Steelmaker Nucor’s Consumer Spot Price (CSP) -the price charges for hot-rolled coils across all of its mills- was steady for a fifth week today, even as US steel market participants continue to report tepid activity and unremarkable demand for US flat steel markets. Given continued low flat steel demand levels and associated weekly trading prices seen, some spot market insiders have begun to increasingly question the validity and usefulness of the Nucor price.
In its usual Monday letter to customers, Nucor said its CSP was stable at $750/nt ($827/mt) or $37.50/cwt., FOB mill, up from $740/nt ($816/mt) or $37.00/cwt., most recently for the weeks of November 4 and October 28. Since October 14, the CSP price has increased by nearly 4.2 percent, while since July 15, the CSP has risen nearly 15.4 percent. The Nucor CSP price remains on par with its nearest competitor Cleveland Cliffs, which announced its Hot Rolled Market Price last at $750/nt FOB mill on October 30.
Since its initial release on April 4 this year, spot market contacts have told SteelOrbis repeatedly they often are confused about the validity of the CSP price. In each weekly letter to customers, Nucor says the weekly hot-rolled spot price is “derived from both quantitative and qualitative data,” however, the price oftentimes is far removed from where current spot market values are reported, insiders told SteelOrbis.
“We just don’t really understand where the Nucor price comes from each week,” remarked one hot rolled steel market insider. “Depending on what Nucor has on its floor, we’re hearing they are discounting to as low as $31.00-33.00/cwt. ($620 to $660/nt or $683-728/mt) to move product.” Discounting to that level of HRC pricing would mean the current reported CSP price for HRC is between 12-17 percent too high.
Market insiders told SteelOrbis on December 9 that posted prices for hot rolled coils by Nucor and other competing mills such as Cleveland Cliffs are oftentimes heavily discounted by the mills in weekly spot markets, so as to match current pricing in spot markets.
At last report, the SteelOrbis spot average for HRC was a bit higher this past week at $34.00-35.50/cwt. ($680-$710/nt or $750-783/mt). At this level, the current Nucor CSP is still nearly 8 percent above spot market.
In its initial letter to customers announcing the CSP on April 4, Nucor said the CSP would be released each week in an attempt to provide “consistent and transparent communications to our customers of our hot-rolled coil spot pricing.” They added, “We want to be a partner who not only offers a quality product and service when you need it, but complements that with regard to current information about our business, enabling you to make more informed and timelier decisions about your business. We believe that the CSP will do exactly that,” they said, “reducing your reliance on speculation while reducing risk.”
Nucor’s California Steel Industries (CSI) monitor was also reported steady for a fifth week at $810/nt ($893/mt) or $40.50/cwt., following its last $10/nt ($11/mt) increase on October 30.
Over the past several months, flagging finished steel demand resulted in Nucor reducing its CSP as low as $650/nt ($717/mt), or $32.50/cwt. during the week of July 15. Since that time, however, prices have fallen only once for two weeks on October 14 and October 21 to $720/nt ($794/mt) or $36.00/cwt., from $730/nt ($805/mt) or $36.50/cwt. Market insiders told SteelOrbis earlier that Nucor has kept its posted CSP pricing above the mills’ $32.50/nt variable cost of doing business because selling below that price could cause the mill to lose money, they said.
Since the first series of price increases were announced on July 29, Nucor’s CSP has increased 11.1 percent to its recent $750/nt high. Prior to the increases, Nucor’s CSP price had lost nearly 22 percent of its value on flagging demand for finished steel products since the CSP was first released in early April at $830/nt ($915/mt) or $41.50/cwt.