Steelmakers including Nucor Corp., the largest U.S.-based producer, fell in New York after ArcelorMittal said it will cut South African steel prices, raising concern prices will drop in North America as well.
Nucor slid $3.43, or 6.5 percent, to $49.07 at 4:15 p.m. in New York Stock Exchange composite trading. U.S. Steel Corp., the second-largest producer by market value, declined $13.68, or 10 percent, to $119.39. AK Steel Holding Corp., the third- largest, dropped $4.69, or 8.9 percent, to $47.92.
ArcelorMittal, the world's biggest steelmaker, plans to cut prices for so-called long-steel products, used in construction, by an average of 5.6 percent in South Africa, spokesman Hennie Vermeulen said today. Last month, U.S. steel prices declined 2 percent.
``U.S. steel stocks are down because of ArcelorMittal,'' said Michelle Applebaum, who runs a steel-equities research company in Highland Park, Illinois. ``It's reflective of the stock market we're in'' that U.S. producers are also lower, she said.
Hot-rolled steel sheet, the benchmark product used in cars and appliances, fell to an average $1,047 a ton in August, from $1,068 in July, Purchasing magazine said in an Aug. 29 report. Most steel mills had expected prices of $1,080 for the month, Purchasing said.
Last month's declines were the first in about a year. Prices had more than doubled from the $508 a ton average that steel mills were charging customers in August 2007. Even with last month's declines, prices still have gained about 80 percent since the beginning of 2008.
The U.S. relies on imported steel for about 25 percent of its needs, and relatively lower prices in North America have made the U.S. a less attractive destination for the imports it requires. That has allowed domestic producers to boost prices even amid lower demand.
Slowing North American demand for automobiles, appliances and construction materials is starting to weigh on pricing, even as inventories remain balanced, Ternium SA, Latin America's second-largest steelmaker, said on Aug. 6.
The price declines also come amid a seasonal slowdown, when automobile makers such as General Motors Corp. cut steel use because of scheduled shutdowns. The Detroit-based automaker's U.S. sales have fallen 18 percent this year as demand for pickups, vans and sports utility vehicles plunged.
Source Bloomberg.com: Worldwide
An article today on Motley Fool entitled Steel Stocks Stumble, points out the rather obvious reason for this "The economy is slowing!"
I do find it astonishing that steel makers were still talking steel price increases as recently as early last month, when it has become painfully obvious to the average man in the street that the economic turndown is really beginning to bite. Credit has tightened, unemployment is likely to rise, construction is almost at a standstill. Against that background it's obvious that sales of many steel based products are going to fall, and anyone in the engineering sector is painfully aware of this.
The steel makers continue to "play the same hand" they have been playing all year, and seem not to notice that the game has changed, well I think they are about to discover it!