GOES Looks Like a Bifurcated Market

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Despite a slight uptick in this month’s GOES M3 index (the index increased 1% to 195 from 193 in November), market participants report some atypical market conditions. The first involves unsettled contract negotiations among industry participants for 2015 requirements (most contracts settle by the end of November).

GOES_Chart_December-2014_FNL

The second anomaly involves the domestic mills not winning any price increases with large buying organizations, but receiving 10-12% price increases from smaller ones. We’d expect large buying organizations to achieve bigger discounts from producers than smaller organizations, but not bifurcated pricing with one group of customers paying price increases and the other not at all.

Meanwhile, offshore mills have also attempted to raise prices on domestic buying organizations, by some accounts to over $300/mt. Japanese imports, however, remain muted when compared to monthly volumes from January – April of this year. India has implemented new standards requiring higher grades of material. Asian producers have claimed limited production for the higher quality grades.

It appears the Asian suppliers feel confident that they can win big price increases in the US market.

We tend to disagree – particularly because the larger buying organizations have used their tonnage as a strategic advantage to hold the domestic producers to minimal if any price increases. That means the domestic mills have had to play ball with these buyers because they need the volume. When a producer has to “play ball” they do not have pricing power. This dynamic will likely cap foreign producer price increases as well.

With additional anti-dumping actions in the EU, producers from Japan, China, Korea and the US may not have a home for all of their volume further capping price increases.

And companies like Cogent with increased wound-core manufacturing capacity will reap the benefits as many buying organizations have shifted core production elsewhere. With these volumes removed from the domestic market, the opportunities for price taking appear diminished.

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Last month, US grain-oriented electrical steel (GOES) coil rose to $2,688 per metric ton.

The GOES MMI® collects and weights 1 global grain-oriented electrical steel price point to provide a unique view into price trends over a 30-day period. For more information on the GOES MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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