Final Thoughts
Final Thoughts
Written by John Packard
September 24, 2013
I want to thank IHS Global Insight for allowing SMU and our readers to attend their Pricing & Purchasing Summit which was held in Chicago over the past two days. SMU is interested in conducting a similar conference dedicated to the steel industry and identifying risks next year as we strive to bring new value to our members and the steel community.
Based on the conversations I have been having with end users, service centers and steel mills over the past few days it appears we may be in one of those interesting times within the steel industry. We have a number of factors coming together – new management at two mills – USS and Severstal and another mill is for sale (ThyssenKrupp). We have contract negotiations beginning and, so far, the mills seem to be committed to doing a better job of controlling their fate and attempting to become more profitable. After many years of shooting themselves in the foot maybe now is the time to make a stand?
Of course end users are not pleased with the changes and I found John Anton of IHS Global Insight comments today to be compelling – maybe it is time for buyers to weigh all of the risks in their supply chain and supporting slightly higher prices may pay dividends over the longer term.
Earlier this evening, Severstal NA announced the appointment of a new Vice President of Commercial. His name is Sachin Shivaram and his background is with ArcelorMittal and McKinsey and Company. He replaces Tom Marchak who has been appointed to the position as Special Advisor to the CEO. We will have more on this on our blog tomorrow.
By the way – John Temples and I will be at Metalcon this year in Atlanta. I expect to attend the AKZO Nobel cocktail reception and to be on the floor for the first day of the show. If you would like to make arrangements to speak to John or myself you can shoot us an email at: John@SteelMarketUpdate.com.
As always we want to thank our members for their support and their business which is truly appreciated by all of us here at Steel Market Update.
John Packard
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Final Thoughts
Steel equities and steel futures fell hard after news broke earlier this week that the US and Mexico might reach an agreement that would result in the 50% Section 232 tariff coming off Mexican steel. The sharp declines didn’t make much sense, especially if, as some reports indicate, Mexico might agree to a fixed quota. They didn't make sense even if steel flows between the US and Mexico remain unchanged.
Final Thoughts
Even before the news about Mexico, I didn’t want to overstate the magnitude of the change in momentum. As far as we could tell, there hadn’t been a frenzy of new ordering following President Trump’s announcement of 50% Section 232 tariffs. But higher tariffs had unquestionably raised prices for imports, which typically provide the floor for domestic pricing. We’d heard, for example, that prices below $800 per short ton for hot-rolled (HR) coil were gone from the domestic market – even for larger buyers.
Final Thoughts
I want to draw your attention to SMU’s monthly scrap market survey. It’s a premium feature that complements our long-running steel market survey. We’ve been running our scrap survey since late January. And over just that short time, it’s become a valuable way not only for us to assess where scrap prices might go but also to quantify some of the “fuzzy” indicators - like sentiment and flows - that help to put the price in context.
Final Thoughts
I think there is an obvious case for sheet and plate prices going higher from here. That’s because, on a very basic level, the floor for flat-rolled steel prices, which is typically provided by imports, is now significantly higher than it was a week ago.
Final Thoughts
We're about to hit 50% Section 232 steel tariffs. What could happen?