In my previous post I cited news of prices of steel plate on target to reach record highs.
Well, it looks like the trend is continuing.:
CHICAGO — Hot-rolled coil prices in the United States are at their highest point in nearly six years – and mills are aiming to send them higher still.
American Metal Market’s hot-rolled coil index has increased to $35.79 per hundredweight ($715.80 per ton), up 1.3% from $35.32 per cwt ($706.40 per ton) previously. The pace of increases has moderated versus a week ago, when the index jumped nearly 4% and crossed the $35-per-cwt ($700-per-ton) threshold for the first time since 2012.
But mills don’t want to see rising prices slow, and are gunning for as much as $37.50 per cwt ($750 per ton) following a recent round of price hikes.
Hot-rolled coil lead times range from three-and-a-half weeks at some mini-mills to as long as nine weeks at certain integrated plants, according to market participants and mill lead time schedules.
That’s assuming tons are available at all. Spot tons are hard to get from certain mills, with others going so far as to essentially put contract customers on allocation by restricting them to only their minimum tonnage in “min-max” contracts, sources said.
“I wouldn’t call it desperation yet. But there are a lot of people out there looking for steel,” one Midwest service center source said. That means service centers, which have lagged mills in raising prices, need to more aggressively increase resale prices to match rapidly rising replacement costs.
Prices could climb to $40 per cwt ($800 per ton) if current trends continue, some sources speculated. A hot band price above that threshold has not been seen since May 2011, when prices were assessed at $43 per cwt ($860 per ton), more than six-and-a-half years ago, according to AMM pricing records.
A measure of just how high prices might rise: Cold-rolled coil prices reached $40 per cwt in late November, roughly two months ago, AMM price records show.
It’s understandable, then, why $40 per cwt might come as a shock to customers who continue to insist that $35 per cwt is too much to pay for hot band, one mill source said. But the sooner they get over their sticker shock, the better.
“I don’t know whether [prices] will reach $800 [per ton]. But it will be higher in the near term,” he said.
Prices are moving up because of limited mill availability; an expected improvement in energy demand, particularly on the line pipe front; and the Section 232 investigation into steel imports, which is keeping some foreign tons out of the market, sources said.
Nonetheless, questions are mounting over whether the rapid-fire price hikes announced this month are sustainable. The risk becomes more pronounced the higher prices climb because, while mills would like to see $40-per-cwt hot band, most are profitable at $30 per cwt ($600 per ton). And that means a correction could be swift and steep, some sources warned.
“While we believe mills will be successful in seeing positive incremental momentum in the coming weeks (enhanced by the import fear shroud of 232), US asking prices are expanding beyond historical normalized levels versus key global benchmarks” such as European domestic prices and Chinese export prices, Keybanc Capital Markets analyst Philip Gibbs wrote in a research note dated Thursday January 25. And 14 weeks of rising prices has been the average for a hot-rolled coil “mini-cycle” since the global financial crisis, Gibbs noted.
Here is the upshot:
The mills are cranking the prices up at a really swift pace and are most likely just a bit ahead of themselves. There is no question that the economy is beginning to kick into high gear and should continue to so in the coming months. This is especially true considering the recent boost and injection of energy into the recent tax cuts and reforms that congress enacted right before the new year.
Same for Exxon-Mobile:
You can just imagine what kind of a boost of capital into the economy this will mean.
By the way, make sure to check out your next month’s paycheck to see if you have more money in your pocket that you earned and will not be confiscated by the government going forward…..
All of this takes time though to make its way into the market and the steel mills seem to be thinking that even if they need to give back some of what they took, they are poised to be ahead of the game when the ball starts to really roll. We’ll have to see how that plays out and how quickly these predictions come to fruition.
On the freight side of things. We here at Premium Steel Sales are seeing a very significant tightening and it is not fun to have to be held hostage on logistics by our common carriers. There is a shortage of available trucks and the carriers can afford to be very picky about which lanes they want to run and be completely in control of setting the terms as is evidenced by an e-mail we received from one of our carriers this week:
I’ve been working on these and your other loads…. obviously capacity has been very tight and these lanes are delivering to very tight markets as well.
Rates will need to come up, but I won’t know for sure how much until I can confirm availability, which is proving more difficult than usual!!
Just letting you know that I am working on these and will give you any options as soon as I have one.
Read this piece for more:
An amazing quote from the piece above:
“Literally every possible thing that could be going against a shipper is happening right now,” said Michael Redisch, a principal at Chicago-based freight broker Atomic Transport LLC.
Prices are up, freight is tight, and customers are still waiting things out………
Should be interesting to see when reality sinks in. My guess is toward the end of February into the beginning of March but certainly within the next 6 months.
To learn more about Premium Steel Sales, LLC and what we can do for you, check out the rest of our web site at: http://premiumsteelsales.com/
Ben Levi – Premium Steel Sales