SMU Trends Analysis: Service Center Spot in Limbo

Last week, Steel Market Update conducted our mid-January flat rolled and plate steel market trends analysis. One of the areas of interest to SMU was how manufacturing companies and service centers would peg spot pricing coming out of the distributors to their end customers.

Prior to the New Year, just below 75 percent of the service centers reporting to SMU told us their company was lowering spot prices (compared to two weeks earlier). The manufacturing companies were almost unanimous with over 90 percent reporting their distributor suppliers as lowering spot pricing. We were close to “capitulation,” the point at which so many service centers were lowering spot prices, and in the process devaluing their inventories, that they would begin to support higher prices. Eventually, the distributors hope the steel mills raise prices (as they did this week) and attempt to break the downward cycle. So, are we at the point of capitulation?