Over the last few months, we have argued that mills will seek to maintain their high second quarter prices at elevated levels through the third quarter. They argue (rightly) that iron ore and coal prices are largely unchanged, but customers continue to point to lower HR coil prices and push for discounts. Mills are reluctant to discount and market leaders -ArcelorMittal in Europe and Baosteel in Asia - are cutting output in an attempt to keep prices elevated (and tinmill operations profitable). Yet we are beginning to see some willingness by some mills to discount to secure sales and we continue to suggest that mills will have to give up something in their fourth quarter contracts. However, with HR coil prices likely to bounce back to a limited extent in this period, the decline will be small and manageable for most.
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