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US steel market sentiment turns more neutral on prices: survey

Highlights

Market participants more neutral on finished prices on scrap availability

Domestics/Imports more competitive

Inventories shrinking

Bullish sentiment for finished steel prices cools in the US ahead of May, as concerns around the sourcing of raw materials have started to dissipate and scrap prices have fallen under pressure, according to the latest S&P Global Commodity Insights US steel market participant survey.

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Buyers are still facing higher transportation costs and logistical bottlenecks.

In the survey of US producers, distributors, traders, and end-users, 50% of those surveyed expected prices to remain flat, compared with 91% expecting increases in April, with 32% expecting prices to fall slightly in May with only 9% of participants bullish on prices for the month.

Most respondents attributed the stability in prices to decreasing scrap prices, but the Russian invasion of Ukraine and changes in the supply chain could add further volatility to pig iron imports later in the year, demand was also expected to remain strong in the near term. Service centers have been more actively inquiring in the spot market, but mills were still holding firm on offers.

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"We are expecting to buy more steel month on month on stronger orders," a flats distributor said.

Steel flats and longs market participants continued to see tightening inventories month on month, with only 10% seeing a slight increase in inventories. This dynamic of the flats market has come as higher inventories were the main driver of the price decline that started in September 2021.

The daily TSI US hot-rolled coil assessment was steady for most of April, rising $50 by April 12, then falling slightly, last settling at $1,440/st May 3 as buyers held out for lower levels and await lower input costs, according to the Platts assessment from S&P Global, adding to now two consecutive months of rises.

The May scrap buy week kicked off with all grades offered down $75/lt as mills assess if they can bid some grades even lower.

Finished steel production is expected to remain steady again this month, as 70% of participants expected it to remain flat and 2% expected a rise. Mills and distributors of flats were mainly seeing production steady to slightly lower.

Around 85% of those surveyed expected inventories to shrink or remain level.

Longs distributors and traders were more constructive on inventories than they have been previous, but supply still remains tight, especially in Florida.

Mills have announced price increases on 20-foot rebar to become more competitive with imports along with increases in freight rates as even imports are facing "nasty" port congestion and higher trucking costs from the ports.

"We expect prices to remain stable with no immediate foreign pressure to push domestic mills," a longs distributor said.

Other distributors throughout the US are still very constructive on demand outlooks, with scrap supply becoming more available.

Long steel market participants were not expecting mills to increase again in May, but are continuing to see tight domestic supply.

Scrap prices were again in focus, with 65% of participants expecting prices to fall and 2% expecting a decline of 5% or more during the May buy week.

Mill margins in the US were under pressure to start the year, with rising input costs and the continued push to utilize more scrap in furnaces and incorporate more obsolete grades in the mix, but mills have been able to raise their offers as the import arbitrage has started to disappear, or even flip, for some products, thus supporting recent margins even before the decline in prime and obsolete grades of scrap.