Letter to the Editor: Pricing Cycles

First, when the market is up, people in the steel business only see up and react accordingly, buy, buy, buy.  As if they believe “up” will never end. 

Second, when the market is down, people in the steel business only see down and react accordingly, no buy, no buy, no buy.  As if they believe “down” will never end.  

Finally, I am reminded of a famous address that Mr. Mittal made at the SSS in June 2008, when HR prices were over $1,000 per ton and USS was on the verge of announcing an $800 per ton increase in all their pipe and tube products.  Mr. Mittal famously said, (pretty close to an exact quote), “The era of the steel cycle is over, it is blue skies as far as the eye could see.”  Of course, this sentiment was driven by my first “up,” above and the China, India, Russia, Brazil, etc. explosion of growth, prices etc.  

Mr. Mittal was right for about 2-3 months.  

So, in conclusion, this might be a contrarian’s time to move.  Mr. Goncalves, in the midst of one of these crazy times told AIIS attendees at a conference some years ago that he had loaded up inventory when everyone was diving for cover and the steel market’s cyclicality proved him right.  

An interesting ride into 2016 is clearly coming our way. Time for contrarians to move or everyone to hunker down?  

Dave Phelps