Steel Executives Wary of Spring Import Surge
At this point in 2013, Americans were feeling a mixture of relief, anger and pessimism about the year ahead. In a last-minute budget vote, Congress managed to keep the nation from plunging over the fiscal cliff, but the partisan bickering between Republicans and Democrats over the debt ceiling and federal spending cuts undermined consumer and business confidence.
The atmosphere is different today. Last month, in a rare recent example of bipartisanship, Congress sent the president a compromise budget that headed off another government shutdown and eased spending cuts. Leading indicators point to a recovering job market and growing demand for manufactured goods. In theory, conditions both political and economic appear ripe for a better year in 2014.
That's not necessarily all good news for domestic producers of steel. With other world economies still struggling, the United States stands to become an even more attractive target for low-cost foreign imports that could undercut current healthy steel prices. Following a series of late-year hikes by the major mills, the price of hot-rolled coil is now flirting with $700 per ton and cold-roll with $800 per ton.
In its mid-December survey, Steel Market Update (www.SteelMarketUpdate.com) asked OEMs, mills, service centers and others in the supply chain to predict the key driver of steel prices over the next 90 days. The most common answer, from 29 percent of respondents, was "an influx of cheap foreign steel."
Also anticipating a bump in imports this spring are members of the Association of Steel Distributors, who participated in an executive roundtable hosted by Metal Center News last month in Chicago (see ASD Roundtable article). Attractive offers from foreign mills last fall could translate into a host of imports hitting U.S. shores this spring, the panelists agreed.
"We see a stable robust market, at least going into the first quarter," said Mark Jeswald, purchasing manager at Worthington Steel. "But the spreads [between import and domestic] right now are pretty significant at $80-$100 a ton in some cases. Imports could cause some instability in the market going forward."
Reflecting the strength of the U.S. relative to other markets around the globe, some of that imported steel may even arrive here unsold, said Lisa Goldenberg, president of Delaware Steel Co. of Pennsylvania. "We have not seen unordered spec tons arrive in the United States for a long time. The last time we saw significant spec tons was cheap Russian hot-roll 10 years ago."
Service centers typically replenish their inventories after the New Year in anticipation of a post-holiday bump in business, especially when stock levels are so tight. But this year, buyers are likely to tread lightly in the first quarter as they wait to see if steel is cheaper in the second.