6/19/2012 — Lunch panel of steel service center executives: In advance of AMM’s and World Steel Dynamics’ Steel Success Strategies conference, we hosted a lunch with a panel of steel service center executives, including Lourenco Goncalves (CEO of MUSA), Igal Zakuto(Deputy-CEO of Rozak Demir Profil, a Turkish subsidiary of ArcelorMittal), and Jeremy Flack (President of Flack Steel). The panelists offered their opinions on steel market conditions both in the US and globally.

Searching for a scrap price floor: Black Sea scrap prices have fallen towards ~$350/l.t. However, at these levels scrap peddlers lack incentive to collect and flows are starting to slow. While we are hearing scrap could decline ~$20/t in July, reduced peddler activity would suggest we could be approaching a floor.

Inventories and trade: Panelists believe destocking will continue near-term. The strengthening USD could be a headwind to steel prices, as imports become more competitive and exports more challenging. However, the panel agreed that a ~$100/t spread between US and global steel prices is required to incentivize imports (and spreads remain below this level).

Price outlook: While opinions were mixed, most agreed there could be some seasonal strength coming out of the summer as supply tightens due to blast furnace outages and temporarily declining imports. However, Mr. Flack, in particular, was the most pessimistic, saying that despite a potential 2H bounce, prices are in a longer-term declining trend.

RG Steel: RG Steel was seen as a major source of domestic overcapacity. Some thought it would be unlikely that anyone will buy the major assets, at least until the next leg up in steel prices.

(via Morgan Stanley Reserch)