Hot-rolled steel sheet drops $10/ton

Sales prices slip to $525 in early November

Tom Stundza -- Purchasing, 11/4/2009 2:18:03 PM

The price of hot-rolled steel sheet has dropped $10/ton instead of rising to the level analysts forecast. They had forecast a price of $600/ton, but the price slipped this week to $525/ton from an average $535 in October.

Analysts say marketplace fundamentals are pressuring prices lower due to continued weak end-user demand and operating rates that need to be reduced. A TD Bank analysis says "low order levels have reduced the order lead time to four weeks, or in some cases even lower, which is leading to some price discounting to entice orders, and is especially supported by weaker steel scrap feedstock costs."

"There has been little improvement in real demand and the uncertainty in our economy is still very high," says Nucor's CEO, Dan DiMicco, in a conversation with Wall Street analysts. "Real demand is in for a long, slow recovery." Even though the steel industry's operating rate is about 48% year-to-date versus about 88% for the same period last year, it has been around 62% of capacity in recent weeks, and analysts suggest production-rate cutbacks may be necessary just to keep prices from slipping back to $500/ton later this