SMU Market Trends: Have Steel Prices Found the Bottom?

Twice as many of the respondents to Steel Market Update’s latest market trends questionnaire expect flat rolled steel prices to remain the same or move higher. About 24 percent feel the downward price trend has bottomed, compared with 12 percent in last month’s returns. Steel Market Update’s current Price Momentum Indicator is pointing toward lower steel prices. There are questions as to whether the “new normal” of having benchmark hot rolled at or above $800 per ton will hold. Earlier this week, as we collected data on pricing, we did capture some numbers under the $800 bottom that had been holding for some time. There is a question in our mind about how we should handle a mill like JSW Ohio when it comes to indexing prices? Once they bring up their electric arc furnace sometime in the next two months and begin regular production (which is not guaranteed to happen at the same time; this furnace has been down for a while), we will then include them as a legitimate steel mill competitor in the market.

The predominant expectation in the marketplace, based on our analysis of manufacturing company and service center steel buyers, is for flat rolled prices to moderate further. By far the largest group of respondents, 76 percent, still expect steel prices to move lower. Corroborating that data, about 68 percent say they are reducing inventories in anticipation of lower spot prices over the next few months.