Steel strip buyers and mills face off over first-half market prices- Report from the USA
There is an interesting article over at purchasing.COM on steel sheet and coil prices from the view of the buyers. Whilst demand is not increasing the mills continue to push prices to recover the higher cost of scrap. It’s well worth reading the whole article, and extract of which follows:-
Steel sheet mills have been increasing prices higher because of higher scrap costs despite reduced manufacturing activity, and that’s got steel buyers steamed. More than half of the buyers polled in April are paying more for steel already this year and a majority expect to keep paying somewhat more well into autumn. However, they don’t expect to be paying as much as the mills want.
U.S sheet steel price increases this year have been led by such mini-mills as Nucor and Steel Dynamics that are facing higher ferrous scrap costs—caused by a worldwide surge in production. The local mills feel they need to raise spot prices in order to pass these scrap costs along to customers—especially since some key scrap prices have surged 65% since bottoming in November 2006. Integrated producers such as U.S. Steel and Arcelor Mittal, which are iron ore-based producers, “get to ride along with the spot sheet price increases without facing any significant increase in their own costs except for their own modest scrap costs,” says analyst Mike Gambardella at J.P. Morgan Securities in New York.
“Demand is down, but steel prices are increasing,” says Joe Diedrichs, director of production resources at mechanical construction services firm ACI Mechanical Inc. in Ames, Iowa. “What doesn’t make sense is that it appears that the mills are trying to inflate prices to unload heavy inventories.” Analyst David A. Lipschitz at Merrill Lynch & Co. in New York agrees that “the recent rise in sheet prices has more to do with increased cost pressures rather than demand pulling steel out of the system.”