ArcelorMittal tries to elevate sheet steel prices
Chicago steelmaker wants $80/ton increases in July
By Tom Stundza -- Purchasing, 6/17/2009 9:29:00 AM
ArcelorMittal plans to increase July sheet steel prices by $80/ton, which would--if they stick--create market prices of $460/ton for hot-rolled sheet in coil (HRC), $560 for cold-rolled sheet in coil (CRC) and $625 for hot-dipped galvanized sheet (HDG). In effect, the Chicago-based steelmaker is trying to get prices back to where they were in March.
At present, buyers and various market surveys show mid-June prices of $380 for HRC, $470 for CRC and $545 for HDG. The new higher levels would supersede earlier $30/ton price-increase announcements, reported on June 4, which would have set July sales prices of $410 for HRC, $500 for CRC and $575 for HDG.
Nucor has told Wall Street that orders have increased in recent weeks and analysts generally agree that steel transaction prices will rise sometime this summer because manufacturers and distributors need to rebuild inventories. However, “restocking activity will likely emerge slowly given extremely tight credit markets and very weak economic momentum,” says analyst Mark Parr at KeyBanc Capital Markets in Cleveland.
Purchasing.com surveys have shown that steel buyers are buying fewer tons and only 21% of those in June had plans to increase steel buying anytime soon.
Historical buyer expectations data can be found at Business Intelligence Center - Buyers' Outlook/Business Index Dataat www.purchasingdata.com, Purchasing’s subscription website for commodities prices, leadtimes and business conditions.
In a letter to customers, ArcelorMittal attempted to justify the price explosion as a way “to recoup the value for our products that has been lost over the last six to eight months.”
Some analysts dismissed the comment as commercial marketing blather, noting that operating rates at 47.7% of capacity in the week ended June 13 remain too low for the mills to regain much pricing power. “We do not believe that demand will strengthen enough to absorb all the excess capacity or to boost prices this high,” says analyst. David Lipschitz at Calyon Securities.
Metal Service Center Institute data indicates that U.S. and Canadian shipments dropped to 2.6 million tons in May, inventories at 7.6 million tons still were almost 3 months of supply. “The supply chain now seems quite lean,” says Parr at KeyBanc Capital Markets noting that U.S. flat-rolled stocks of 3.37 million tons were down 9.4% from 3.72 million tons in April.
Looking ahead into the third quarter, ArcelorMittal says it’s observing “an increase in orders from our end user customers indicating that they have also fully depleted their inventory levels and some are planning increased production schedules during the third quarter.” Parr agrees that “any uptick in end demand could have an outsized impact on mill order momentum and pricing, given the tightened state of service center inventories.”
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