Final Thoughts
Final Thoughts
Written by John Packard
April 11, 2014
Here is what I know/understand regarding the situation at US Steel as of early Sunday evening, April 13th. Our sources are advising us USS is moving iron ore from Great Lakes to Gary. We are also following the vessels which are now being reported as in port in Minnesota loading ore. We are aware that there is talk of US Steel considering declaring force majeure on their contracts out of Great Lakes. We do not have any evidence of them doing this although it would make common sense if the mill is not able to have it’s steelmaking back online within a reasonable time frame. I asked US Steel to comment on the status of Gary Works, Great Lakes and the force majeure rumor but they did not respond to my request by the time we published on Sunday evening. We will have further updates on the status of steelmaking at Gary and Great Lakes in Tuesday evening’s edition of SMU.
We anticipate closing registration for our next Steel 101: Introduction to Steelmaking & Market Fundamentals workshop by the end of this week. We have one spot left before we will be considered completely sold out. Those already registered for the workshop represent manufacturing companies, service centers, trading companies, steel mills, toll processors, logistics and the head of an industry organization. This will be a great class and Severstal Dearborn is promising to conduct another wonderful mill experience for our group (a special thank you to Severstal). If you would like to take the last spot you can register online or you are welcome to contact our office at: 800-432-3475.
As with all of our programs there is a benefit to those who are subscribing companies to Steel Market Update. We offer a $100 per person discount for SMU member companies. We also offer discounts for multiple people attending many of our programs.
We anticipate working out final dates with the CME Group in Chicago for our first Managing Price Risk 2: Strategies & Execution workshop. This is a step up from our original Managing Price Risk workshop which was focused on building a base of knowledge about HRC derivatives and the terminology used by HRC brokers. We feel the next logical step is to spend time focusing on specific hedging statagies and then how to execute those strategies in order to obtain a specific result. We will look at inventory management strategies, protection of margin strategies, how to offer long term fixed pricing strategies, etc.
We will then go beyond discussing the strategies and work with our workshop attendees to understand the actual trading process (how to make the initial trade through the conclusion of the specific strategy using futures, options, etc.).
Managing Price Risk 2 will run over two days. We will begin the class at 1 PM on the first day and then at 8 AM on the second day. The program will conclude around 2 PM on the second day. Details, registration and pricing will be available soon (shortly after we arrive at the final date with the CME Group in Chicago where we hope to conduct our first workshop).
We want to welcome our newest members to SMU. Our existing members know that if they have any questions, comments or suggestions that we are all ears here and very willing to speak to or trade emails with our members. You can reach us at: info@SteelMarketUpdate.com or by phone at: 800-432-3475.
As always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher
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?