Final Thoughts
Final Thoughts
Written by John Packard
March 18, 2015
Any of you out there feeling like the beat of the anti-import drums are once again beating harder and harder. So, what happens if the Chinese steel mills decide to “voluntarily” reduce or allocate their export tonnage to the United States? First, would they try to allocate at existing tonnage levels (which are quite high) as opposed to a lower percentage of tonnage? Will they eliminate commodity items and try to continue to gain market share in items like galvanized and Galvalume?
The comments we heard that the Chinese government may be considering removing any tax rebates on steel heading for the U.S. doesn’t help much. Our understanding is their either is no tax or very limited tax on cold rolled and coated products.
We should know more tomorrow (Friday) and will report to our Premium members as soon as we do and to everyone in Sunday evening’s edition of our newsletter.
Another note to our Premium members: Imports by product, port and country are updated in the website. Second, our Power Point presentation on this weeks flat rolled steel questionnaire should be updated and in the website by Friday afternoon. We also published two articles for Premium members earlier today on MSCI data. One which covers both long and flat products and our Apparent Excess/Deficit analysis and forecast.
If any of our Executive members would like to consider becoming Premium level members please contact our office: 800-432-3475. I will be in the office all week next week.
From Cowen & Company this morning to their customers after they attended the Platts Steel Conference in Chicago earlier this week: “Roger Schagrin, an attorney representing the steel mills, presented at the conference and described the flood of steel imports coming into the U.S. as a “crisis situation.” He expects trade cases to be announced within the next three to nine months due to the fact that injury will be apparent and proven.”
Boom, boom, boom, boom…
Timna Tanners put out a note to her clients this evening entitled, “U.S. mills declare war on imports, prices suffer.” What she wrote about was the domestic steel mills willing to match foreign steel pricing into certain customers and products. In the process domestic spot prices have suffered (although future foreign tonnage should also suffer).
Boom, boom, boom, boom…
If a trade case is eventually filed don’t expect it to just hit the Chinese steel mills.
We will continue to watch developments as the come.
Take a moment to read Andre Marshall’s comments in the Hot Rolled Futures: Reality Check article above. Read his comments about scrap. Steel prices will do one thing – change quicker than anyone realizes. We just don’t know what the catalyst will be this time around…
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?