Steel Sheet Prices on Verge of Decline

22 Oct 2010 • by Natalie Aster

Steel buyers of hot-rolled sheet in coil (HRC) have been paying $535-$540/ton in spot sales this month, only slightly more than the $535 average for September. Now, they are sitting tight on placing November orders as domestic mill salespeople approach with "deals" well below the $550 ex-mill price they were seeking just days ago.

Some analysts say they aren't surprised to see some pullback in the benchmark HRC steel price because such mills as ArcelorMittal and U.S. Steel have been pushing list prices aggressively toward $600 despite relatively weak end-use demand. Atop that, production has steadily increased to almost 62% of capacity even though August U.S. steel mill shipments of 5.6 million tons is still about 37% lower than a year earlier.

The September survey of the Steel Buyers' Forum of the Institute of Supply Management showed that 77% of those polled believe their current inventory level is sufficient for one to two months. The October survey of steel buyers by Purchasing magazine found 76% with no plans to boost steel orders These findings support the view that any inventory restocking efforts are likely to be both price sensitive and nominal at best, as only 18% of respondents to both surveys plan to increase inventory over the next six months.

The prevailing business sentiment doesn't appear to be improving among steel buyers as 24% expect their trend of incoming orders to decline over the next month while 46% expect their trend of incoming orders to decline over the next three months.

A report by TD Financial also notes that prior positive sentiment among steel buyers tied to an expected automotive demand rebound "has clearly eased." Reason: The latest J.D. Power and Associates automotive production forecast now suggests material declines are likely through November and December. J.D. Power estimates October production of about a million motor vehicles, which would be 7% higher than September assembly. However, the light vehicle production for November is forecast to drop 9% and slide another 15% to 780,000 units in December.

Source: Purchasing


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