Sheet steel prices are crawling forward

By Tom Stundza -- Purchasing, 11/7/2007 7:44:00 AM

Carbon steel flat-rolled prices have declined 9% this year. They are starting to move up slightly as the year draws to a close, although the movement has been slow and erratic. Buyers aren’t buying as most have plenty of inventories for current business conditions. The price average for hot-rolled sheet in October was $513. Most transaction prices are anywhere from $500 to $520 early this month—all well under the suggested manufacturers’ price of $540. And there is market intelligence of some November-December deliveries that will be made as low as $470-$480/ton.

Chuck Bradford, the principal analyst at Bradford Research/Soleil Securities in New York, says it appears that steel users and steel mills “are playing chicken—with the users holding back their orders in the hope that steel prices will weaken before the end of the year.”

Steel buying in 2007 has dropped by an annualized rate of 3%. In an October survey by Purchasingdata.com, 72% of buyers planned to maintain or reduce purchasing of steel products over the next three months. A separate survey of its 300-member Steel Buyers Group by the Institute for Supply Management later in October found 94% planning to decrease or maintain in-house inventories over the next six months.

These surveys mesh with a poll of service center executives by UBS Securities, which found respondents suggesting the domestic mills are struggling to enforce the $30/ton price hike announced for October—since the distributors say underlying demand remains weak, possibly postponing any inventory restocking until early 2008.

Bradford now suggests that two separate $30/ton sheet steel price increases—one for October, which hasn’t been fully successful, and another for January (boosting list to $570)—“probably are a reflection of current market weakness” as the mills try to boost orders for late 2007 sensing a continued slowdown in purchasing in early 2008. Demand from makers of such key consumer durables as motor vehicles and appliances is soft, through, definitely reducing demand for sheet.