Final Thoughts

Earlier this week Steel Market Update went out to a group of steel buyers to gather pricing information and market intelligence regarding how they were reacting to the recent price announcements, and if they thought this round of increases would result in yet another dead cat bounce. (A dead cat bounce is one where prices rise briefly before continuing their downward trajectory. The saying goes that even a dead cat will bounce when dropped from a high enough platform. Personally, I have never tested the theory…).

We received a mixture of comments with most leaning toward another dead cat bounce. I tend to be a little more optimistic than most steel buyers (luxury of not having to make purchasing decisions). My short-term optimism comes from 1) removal of a couple of blast furnaces from the market, 2) normal bounce we get from demand in early first quarter due to inventory adjustments for tax purposes or other reasons, 3) a pricing “overcorrection,” which took numbers below sustainable levels, 4) reductions in inventories (however, our data is suggesting this may be short lived), 5) and my gut instinct (which has failed me on many occasions and you should never make decisions based on my old gut…).