Service Centers
February 22, 2015
Service Center Spot Prices at Point of Capitulation
Written by John Packard
It is no secret, the U.S. flat rolled steel service centers are over-inventoried and mill spot prices are falling. In order to take advantage of the lower pricing, distributors must move off any excess inventories which Steel Market Update has calculated to be approximately 1.145 million tons as of the end of January. (Note: the service center Apparent Excess/Deficit analysis and forecast is part of our Premium level service.)
The result of the destocking at the service centers is that spot prices to their end customers are also falling. The distributors are very close to, or in, something we call “capitulation.” This is the point where the service center industry essentially has given up hope as spot prices spiral out of control. In the past we have identified the point of capitulation to be when 75 percent or more of our service center respondents are reporting that their company is lowering spot prices.
