The sentiment for finished steel prices continued to shift higher for March as domestic flats mills have been successful in increasing offers as lead times continue to extend and some mills lacking material have pulled spot offers, the most recent S&P Global Commodity Insights US steel market participant survey showed.
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In the survey of US producers, distributors, traders and end-users, 94% expected finished prices to rise during March, following February, during which 45.7% of participants were seeing prices moving higher, with 100% expecting prices to increase or remain steady as domestic mills continued to raise their spot offers amid extending lead times and limited availability.
With the recent round of sheet price increases, most mills were seeking $1,150-$1,200/st for hot-rolled, with tradable values seen moving higher as mills have seen lead times move out until April/May, with some still needing work to boost capacity or expansion and others possibly out of spot tons until June.
Flat-rolled mills were among the most bullish on prices for March, seeing increases of more than 5% possible as they have been able to raise prices and hold margins with limited competition from imports.
The upside for flat steel remains limited, according to market participants, given the expansions in the US, and some of those mills are still trying to move up utilization rates, with many expecting a pullback in prices late in the second quarter. Domestic mills, however, have remained disciplined in production.
Some service centers noted that they were reselling below replacement costs as they have tried to work on contract maxes, but inventories remain "light."
Raw materials traders were seeing seasonality and restocking of steel, with more orders and more increases in prices possibly on the way, as a trader commented "buckle up!"
Scrap prices were again in focus, with 93.8% of participants expecting prices to increase, and in total, 31.3% expected prices to rise by more than 5% during the month.
As trade wrapped for March delivered scrap, busheling scrap prices rose by $105/lt in the Midwest with deals done at even higher levels for large volumes while shredded prices were up $60/lt as exports prices are expected to remain firm as exports and traders are expecting Turkey to be active in the scrap market comes late March/April in order to secure tons to produce all the rebar that will be needed for restriction after the earthquake.
Mills will look to rising scrap prices to lend further support to finished prices as well as extended lead times and try to hold or increase margins, but seasonality still remains for the demand of long products as mills have just started to increase wire rod and rebar prices, both which have seen margins compress.
"All indications are that rebar prices should be increasing," a longs fabricator said. "However, new construction project awards are still very muted."
Buyers still trying to run lean inventories
Views on inventory changes again remained mixed as some flat steel and long products distributors were continuing to see inventories draw, while some distributors were expecting inventories to build.
The majority of participants expect inventories to remain steady or decrease month on month, with 90.6% of those expecting stable or slightly drawing inventories. On the long product side, 100% of those were expecting inventories to tighten or remain steady, with 85% on the flat steel side expecting the same. On the whole, 65.6% of all participants expect inventories to remain unchanged in March compared with 57.1% in February but 25% of all participants were also expecting inventories to decline in the coming month.
Around 12.5% of all those surveyed expected inventories to increase in March, which comprised a mix of flats distributors and raw materials traders.
The Platts TSI US hot-rolled coil assessment continued to rise in February and into March as mills looked to support spot prices as they have been successful in adding new annual contracts linked to indexes to start the year, even from automakers, which have led to less material available for spot sales, rising by $365/st from the start of February, and last assessed at $1,150/st March 13, according to S&P Global data.
Some mills have seen hot-rolled orders slow week on week as buyers were trying to adjust to the rapid increases in prices, according to market participants.
Wire rod buyers are now digesting the second mill increase in as many months. Rebar buyers across most of the US still haven't seen demand materializing but faced the first mill increase since April 2022 as "spotty" demand hasn't warranted additional tonnage, especially with shorter domestic lead times.
Some rebar buyers and traders were expecting another possible increase in late March/early April as scrap prices continued to rise, and most expected demand to pick up on both the construction front and from infrastructure projects.
"Seasonal demand will improve and support demand, along with improved weather," a longs distributor said.
Rod and rebar mills continued to monitor imports to remain competitive, as foreign offers remained limited and as higher energy and scrap prices have supported foreign prices, especially in Turkey.
Views on flat steel production mixed
Finished steel production expectations remained loosened slightly, as 50% of participants expected it to remain flat, with 43.8% expecting increases and 6.2% expecting production decreases. Users of longs and some flats were seeing production lower. Raw materials traders and other flats distributors and mills were seeing production climb slightly in March.
Flats mills see production steady during March as spring outages will come into play over the next two months.
Mill margins in the US remained under pressure on the longs side, with rising input costs and the continued push to utilize more scrap in furnaces and incorporate more obsolete grades in the mix. Mills have been trying to support margins, but as spot prices increased for some products, scrap prices could see continued support through the spring as domestic mills will be looking to restock in order to try to increase utilization.
Domestic sheet mills have been successful in raising margins so far in 2023 as they have been able to increase index bases contracts up near levels of fixed price contracts.
Buyers still remain focused on inventories and cost controls across all products to start the year as service center inventories have come down during the restocking. Flats mills have moved lead times out as they have been able to meet strong demand from increased annual contracts, though some sheet mills have said buyers have been cautious and looking for the direction given the velocity of the price increases.