Final Thoughts

Steel Market Update’s service center inventories data for September shows supplies on hand at very low levels. At the same time, the percentage of inventory on order is at very high levels. That suggests, say some observers, that some service centers may have waited too long to replenish their inventories, then did some panic buying to catch up, pulling demand forward. The result may be lower demand than expected from the distribution sector for the rest of the year. On top of seasonal weakness and lower scrap prices, that could add to the challenge the mills face in collecting higher prices.

Mills reportedly are pushing for $700 per ton hot rolled, but only 27 percent of buyers polled recently by SMU believe prices will get that high before correcting. About 38 percent believe steel prices are already peaking around the $650 level. As one skeptic commented to SMU: “Pricing at over $650 in this market cannot be sustained. The air is too thin at that elevation.”