Casting my mind back to MetalMiner’s conference in Chicago last fall and a presentation made by my colleague Lisa Reisman, I recall Lisa predicting steel prices would come off from the early part of this year – much to the derision of steel producers in the room, who were looking for price rises in the final quarter of 2013.
Not to be swayed, Lisa stuck to her prediction, arguing the price rises were the mills’ attempt to create a more bullish sentiment on price direction. Those price rises didn’t stick, and sure enough, this week The Steel Index (TSI) reported in their Monthly Steel Review that sheet prices in the US Midwest hit a nine-month low in March.
Globally, the story was the same, as weak demand and pressure from buyers forced European producers to cut their asking prices by €10-20/metric ton in an attempt to secure new orders and ASEAN steel markets experienced a decline as Chinese exporters slashed offer prices due to a bearish domestic market and falling raw material prices.
In spite of the trend, US producers have yet again tried to put up prices.
Producer Price Increases
In the last few days, steel producers raised list prices by as much as US $40/short ton and Platts reported that ArcelorMittal announced to its European clients its intention to increase some prices with immediate effect. Severstal NA and ArcelorMittal both raised prices for HR coil by $40/short ton to bring list prices closer to the $660/short ton mark, while CR coil base prices were also raised to US$790/short ton.
This time, though, there may be more support for price rises to hold. Imports are up strongly, as the following graph from the TSI shows.
Indeed, if it weren’t for a fall in November/December, one could say the import trend has been heading upward for the last nine months, supported by recent manufacturing PMI numbers, the most recent from the Institute for Supply Management (ISM) at 53.7.
What This Means For Metal Buyers
Last year, price rises were followed by buyers withdrawing from the market to wait for prices to fall; this year, the reaction has been a flurry of covering before other mills follow suit, suggesting buyers see price rises sticking. Material tightness has helped, supported by some producers cutting back due to raw material supply issues, such as US Steel facing iron ore delivery delays due to bad weather this year.
So it will be interesting to see if mills maintain current production levels and keep the market sufficiently constrained to maintain raised prices, or once full material supply is resumed, they increase capacity utilization and greater availability weakens prices again.
For now, the price increases look like they will stick, but a combination of rising imports and better raw material supply will test producers in Q2.