Now that some significant capacity has been yanked from the US sheet steel market, there isn't much left to do but wait out inventories, buy-side sources said Thursday.
One trader said that mills are unlikely to gain much in the way of new orders by allowing prices to erode below Platts' current assessment of $545-$555/st for hot-rolled and $680-700/st for cold-rolled, normalized to a Midwest (Indiana) ex-works basis.
The trader said mills insisted on running prices up at a significant premium to world prices, inviting a flood of imports that likely won't stop rolling in until the second quarter. As a result, service centers are well-stocked and not interested in dabbling in the spot market.
"They put themselves in this situation, and they've got to pay for it," he said. "And they'll pay for it with a lack of orders. They've got to let the air bubbles pass through the order books."
Low raw material costs should help mills weather thin buying for some time as long as mills stick to a realistic market price for their steel and stop chasing orders by dropping prices, he added.
"They're looking for that mirage in the desert that's not there," he said. "They need to stop acting desperate and take it on the chin like they need to."
A service center executive said melt rates may be down as a result of idled capacity, but at least some mills have stockpiled semi-finished steel and have not significantly reduced their finished capacity rates. As a result, the capacity cuts won't have much of an effect until about April, he said.
In the meantime, all mills can do is pick a line, hold it, and hope for the best, he said.
A second service center source described the market as "still very quiet" with little upside, even after the March-April timeframe.
"I think we get to the bottom a bit quicker than that (March-April) but still not sure there will be much of a rebound," he said.
Source: Platts
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