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''Flat-roll market improved, but still fragile: for service centers trying to pass along the latest mill increases, the watchword is "handle with care.".

Article Excerpt
With an economic turnaround on the horizon, and strengthening order books in hand, mills have announced moderate price increases for flat-roil in the third and fourth quarters. Noting that American mills are finally getting more disciplined about producing steel to meet actual demand, service centers are working carefully to pass along the higher prices without derailing any recovery.

Metal Center News spoke with an assortment of mill and service center leaders to get their take on trends in end-use demand, supply, pricing and supply-chain relationships. Their views reflect a mix of optimism and apprehension.

MILLS SEE STRONGER ORDERS

North Star BHP Steel LLC is sold out through October, and President Jim Jonasen anticipates the Delta, Ohio, mill will have no trouble booking sufficient tonnage during the remaining months of the year.

North Star is still recovering from a transformer problem in June that knocked out about 30,000 tons of production. "Then we were affected by the [August 14] power outage," Jonasen says. That took some of our capacity away, so we're a little bit behind right now."

Of the end markets North Star serves, automotive continues to be "fairly strong," capital goods is "improving slightly," while commercial construction remains "very depressed," Jonasen says.

"Scrap is unreasonably high priced based on the historic spread between scrap and hot band," he adds. He expects the scrap price to stay high for the foreseeable future because Asia's high rate of steel production "makes for a strong export market out of the United States, aided by a dollar that has lost a little bit of value."

Driven primarily by higher steelmaking input costs and an attempt to recover some margin, North Star has been gradually increasing its prices since August. "Our margins are thinner than what history typically tells us they should be," Jonasen says.

Mills are realizing price increases on flat-roll, not because demand is picking up, but because suppliers are more disciplined, says Vincente Wright, president and CEO at California Steel Industries Inc. "The prices are being achieved basically because of supply. Suppliers are watching their production levels."

Customer inventories have fallen to a level that now corresponds more closely to demand. "They are coming back to buy, to maintain a stable inventory. This has caused the order book to go forward, but it does not mean the...