00/cwt base on base gauge galvanized and $42.00/cwt base on light gauge galvanized.

We are hearing mixed commentary from steel buyers. At this moment SMU would say that the majority of the comments being received this week are optimistic regarding demand for 2017. Most are looking for business to remain about the same (such as automotive) to being up by as much as 10 percent.

We received the following email from a service center in the Midwest who told us, “Here’s what we’re seeing for small spot orders – on standard stock items we moved into a replenishment mode quite some time ago based on usage and lead times.  However, demand and business activity are strong and the New Year is off to a good start – we are expecting a strong 1H/17.  We expect demand to increase across most of our market segments.   Price increases from the other mills have been via e-mail indicating “here is our new spot pricing” – nothing published per se in a formal announcement letter.  Some mills are “inquire only” on some products and quoting net/net FOB mill pricing.   It looks like all of the mills and converters will follow.

HRC = $31.50 – $32.00 (4 weeks at most EAF’s & 5-6 weeks at the integrated mills)
CRC = $42.00 – $43.00 (6-7 weeks at the EAF’s & 7-8 weeks at the integrated mills)
HDG = $42.00 – $43.00 (5-6 weeks at the EAF’s/converters & 8- 9 weeks at the integrated mills)

I follow the leading indicators closely, being a subscriber to ITR and other economic publications along with the great info SMU provides, and a stronger 2017 has been on the horizon for a while. The Manufacturing recession is in recovery and moving into growth mode.  You have to observe that globally there are improvements happening in China, The Euro Zone, Brazil – virtually everywhere.  That is a very encouraging sign for our industry.”

We heard from an automotive service center, “With scrap moving – I expect all mills to push prices up – but don’t have any negotiations finalized yet.  I would bet that prices will be up about $20 per ton.  Prices will definitely be higher than they were 2 weeks ago / although I doubt that any large buyers will be a full $40 up if they are buying at typical tonnage levels from traditional suppliers (new or unusual demand would probably get the full amount). Our demand is good and forecasts look good – so we are buying some spot – but are being VERY careful not to build inventory.  We are as optimistic as anyone – but we aren’t in the business of gambling – especially with so many unknowns right now.”

A second automotive supplier told us, “Still pretty much status quo, safety equipment seems to moving from some manufacturers to others and that market is still pretty strong. I think the projection for automotive is still around 17,000,000 units, should stay strong, maybe not as strong as last year, but strong.”

A Chicago area service center reported strong sales in late 2016 and, so far business appears to responding to the “Trump effect.” Here is what we were told, “…As a sidebar, I will say that some of our customers are talking about the “Trump effect” which seems to be something like, “we’re expecting better business in the mid-term future so we’re going to increase our finished parts inventory to be ready”.  The result of this is that December was a good month, 10% better than December 2015, and January is shaping up to also be better, though perhaps not by 10%.”

From the southwest we heard, “Yes I am a buyer at new spot price levels; business is started off strong for 2017 and expectations are 1st QTR will be very strong now.”

An automotive sub-contractor told us, “We have plenty of new projects starting this year and expect to outperform 2016.”

We did hear from a couple of service centers, one in the east and another in the Midwest, who reported business as being “fair” and both expressed concern going forward.

At this point in time our SMU Steel Price Momentum Indicator continues to point toward higher prices over the next 30 days. We will see what happens after that…