Steel: ''Inventory anxiety''blankets the marketplace

In trying to figure where spot HRC (hot-rolled sheet in coil) is these days, we’ve been referencing a number of independent sources and most were figuring that the Midwest f.o.b. price was around the $520-$538/net ton range as last month ended.

But, for all of January, Purchasing magazine placed its monthly average at $509/ton, 10% below its December average of $566. This week, the Steel Business Briefing (SBB) Steel Index is showing HRC at $527; that’s down $11 from last week’s $538 reference price. Platts, however, sees a much weaker February market and has subsequently lowered their Midwest f.o.b. reference price to $480-$500, with the midpoint figured below the psychologically important $500/ton level.

The consensus among the analysts is that the destocking cycle has not ended. “Inventory anxiety” is an ongoing theme these days as expectations for higher first quarter demand continues to disappoint.

Reported ferrous scrap prices as February got underway are lower compared with January, confirming the uncertainty that was expressed to us as last week ended. The guess last week was for a “sideways” market (at best) although others were calling for drops ranging between $20 and $30 per ton. Shredded scrap, as reported by SBB, for example, is now lower by some $32/gross ton at $218 delivered. Should this number hold, it would represent about a 12% drop compared with January.

The Scrap Price Bulletin No.1 HMS (heavy melt scrap) composite price this week was placed at $193.50/gross ton, down $9.33; shredded scrap was figured at $241.50, and Chicago bushelings listed at $252-$253/gross ton delivered. Look for downward revisions in next week’s report.

Platts, meanwhile, is reporting its midpoint reference price for shredded scrap at $225, delivered, with spotty mill demand, inconsistent inbound flows, and no help from exports. Sources place Turkey at $275/metric ton cfr, for an 80:20 mix of No.1 & 2 HMS.

Although we saw some positive news this week, the domestic auto industry remains distressed: January sales dropped sharply. Ford and Toyota January sales, for example, reported 40% and 34% declines year-over-year, respectively, while General Motors said its sales fell 49% from a year ago. Sales at Honda and Nissan were off by 28% and 30%, each. Total light vehicle sales were sold at a 9.6 million annual rate, 39% below a year ago and the slowest pace since 1982. Gads!

(Note: Due to travel next week, along with a couple of days of R & R thrown in for good measure, we’ll be publishing abbreviated reports on February 13 and February 20.)