Don’t look directly into it.
What is that?
It is getting brighter!
That dot, we now see, appears to be light at the end of the long, downward spiral that the flat-rolled market has been in for over the past ten-plus months.
Most, if not all, of the domestic flat-rolled suppliers announced new prices last few weeks. While Nucor led the way with a $40/ton increase, USS-POSCO, US Steel, ArcelorMittal, and others quickly followed. Others, like NLMK, announced new minimum base pricing of $560/ton for hot rolled and $700 for cold rolled and coated.
There is always a debate as to whether the time for a market bottom is now. These debates typically hinge on supply, demand, other factors. As the mills see it, the ancient proverb “there is no time like the present” sums up the situation perfectly.
The flat-rolled market was in need of spark and the kindling had been laid out to ignite the flame. Supply chains have tightened, demand remains solid after a slower than desired start to the year, and distribution margins are squeezed past the point of a juice box in a three-year old’s hands.
Now that the spark has been lit, what will it take to keep the flame going? The main driver of mill pricing power is lead times. If the psychology in the market truly has swung higher, people will begin maxing out their contracts. By maxing out their contracts, there will be less spot availability. The decreased spot availability, exaggerated by the furnace idling at US Steel’s Gary and Great Lakes facilities and maintenance at other flat-rolled operations, should push lead times higher.
Until those lead times push out, however, the market will remain in a period of hesitation and nervousness as some buyers fear this being a short-term move.