Final Thoughts
Final Thoughts
Written by John Packard
May 9, 2014
Last week was a busy week with scrap prices for May coming into focus, our beginning of May flat rolled steel survey having been completed and getting more information about the possible sale of the Severstal NA assets made for an interesting week. On top of that SMU conducted one of our Steel 101 workshops. We have a busy issue for a Sunday evening and our Premium Level customers will receive another special supplemental issue tomorrow with a number of articles (plus our survey power point is now online).
Last week I interviewed Saikat Dey who is the CEO of Severstal North America. During our interview we touched on a number of subjects. One of the subjects was foreign imports. Dey told SMU, “I am not against imports as long as they are fair. What is not supportable is unfair trade practices.” He told us, “Imports are symptoms of world over-capacity.” However, he felt that some in the steel industry have become “obsessed” with the subject and have begun to lose focus. North American steel mills have become, “myopic in our view of the world…The steel mills are too focused on Washington and what they can do for us instead of what we can do for ourselves.”
A reminder to those of you who are interested in expanding your knowledge about hot rolled coil derivatives and the various strategies which can be used to protect margins or inventory values, offer long-term fixed pricing, etc. and how to execute those strategies – we invite you to participate in our new Managing Price Risk II: Strategies & Execution workshop which will be held in Chicago on June 24 & 25th. More details can be found on our website. Note: This is not the same as our original Managing Price Risk workshop. The new workshop is geared toward identifying solutions to a specific goal and then working on executing trades (and what to do in various scenarios). If you have specific questions we recommend you contact Andre Marshall of Crunchrisk, LLC. Andre can be reached at: Andre.Marshall@crunchrisk.com or by phone at: 713-401-9146.
We also want to remind our readers that Steel Market Update will be conducting a Steel Summit Conference on September 3 & 4, 2014 in Atlanta, Georgia. We are completing our program and should have announcements out very soon.
As always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher
John Packard
Read more from John PackardLatest in Final Thoughts
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?