US steel plate prices on course to hit 3-year high in 2018

The month of January has not yet ended and steel plate prices in the United States, which are just below last year’s peak level, appear to be heading toward their highest for more than three years.

American Metal Market’s price assessment for cut-to-length steel plate is $36.75 per hundredweight ($735 per ton), up by 3.5% from per $35.50 per cwt previously. This means that current prices are only $0.25 per cwt below the 2017 peak of $37 per cwt, which was reached last April.

And prices probably have nowhere to go but upward, at least in the short term, market participants have said.

Mills are seeking as much as $38-39 per cwt for new orders while they continue to try to impose the full weight of a $9 per cwt price increase announced early last November, when prices had fallen to $30 per cwt. That price was itself only $0.25 per cwt above the 2017 low of $29.75 per cwt.

Plate prices last reached $39 per cwt in December 2014, according to American Metal Market’s price archives.

Imports down, rig count up
“Plate in particular is very strong,” one source at a US national service center said.

Prices are pushing higher due to a combination of factors, including the mill announcements, a weaker dollar – which makes exporting to the US less attractive – and higher oil prices that have resulted in increased demand.

The US imported only 42,415 tonnes of plate in December, down by 22.9% from 54,999 tonnes in November, according to data last updated by the US Commerce Department’s Enforcement & Compliance division on Tuesday January 16. And January’s equivalent figure is expected to remain low, with only 18,628 tonnes licensed for import at US ports as of mid-month.

That drop in imports does not appear to be a short-term trend. US plate imports totaled 686,931 tonnes in 2017, down by 32.2% from 1.05 million tons in 2016 and incorporating the lowest figure for cut-to-length plate since 2010, according to the Commerce figures.

The US rig count, meanwhile, totaled 936 in the week ended January 19, up by 242 rigs from the corresponding week last year, according to data from Houston-based oilfield services company Baker Hughes.

The rig count is a leading indicator of demand from the oil and gas sector, a key end-market for steel plate.

“Oil is driving a lot of it,” the service center source said, adding that demand has also been steady from other markets in part because customers have been buying for stock so they are prepared for any announced or anticipated price rises.

Are prices flying too high?
But others have noted that the big upward move in prices has not been accompanied by a similar jump in lead times.

Lead times currently average four to six weeks compared with as little as three weeks in mid-October and early November, when plate prices slumped. But they are still a long way short of the lead times of 12 weeks seen in 2014, when plate prices were strong.

“Pricewise, it has made an improvement. Demand is, of course, something of a separate story,” one mill source said, predicting that demand would catch up to mill price rises due to lower imports, low service center inventories and a new trade case against large-diameter line pipe, some of which is made from plate.

Demand could also get a boost from increased infrastructure demand in the US as well as in Mexico.

“There are a number of projects that we are aware of, and [supply discussions] are becoming more serious,” the mill source said, citing Mexico City’s new airport, which is scheduled to open in 2020 and is expected to be the country’s biggest public infrastructure project in 100 years.

But other sources said that they thought the rush to raise prices was more about mills taking advantage of a supply squeeze than about any significant increase in demand.

“I don’t know what the endpoint is. [The current situation] is ‘Hey, [the price] is going up, lead times are going out and you better get your order in now’,” one US Midwest service center source said of discussions with his mill representatives.

While that kind of opinion is not uncommon among producers in a rising market, he questioned what was underpinning such bullish sentiment at the moment.

“It’s not being driven by demand,” he said. “At least with the customer base we have, it is strictly supply-driven – so everyone is concerned that this could be fragile.”

And he warned that price increases that are supply-driven typically fall apart more quickly than those that are driven by demand.

Dom Yanchunas in New York contributed to this article.