I spotted an interesting article over at Purchasing.com on steel prices. Buyers are expecting further price rises, but with demand remaining weak, and inventories relatively high they are expecting resistance.
Historically steel mills were quick to "back off" when higher prices resulted in a reduced order intake, but more recently they have been prepared to reduce capacity to ensure the price increases went through.
Whilst a return to the days when steel producers were losing money is neither forseeable or desirable, it's equally important that they don't bolster profits at the expense of their local manufacturing industries.
Excerpt from the article.
Steel prices paid have increased for 44% of the buyers polled this month, the highest such response in six months, and 48% believe prices will continue to rise over the second quarter. Early polls of steel buyers at manufacturing companies put the March price in the $520-$530 range, up from $500-$510 last month. However, some media and analysts are touting hot-rolled steel sheet sales at $560-$570 to service center buyers for deliveries in April and May,
And that could create a big problem in the marketplace: “While the mills think that everything is going to go boom again, our customers are not responding positively to price increases or extended leadtimes,” says Bill Sutfin, director of purchasing at distribution firm Kelco Metals Inc., Gary, Ind. Analyst Chuck Bradford at Bradford Research/Soleil Securities in New York adds that “steel buyers are concerned that the mills have increased their prices too much and too fast. Thus, they may be pulling back their purchases next month as their inventories remain high.”
The steel market really isn’t all that strong as only 34% of the buyers polled plan to increase their bookings through April—while 16% plan to less buying and 50% plan to book only what they bought last month. Most steel buyers at original equipment manufacturers (OEMs) say their steel inventories remain in oversupply and they will be reducing stocks over the next six months.
The full story is here