Service Center Support for Price Hikes Raises Questions

Twice per month, Steel Market Update (SMU) conducts an analysis of the flat rolled steel markets and trends associated with those who buy and sell hot rolled, cold rolled, galvanized, Galvalume and steel plate. One of the key areas we review is how steel service centers are handling spot pricing to their end user customers. It is our belief there is a clear correlation between service center spot pricing and the success or failure of the domestic steel mills’ ability to collect price increases. What we found during last week’s queries was a change in direction, but not a wholesale acceptance of higher spot steel pricing out of the service centers.

This can best be seen in the responses of the manufacturing segment of our survey. As early as last week, 41 percent of the manufacturing companies reported their service center suppliers as continuing to lower spot prices in comparison to what they saw just two weeks earlier. This represents a 21 percent drop in the percentage of end users reporting this way, as we had 62 percent reporting distributors as lowering spot prices in our mid-October analysis. Eighteen percent reported service centers as raising prices, where in mid-October none of the manufacturers were reporting that way.