Final Thoughts
Final Thoughts
Written by John Packard
September 22, 2014
Consolidation may not be over yet. We saw a report this evening out of Minnesota about how Essar Steel Minnesota has failed to secure financing to complete the $1.8 billion taconite pellet facility. The company’s India parent company was so over-leveraged it was put on the top ten watch list by Credit Suisse one year ago, according to a report in the Star Tribune out of Minnesota. Essar is also the parent company of Essar Steel Algoma which recently was able to procure funding for the Canadian steel mill.
We added a couple more people to our Steel 101: Introduction to Steelmaking & Market Fundamentals workshop in Ft. Wayne, IN in a couple of weeks (October 7 & 8). The workshop will include a tour of the SDI steel mill in Butler, IN. We encourage anyone who has been thinking about attending to register soon as we will close registration late this week. If you have any questions, please contact our offices at 800-432-3475 or info@SteelMarketUpdate.com.
The next workshop after Indiana will be in South Carolina in late January and will include a tour of Nucor Berkeley. More details on this workshop will be coming out in the coming days.
I want to take a moment to welcome our newest member companies and let them know that we encourage interaction with our people. If you have a question, comment or suggestion we are here and available. This includes me personally and I can be reached at: John@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?