US steel prices still trending down

Commodities , Metals , Steel , USA Mar 02, 2015 No Comments

US steel prices still trending downUS flat-rolled steel prices crept down last week as mills continued to battle for market share against a backdrop of increasingly aggressive import offerings. Domestic steelmakers in the U.S. slashed prices in February to cope with a flood of imports juiced by the strong dollar, a move that will pressure their profit margins and reduce costs for buyers of steel, including auto makers.

Imports rose 33% in January compared with the year before, according to figures released Wednesday by the American Iron and Steel Institute, reaching 3.85 million tons, compared with 2.9 million tons a year earlier. The jump in imports comes as oil and gas drillers cancel orders for steel pipe, underscoring the resilience of overall U.S. demand compared with other markets.

When the market ultimately hits bottom, it’s unlikely to bounce back quickly due to low global prices, analyst Timna Tanners of Bank of America Merrill Lynch Global Research said in a research note Wednesday. “While a price bottom could be near as imports wane and domestic mill lead times stabilize, global oversupply likely keeps prices in check with foreign mills anxious to ship to the US,” she said.

To stem that import tide, steelmakers with major U.S. operations such as ArcelorMittal, U.S. Steel Corp. and Nucor Corp. have cut prices in the past few weeks, according to steel distributors who buy from them. The benchmark hot-rolled coil index is down 17% since the start of the year, to around $500 a ton, its lowest level since August 2009.

The lower steel prices are good news for makers of cars and car parts, construction companies and other major buyers of steel. Ford Motor Co. said it was “starting to see good news” on commodities when it reported earnings last month.

Steel industry insiders don’t expect prices to recover until May at the earliest. “You’ve got the flood in imports, a fall in iron ore and scrap prices, and the domestic steel service centers are over-inventoried,” said John Packard, publisher of Steel Market Update, an industry newsletter. “Prices will recover in May if we see imports shrinking and we see domestic service centers reducing their inventories.”
Via

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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