US steel market expects further price decline despite constructive demand: survey

in Commodity News12/05/2023

Sentiment for finished steel prices continued to soften in May, as many buyers remained out of the spot target expecting further price declines, a S&P Global Commodity Insights US steel market survey showed.

In the survey of US producers, distributors, traders and end-users, 75.8% expected finished prices to fall in May. For April, only 9.8% of participants had expected lower prices. Only 6% of those surveyed saw prices moving slightly higher, as lead times have contracted but remain extended with most order books filled through mid-June. Of those surveyed, 18.2% expect finished prices to remain steady.Mills have been trying to hold on to offer levels but as contractual buyers have moved down off contract max tonnages it has created more availability in their order books and spot transaction prices have moved closer to the $1,100/st level.

"We still see good demand in virtually every end-user market," an integrated mill source said.

Integrated mills continued to see strong demand from the auto sector during the second quarter, and some have been able to raise fixed-price contracts for those buyers.

Downside expected for flat steel pricesFlat-rolled mills have shifted to be more neutral on prices, as buyers see downside in the coming months and are on a wait-and-see mode, especially amid competition from imports with prices in the $900s for Q3 and below that for early Q4 arrivals from South Korea and Vietnam.

As mills have started to move out of outage season and some have been able to increase capacity, many buyers are expecting a pullback in prices as cheaper imported alternatives arrive — but those tons are limited and many buyers aren't willing to book futures deals with Q3 lead times, given economic uncertainties.

Raw materials dealers and traders were seeing lower finished prices as mini-mills were trying their best to push scrap prices with export markets on the coasts softening and scrap exporters looking to a possible restocking by Turkey.

Scrap prices were again in focus, with 66.7% of participants expecting prices to trade lower, and in total, 97% expecting prices to fall or trade sideways during the month.

As trade wrapped for May delivered scrap, busheling scrap prices fell by $25/lt in the US Midwest with shredded scrap prices trading down $40/lt in both the Midwest and South.

Mills will look to hold margins steady, but seasonality still remains for long products demand, and prices adjusted lower to metal spreads of obsolete grades.

Customers still keeping lean inventoriesViews on inventory changes remained mixed, as some flat steel and long products distributors were expecting stocks to increase slightly from April, while other users of flat and long steel were expecting stocks to be drawn.

The majority of participants expect inventories to remain steady or decrease month on month, with 78.8% expecting stable or a slight draw in inventories. On the long product side, 77.8% were expecting inventories to tighten or remain steady, with 78.6% on the flat steel side expecting the same.

On the whole, 57.6% of all participants expect inventories to remain unchanged in May compared with 54% in April, while 21.2% of all participants expect inventories to decline in May. Around 21.2% of all those surveyed — comprising a mix of flats and longs distributors — expect inventories to increase in May.

The Platts TSI US hot-rolled coil assessment started moving lower after five consecutive months of increases, as mills look to support spot prices with strong orders books and melt backlogs. Platts, a part of S&P Global Commodity Insights, assessed TSI US hot-rolled coil at $1,125/st on May 10.

Long products users still cautiously optimisticWire rod buyers are still fighting back on previous price increases from mills, as demand is still too weak to support higher finished prices and mills were hungry for orders. Domestic rod mills were starting to get more aggressive in search of orders and weary of trying to keep imports out of the market as ocean freights moved lower.

Rebar buyers in the Midwest were only buying what they needed as they expect prices could fall further with good availability at the mills and "decent" demand that hasn't warranted additional tonnage from larger import deals, especially with shorter domestic lead times. Though fabricators in the South tied to commercial remained busy with some signs of improvement and a possible bottom for prices in the residential sector both there and in Florida.

"Falling scrap prices and increasing downward pressure [seen] on prices from imports, along with [rather weak] demand but [there are] encouraging signs on the horizon," a long products distributor said.May steel production expected mostly steady

Expectations on finished steel production eased slightly, as 66.7% of participants expected output to remain flat, with 24.2% expecting decreases and only 9% expecting production increases. Some sheet mills were seeing production steady for May. Longs market participants were mostly seeing steady production during the month.

Mills will start to realize lower scrap and metallics prices this quarter as they look to increase utilization rates which are still below year-ago levels. Many market participants believe there is a limit to the downside in scrap prices after June.Domestic sheet mills have been successful in raising margins so far in 2023, as they have been able to increase index bases contracts up near levels of fixed-price contracts. Integrated mills have been firmer on offers than mini-mills in the Midwest with Southern mills offering above many Midwest mini-mills and integrated mills, as their lead times are still further out.

Buyers remain focused on inventories and cost controls across all products as service center inventories have come down amid steady supply of shipments. Flats mills have seen lead times contract, but remain six to seven weeks out as they have been able to adjust without those max contracts for now. But it could prove to be a tough task come July. Buyers are still only buying if needed ahead of further pricing pressure amid talk of offers around the $1,000/st level or better for larger tonnages.Source: Platts