Service Centers
November 27, 2016
SC Spot Prices: Classic Capitulation Equals Support for Price Increases
Written by John Packard
Flat rolled steel service centers and wholesalers sell material into what is called the “spot” market. The spot market is where a service center customer buys material at whatever price the market will bear in order to fill a short term need. Over the years Steel Market Update has found that when flat rolled steel distributors are “dumping” steel (i.e. selling to their spot customers at lower and lower prices in order to move inventory) they reach a point which we call “Capitulation.” Capitulation is the point when 75 percent or more of our survey respondents are reporting that their company is lowering prices to their spot customers. Once we reach the point of Capitulation our survey history shows distributors are ready to accept price increases in order to stop the cycle and bring value back to their inventories.
We reached Capitulation in early October 2016 and the first price increase announcement was made on October 21st. Since then there have been two more announcements for a total of three.
