We reported earlier that steel prices may have peaked and our own anecdotal evidence also supports this claim. We understand that one major steel producer shipped July orders early because of weak demand. And all of this ‘demand’ that everyone seems to talk about, is well, not exactly meeting expectations.
Every single steel producer and probably 80% of the financial analysts making their “picks” site rising demand from, you guessed it China. But the Chinese themselves acknowledge that supply is exceeding demand. And with automakers reporting their biggest sales declines in 15 years, this ‘demand’ argument doesn’t seem to be holding up. And yet like Honda before them, Ford, GM and Toyota have also been asked to cough up a $250/ton steel surcharge according to this Wall Street Journal article.
It is interesting that all of the automotive OEM’s seem to be relying on the contracts as a negotiation tactic. There probably aren’t too many other strategies available. But, what goes up, must come down. Will China demand keep steel prices high? Time will tell.