US flats mills put up united front against falling prices, but will it work?

The first week of July was anticipated to be a quiet one in terms of activity in the US steel market given the mid-week Independence Day holiday, making Severstal North America’s price increase letter on Monday, July 2, that much more of a surprise.

Despite what many in the industry considered an ill-timed announcement—given so many in the industry taking extra days off to extend the holiday and an expected scrap price drop for July—other US mills rapidly followed suit. By the end of the day Friday, NLMK USA, ArcelorMittal USA, US Steel, California Steel Industries, AK Steel and Nucor had followed with similar announcements of their own.

While a move to stem the tide of rapidly declining flat rolled stop prices was widely anticipated, an increase the same week scrap prices plummet has put the success of the increases in question. As supply and demand fundamentals don’t change simply because of an increase, mills may have to make other changes for the increases to really stick. First and foremost on that list is lowering production levels—many flats mills have slated some sort of outage in June through September, but the overproduction of sheet products remains so profuse it may not have the desired market impact. And even though this past week’s increases haven’t had any measureable market impact just yet, sources are already speculating about a second increase to seal in the first.

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