Hot-rolled steel sheet price rises just 1%

Some market insiders think the surge may be peaking

by Tom Stundza -- Purchasing, 7/23/2008 11:06:00 AM

Purchasingdata.com is posting an early July transaction price for hot-rolled steel sheet in the Midwest at $1,068/ton, which is the same price average being posted by the Platts Steel Business Daily subscription newsletter. This price average is just 1% higher than the $1,052 price average for June although it is 96% higher than in December 2007.

Some other market researchers are estimating July bookings at prices in a $1,074-$1,080 range but transactions actually are being reported this week as low as $1,060 for deliveries within four weeks.

Interestingly, the mills still are looking for a consensus on future hot-rolled pricing: Nucor now has an August list price of $1,120/ton for hot-rolled sheet while reference prices for U.S. Steel and ArcelorMittal in September are $1,100. All of these proposed prices are less than expected earlier, which supports the view that many buyers at original equipment manufacturing (OEM) firms and service centers have gone on vacation.

Back in May, separate polls of analysts by the Kiplinger subscription newsletter and the Reuters news service suggested that steel users could expect to pay around $1,200/ton for hot-rolled steel by July, or slightly more than twice the cost in January when the transaction average was $579. That hasn’t happened and some analysts now suggest that the hot-rolled price peak has arrived and post-Labor Day slippage back to $1,050 to $1,060 is possible.

One buyer sees the tentative nature of future pricing as evidence that sheet prices may have peaked. “The price increase could prompt some to buy in advance, but I think we're pushing the envelope,” he tells the Steel Business Briefing online subscription newsletter.  In fact, some market analyses suggest hot-rolled sheet prices could fall to $900/ton by December due to the seasonal fourth-quarter slackening in demand.

Corrado De Gasperis, CEO of the Novamerican steel service center chain, agrees in his quarterly earnings statement that recent monthly price increase by the steel mills appear relatively weaker than prior increases. He and other analysts say that the initial spike in prices were pinned to cost increases and then by allocations of supply as the mills boosted exports. However, there hasn’t really been a surge in exports and now are slowing because of the strengthening dollar.

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