Final Thoughts
Final Thoughts
Written by John Packard
February 16, 2015
OK, I have been asked for my opinion as to what I think will happen to steel prices from this point. I have a sense that we may be entering a period of transition. A point where the price spreads between foreign and domestic are “reasonable” and the domestic steel industry can re-capture some of their lost market share. I heard a couple of traders complaining at the Port of Tampa Steel Conference that they were spending more time trying to keep the orders they had on the books from being cancelled than they were taking new orders.
I was disappointed that the US Department of Commerce did not update the import licensing data as they normally do on Tuesday evenings. I expect it will be updated prior to our Thursday edition of SMU. I am curious to see if the license request flow remains consistent with what we saw in January or if we might see a bit of a pull back. Everyone is waiting for the pull back as it is needed in order to reduce and balance service center inventories.
There is continued pressure on scrap prices as we move through February and into March. I am not a forecaster of scrap pricing but, if the selling numbers erode further, then we might see more pressure on HRC pricing. But, if the foreign numbers remain at, or above the $460-$480 mark, the domestic mills – at least the mini-mills – will have the ability to maintain or even recoup some market share, even at the $500+ numbers.
That is my opinion – I wouldn’t necessarily take it to your bank to borrow money….
The MSCI inventory and shipment data is due out tomorrow (Wednesday) and we will have a detailed analysis for both our Premium and Executive level readers. Premium will receive our service center inventory Apparent Excess/Deficit report. Previously, we have been forecasting a large excess of flat rolled at the domestic distributors.
As always your business 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?