US domestic flat rolled price increases in Q4 2012 and Q1 2013 did not stick due to lackluster demand, overcapacity woes and import competition, executives at Reliance Steel & Aluminum said during the company's Q1 2013 conference call on Thursday. The lower prices, they said, are both bad for mills and service centers alike.
Reliance addressed analyst questions about how the CRU discounts are affecting the domestic carbon flat rolled market, noting that the discounting is extremely unhealthy for [our] suppliers as well as for Reliance, but much more of a problem on the mill side; "we expect it to go away" as there is a "tremendous amount of discontent over the discounting." The fact that the CRU can be manipulated is one of the chief issues, although the overall impact hasn't been as significant a problem for Reliance because the company does not hold a large volume of contractual business.
As for the solution to a soft flat rolled market, Reliance said that the feeling on price increases nowadays is that they are used more to stop prices from going down than to really get prices up. Production cuts "definitely" need to happen to help stabilize the market as there is just too much capacity domestically as compared to current demand and future demand, company executives explained.
Reliance also touched on the looming sale of ThyssenKrupp's Calvert, Alabama mill, revealing that "it would be our dream come true if a domestic producer acquired that asset. If someone like US Steel got their hands on that, it would be a very positive influence." Meanwhile it would be "problematic" if someone came in from overseas and took possession of the mill.