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POSTED July 13, 2016

Market Overview – Mid July 2016


The AMM Shredded Scrap Index for Chicago decreased $40/GT to $240/GT as of mid July ’16 which is up $80/GT from early January ‘16. AMM Shredded Chicago scrap is generally used as an indicator by many domestic electric arc furnace mills to help determine price changes for finished steel products. After a strong scrap export month in May ‘16 activity has settled in June ‘16 allowing domestic mills to negotiate lower prices. Absent a strong export market, domestic mills have benefited with lower prices by delaying purchases.


Mill lead times decreased to roughly 6-7 weeks for delivery from the Midwest with 3-5 week lead times from the West Coast. Domestic plate mills announced additional price increases in May ’16 before new orders started to decline. The threat of previously announced trade cases has not been enough to offset weak demand. Some mills have been holding prices flat while others have begun quietly discounting for August ’16 production. Most domestic plate prices have begun to ease modestly in July ’16 for new orders based on weaker demand and recent scrap price declines. With the recent softening plate prices are up $175/ton since the beginning of the year.


Mill lead times decreased to roughly 7-9 weeks for delivery from the Midwest with similar lead times from the West Coast. After a series of prices increase through April ’16, West Coast sheet mills increased prices by $130/ton and $20/ton for August and September ’16 production, respectively. Tightness of supply earlier in the year has begun to fade and mill lead times have come in. There has been minor discounting over the past month by roughly $20/ton for new orders but it is difficult to tell if a broader softening is beginning to occur or if it is simply the seasonal lull that typically occurs in early summer. With the recent softening sheet prices are up $265/ton since the beginning of the year.


Tube mill rolling cycles are roughly 4-5 weeks for West Coast tube mills. Domestic tube mills announced a $60/ton price increase in June ‘16 which is in addition to earlier price increases. There has been no backsliding in domestic tube prices yet but the import price gap is widening and the recent slide in sheet prices would indicate tube prices are under pressure to follow suit.


Lead times remain at roughly 4-7 weeks for most production runs on the West Coast. Domestic merchant bar mills have held prices flat after raising prices by $60/ton in May and June ’16. Demand is steady for merchant bar products but imports are still available at a discount primarily from Turkey, Mexico, and Taiwan. There is no indication that prices will increase in the coming 30 days.


Lead times are roughly 6-7 weeks for West Coast delivery. Domestic beam mills have held prices from the $40/ton increase announced in April ‘16. Demand is stable with beams but domestic and global supply appear to be larger than demand which could explain why beams have increased prices less than the overall price hike in scrap so far in 2016. There is no indication that prices will increase in the coming 30 days.


Scrap prices decreased by $40/GT over the past month which dampens most domestic mills ability to raise prices. Plate and sheet prices have seen some discounting in recent weeks whereas prices for tube, merchant bars, and beams have not declined. There are no indications of additional price increases coming in the next 30 days for any carbon steel products. Steel imports remain competitive and trade case action is still pending for sheet, plate, and tube products. According to the Institute of Supply Management (ISM), the overall economy grew for the 85th consecutive month in June ‘16. ISM indicates domestic manufacturing expanded with an index of 53.2 for June ‘16, which is up from 51.3 in May ‘16. The ISM New Orders and Production Index expanded with readings of 57 and 54.2 in June ’16 respectively. ISM readings greater than 50 signal expansion. The US Labor Department. showed non-farm payrolls increasing in June ‘16 by 287,000 jobs with an unemployment rate of 4.9%. The US Department of Commerce has issued a revised estimate of GDP expansion of 1.1% in Q1 ’16. Updated figures from the US Department of Commerce indicates that GDP expanded at an annual rate of 1.4% in Q4 ’15, 2.0% in Q3 ’15, 3.9% in Q2 ’15 and .6% in Q1 ‘15.

Sources include: AMM, ISM, Bloomberg, AP, US Labor & Commerce Departments, Domestic Steel Mills