New capacity will keep steel plate prices low

By Staff -- Purchasing, 2/8/2001

The steel plate market is poised for a very soft year with low prices, according to insiders.

"The market is characterized by slowing demand and overcapacity being made worse by new mills that have yet to ramp up to full production," says Jim Urban, vice president of sales and marketing for the Plates and Shapes Group of the Metals USA service center company. "Let's hope that the new Bush administration can restore some confidence in the economy and perk up demand." Otherwise, he sees weaker players continuing to file for bankruptcy protection or shutting down.

Nucor Corp., Charlotte, N.C., is selling plate made at its new Hertford County, N.C., mill. Ipsco Inc., Lisle, Ill., is scaling up production at its new plate mill near Mobile, Ala. The million tons of new capacity from these mills will offset the supply tonnage lost when Gulf States Steel Corp., shut its Gadsden, Ala., plant last autumn.

Various service center sources say domestic mill prices for cut-plate product is down to $290-$300/ton, matching prices from importers. OEM buyers report that coiled plate continues to sell at $260-$280/ton. Daniel DiMicco, president of Nucor, admits that new production from the mill-running at 40,000 tons/month and heading toward 65,000-has caused a temporary pricing downturn. "When you have a new entrant into the market like Nucor, pricing suffers," he says. "That happens unless demand exceeds supply, which in this case it does not. Everyone anticipates price declines when a new mill comes in, so in that sense, this is no surprise."

A recent market analysis by CIBC Wood Gundy in Toronto suggests that the U.S. plate capacity increases make it unlikely for prices to recover in the near future-"although recent reductions in plate inventory levels at the service center level should help keep prices fairly stable." The Canadian analysts also believe that "growing global demand for plate from shipbuilding and natural gas transmission pipelines should also support plate prices."

Steel plate supply has dropped over the past two years by 2%-2.5% to 10 million tons, with imports accounting for an average 17%. Demand has been averaging 8.5 million tons. While plate use for conversion into large-diameter pipe and by heavy construction have been healthy, and sales have been solid to the machinery market, shipments into transportation (for ships, trains, heavy trucks and off-road vehicles) have dropped.

Joseph Rutkowski, executive vice president of Nucor, also says "the plate market is relatively stable, but it's not extremely strong right now. With us bringing in capacity and Ipsco ramping up, that's likely to continue." He hopes that this new capacity "will push some of the low-priced imported tons out of the market." However, that is unlikely, according to market analysts, as long as the U.S. remains the lucrative market it has become because of the strong dollar.