Written by: John Packard, Publisher, Steel Market Update

The 26th annual Steel Survival Strategies (SSS) conference, hosted by World Steel Dynamics and the American Metal Market kicked off on Tuesday. The steel world is in attendance with close to 1300 registered participants listen intently to presentations by steel executives, World Steel Dynamic’s partners Peter Marcus and Karlis Kirsis and networked with one another at the Sheraton Hotel and Towers in New York City.

World Steel Dynamics chose a Star Wars theme – Steel: Intergalactic Warfare, Innovation, Change and Response.

As is the norm, Peter Marcus and Karlis Kirsis began the program by discussing how “Chaos is here to stay” and those who are able to harness chaos will survive and succeed in what many are calling the new normal in the steel and related industries.

Accompanying the duo’s presentation was a written document entitled, “Chaos, The Peril of Black Holes.”

In the document WSD made the following forecasts for the remainder 2011 and through 2012. The WSD forecast is for export prices (fob port of export) and is referenced in dollars per metric ton (SMU will translate to short tons). If you have not seen a WSD forecast before they hedge their bets by placing odds on their predictions:

Hot Rolled World Export Pricing:

Prices rallies to about $950 per metric ton ($862 per short ton). Odds are 5% for 2011 and 20% for 2012.

Prices rise to about $800 per metric ton ($726 per short ton). Odds are 35% for 2011 and 30% for 2012.

Prices remain about flat at current levels. Odds are 35% for 2011 and 30% for 2012.

Prices decline to $650-$700 per metric ton ($590-$635 per short ton). Odds are 20% for 2011 and 15% for 2012.

Prices fall sharply to $575-$625 per metric ton ($522-$567 per short ton). Odds are 5% for 2011 and 10% for 2012.

World Steel Dynamics did note in their report, “In the second half 2011, steel export prices may rise moderately; home-market prices are likely to hold at good levels (although perhaps not in the USA); raw material costs will probably decline; and shipment volumes will continue to improve. Of course, no matter the improvement in the steel mill’s profitability, volatility in hot-rolled band and other export prices will remain the normal condition.”

WSD referenced the current USA spot market price for hot rolled steel to about $780 per short ton (late May price). This is about $20 per ton higher than SMU HR Index during the same time period. The last SteelBenchmarker (which is WSD product) HR price for the U.S. was $771 which continues the approximately $20 per ton spread compared to our index.

WSD believes the hot rolled band price in the U.S. market is “competitive” meaning the domestic mills do not have much “pricing power” except when supply/demand is tight. WSD does not believe with RG Steel, Severstal Columbus and ThyssenKrupp Steel USA coming online there will be much pricing power in the hands of the domestic steel mills.

During their presentation, Peter Marcus and Karlis Kirsis made it quite clear they believe the “Elixir” to protect against price volatility is a liquid futures market and they are calling for the market to take hold in the years ahead.