Final Thoughts

Final Thoughts

Written by John Packard

It appears that very slowly steel buyers are slowly starting to come to a realization that there may be a lockout at US Steel and possibly ArcelorMittal as well. As many of you know, these two mills are not huge players in the spot markets so the immediate impact may be slightly muted should one (or both) of them move to lockout the union in an effort to break the stalemate. Even so, the number of tons being taken out of the market would quickly begin to have an impact on lead times at the other remaining mills. If both mills are involved and the disruption in supply lasts for more than a few weeks (I assume they have built a back-up supply of slabs for their key customers) as the ATI lockout has, well, things could get a bit dicey at that point.

I certainly am not predicting that there will be a lockout or any disruption in supply. I still look at the ATI situation as what needs to be watched. ATI and the USW are in mediation and maybe they can come to some sort of resolution which can then be emulated by the other mills (or at least break the deadlock). If mediation fails at ATI, then my opinion is that we would have at least one of the mills go out, and if the failure comes a week or two from now and nothing is moving at either AM or USS then they both may go out.

If that were to happen (lockout or disruption of supply) over the course of a few weeks lead times would jump out and those carrying light inventories would have to replenish quicker than what is available. This would put them into the spot market which could actually have a positive impact on service centers who are carrying too much inventory.

If the disruption were to last more than a few weeks and steel buyers start double buying well, those situations never end well. What goes up very quickly crashes at a higher rate of speed and a steeper incline – i.e. prices would not return to today’s levels, they could go down below today’s levels.

And we are starting to see imports slowing…

Volatility makes my life interesting but probably doesn’t make most steel buyers happy. Especially, when the swings are wild in opposite directions over a short period of time.

Or, nothing could happen at all. One of the mills is able to get a crack in the negotiations that works for their situation and contracts get signed. No disruption and there is still plenty of inventory out there (including the 30 days or so of build up for their contract customers). Market stays soft…

Until the trade cases start to hit. First case up – corrosion resistant (CORE) with Preliminary Determinations to be announced on (or about) November 2nd.

As always your business is truly appreciated by all of us here at Steel Market Update.

John Packard, Publisher

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