Steel Dynamics President and CEO Mark Millett said during the company's third-quarter earnings call Thursday that US sheet steel pricing had likely reached its trough for this year, but buyers were skeptical that pricing would not continue to stair-step down.
"The volatility is driven more by procurement decisions by inventory positioning than by any structural change in demand," Millett said on SDI's earnings call.
The decline in price the sheet market saw beginning in the third quarter was related to seasonal demand, and Millett said he expected this year's pricing trend to parallel last year.
"The speculators out there that tend to take large positions -- and they're the ones that tend to draw the market pricing down in a trough like the period we're in today -- most of them have taken those positions, and so I think the pressure is off," he said.
Low inventories and limited imports as a result of generally successful sheet trade cases set the stage for pricing to stabilize, and the inflection point is "around the corner," Millett said.
One end user acknowledged that the market seemed to have tightened a little bit recently, but he said this is "probably a false bottom" and the bottom of the market is 4-5 weeks away.
"The mills are looking for any type of sign. So they get a decent order, then they pray it continues, but it probably won't," the end use said. "They will use any positive news to hold off downward pressure."
A service center source said mills will soon book enough business to close out their order books for this year, but there's some availability for cold-rolled coil and galvanized sheet in November. Automotive business is slowing, he said.
"I think the domestics will close their books on 2016 as soon as they can, then try to push prices back up by announcing higher prices and at the same time, try to wait out the service centers," he said.
This worked in the first half of this year, but the service center source said he expects 2017 will start with lower demand.
For orders less than 500 st, the service center source said $500/st ex-works is still being offered, though transactions on larger volumes are happening $20-$40/st lower. Mills have been keeping CRC and galvanized sheet prices at $700/st, he said.
Another buy-side source said the lowest spot purchase he's made has been at $480/st, though he did not doubt that mills are still asking for $500/st and buyers have been able to purchase HRC at less than $480/st.
Some market sources said they sensed the bottom was near, and with low inventories, the mills are positioned to take advantage of any popup in demand to help drive prices up early next year.
S&P Global Platts kept its daily HRC and CRC assessment unchanged at $460-$500/st and $700-$720/st, respectively. Both assessments are normalized to an ex-works Midwest (Indiana) basis.
