NEW YORK The steel sheet
spot market has dragged its feet this week as thin margins and
short lead times continue to hinder pricing upside.
Mill and buyer sources have
pointed in recent weeks to overcapacity as a top concern for
the sheet market, particularly as a glut of material has
discouraged would-be buyers from purchasing more than what they
And with U.S. raw steel output
at an average capability utilization rate of 78.5 percent last
week, down 0.2 percent week on week but up significantly from
72.6 percent at the start of the year, sources say they see
little change to the supply situation ahead.
"Theres overcapacity. But
its not only in the U.S.; theres global
overcapacity issues, too," one Midwest service center source
Sources pointed out that recent
supply disruptions have done little to change market
fundamentals. Last month, Pittsburgh-based U.S. Steel
Corp.s Lake Erie Works in Nanticoke, Ontario, locked out
some 1,000 unionized workers after the two parties failed to
reach a labor agreement (
amm.com, April 29). Chicago-based ArcelorMittal
USA LLC also recently had a "technical" issue with the No. 7
blast furnace at its Indiana Harbor facility in East Chicago,
Ind., which a spokeswoman confirmed has since returned to
But those issues havent
had a noticeable impact on steel availability, sources
"Everyone is quoting such short
lead times. When one of them disappears or has a labor outage
or stoppage, it doesnt even change the psychology of the
market," one northern steel buyer said. "Pricing in steel
continues to slide. There are still too many people chasing too
report, released May 15, confirmed the lower pricing trend,
with hot-rolled band prices falling to $647 per tonne ($587 per
ton) during the past two weeks, down 2 percent from $660 per
tonne ($598 per ton) previously. SteelBenchmarkers price
for cold-rolled coil was also down 1.9 percent to $757 per
tonne ($687 per ton).
But while prices continue to
slide, market players point out that in terms of volume,
conditions look better year on year.
The latest data from the Metals
Service Center Institute (MSCI) confirms the trend, with U.S.
distributors shipping in April at a rate of 165,000 tons per
day, up from the 163,200-ton-a-day rate logged in March
although down slightly from 169,200 tons a day shipped in April
2012. For carbon flat products, the daily shipment rate in the
United States was 106,800 tons, up just slightly from 106,200
tons a day shipped in March but down from 108,500 tons a day
shipped in the same month last year.
In Canada, total April steel
shipments were at a rate of 23,900 tons a day, up slightly from
23,600 tons a day shipped in March but down from the 24,800
tons a day shipped in April 2012, while Canadian flat-rolled
carbon shipments were at a rate of 12,400 tons a day last month
vs. 12,200 tons a day in March and 12,700 tons a day in the
same month last year.
Meanwhile, U.S. distributors
held 5 million tons or 2.3 months worth of flat-rolled
carbon inventory in April, down from 5.2 million tons or 2.4
months stock in March, MSCI data show. Canadian
distributors stocks fell even further, dropping to 3.8
months worth supply in April from 4.5 months worth
the previous month.
According to sources, with overcapacity at both the mill
level and the service center level, margin pressure
doesnt look likely to change in the near term.
"Compared to last year, demand
has been a little better. But theres just so much steel
out there and margins are being squeezed so thin throughout the
supply chain," a second Midwest service center source said.
Purchasing managers also noted a
hesitancy to buy steel because prices have continued to slide.
In some cases, the value of product in hand loses its value
within days of arrival, they said.
"Pricing is in the ol
garbage," one Northeast service center source said.
"Unfortunately, I dont see prices getting better. No one
is telling me anything good; theyre all still hand to
As for significant upside, the
future looks grim, sources said.
"I think people are saying that
were at the bottom because the mills cant go any
longer. But just because its a bottom doesnt mean
were going any higher," the second Midwest service center
source said. "Theres too much inventory out there. With
lead times so short, theres no need for people to buy