Final Thoughts
Final Thoughts
Written by John Packard
February 7, 2014
One of the interesting tidbits that came out of the ArcelorMittal conference call last week was their intention of taking down the #7 blast furnace at Indiana Harbor for two months beginning in May.
They also discussed the purchase of ThyssenKrupp which they feel will be completed by the end of March (end of 1st Quarter). They have not been able to communicate directly with the commercial department at the mill but noted that TK Alabama was running at approximately 3 million metric ton per year level. The mill is essentially full at approximately 4.2 million metric tons due to the stainless conversion agreement they have. It appears AM does not intend to back off any tonnage. They are targeting automotive and energy sectors as their primary focus coming out of the gate.
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?