North American sheet steel prices have risen gradually by slightly more than $100/ton over the past 10 months, according to numerous buyers responding to Purchasing's monthly surveys. Several domestic steelmakers say that's because of increased demand for steel products and, now, they want to push transaction prices up off their latest plateau.

Order-intake reports from the mills for hot-rolled, cold-rolled and galvanized sheet steel show demand has awakened. Shipments from service centers in the U.S. and Canada are at a healthy daily average rate of 148,450 tons in the early months of this year, as compared with 142,555 tons for all of 2005.

"Recently, we spent some time with several steel management teams, and came back with a sense that steel order books are quite full through June," says analyst Aldo Mazzaferro at Goldman Sachs in New York. "We have already been impressed with the stability of U.S. pricing, following its rebound from the summer 2005 lows. We believe there is higher supply hitting the market, including more material brought by steel traders from foreign markets, but that supply is meeting with good demand and is not resulting in any significant price discounting."

Another analyst, Michael Gambardella at J.P. Morgan Securities in New York, agrees that "demand for steel will remain healthy through 2006 as inventory levels remain low and steel imports have not been price-disruptive." He notes that steel prices are rising globally—notably in China—which diminishes the risk of a surge in steel imports later this year. There have been reports of overseas suppliers reneging on previous offers, only to come back to the market at higher prices. However, this appears to be more rampant at the service center link of the supply chain than with end-use buyers.

Domestic ferrous scrap prices, a strong indicator of future steel spot prices, have been rising. So, some market insiders see mills pressuring buyers on further price increases as springtime progresses into early summer. Assuming that hot-rolled sheet would be averaging $570 in April—with cold-rolled sheet at $660—Nucor announced a $10/ton to $15/ton price hike for sheet products in May.

Gambardella suggests a $25/ton price hike for June delivery would be "quite likely." Buyers, however, remain skeptical about the projected price increases; in fact, less than 40% of those surveyed see hot-rolled sheet price inflation through June, and definitely not to levels the mills were proposing.

This year's price rises are expected to be more manageable than the drastic increase in 2004 that saw hot-rolled sheet steel prices double to nearly $760/ton. While prices are rising again in North America, they are climbing even faster offshore. Chinese hot-rolled sheet in coil prices for April had risen 40% since December.

"We believe that U.S. steelmakers will successfully raise spot prices in the second quarter as there is justification for a rise in both base prices as well as the raw material surcharge," Gambardella says. And there have been reports of tight supply of sheet steel but these reports are scattered—and appear to be centered in the Mid-Atlantic and eastern Midwest regions. That's where service centers are still coping with low inventories and expressing the most concern that they will not get the tonnages they need. One big problem is that integrated (blast furnace-fed) mills, especially, continue to be late in delivering flat-rolled orders booked during the winter.

Benchmark hot-rolled steel sheet prices actually improved slightly to $550/ton in March, the first gain of this year and a match of an eight-month high reached in December. Subsequently, analyst Timna Tanners at UBS Securities in New York then raised her second quarter transaction price forecast to $570, just slightly below the Purchasing forecast of $575. Like many analysts, Tanners estimates that market prices of steel will rise in the second quarter but taper off in the third and fourth quarters. She estimates prices for hot-rolled sheet in coil will average $548/ton in 2006, compared with $547 last year. The Purchasing full-year forecast at present is $563.

The online news service SteelBusinessBriefing.com is projecting a top of the range price of $580 for hot-rolled and $680 for cold-rolled in May. That's based on pricing announcements from Mittal Steel USA and Wheeling-Pittsburgh Steel. Some trade press reports have suggested that some domestic steel mills even try for June prices of hot-rolled sheet at $600 and cold-rolled sheet at $700.

Some service center buyers believe pricing strength is being fed by earlier unfulfilled expectations that second-quarter prices would fall due to an increased supply of lower priced imports and increased domestic mill production. "Everybody had the mindset that prices were going to fall, but they didn't and now everyone is scrambling," one such buyer tells SteelBusinessBriefing.com.

However, some analysts such as Sidney Fish of MEPS (International) Ltd. in Sheffield, England, see prices going south instead of north as summer approaches. He says cheap imports actually are increasing and marketplace feedback finds that a growing number of end-use customers have been ordering low-priced sheet from offshore sources. Some steel analysts do wonder if end-use buyers, anticipating higher prices, actually have been building stockpiles of cheaper foreign-made steel. Note that imported cold-rolled sheet in coil from such nations as Turkey was delivered in March and April closer to February's domestic market prices.

Analyst Charles A. Bradford at Bradford Research in New York says that orders for steel imports tracked by the U.S. Department of Commerce in February (the latest available data) "were largely placed four to five months earlier when the spread between domestic and foreign prices was close to $200/net ton, but which has fallen to about $100 today." He says the current spread makes the importation of foreign steel uneconomic from a price standpoint, but some grades and qualities are not available in the U.S. Still, "we expect imports to stay high for a few more months," says Bradford, "due to orders placed before the rally in Asian steel prices, which began a couple of months ago."