Final Thoughts
Final Thoughts
Written by John Packard
October 12, 2015
Our next Steel 101: Introduction to Steel Making & Market Fundamentals workshop will be held in the Columbus, Mississippi area on January 19 and 20, 2016. This workshop will include a tour of the SDI Columbus steel mill. We are working on hotel information right now and hope to have the hotel selected by early next week. We already have a waiting list for our January workshop so we encourage those interested to ask questions and register as soon as possible.
I will be in Tampa, Florida on Wednesday of this week attending the Metalcon exhibition. If you are attending Metalcon and would like to spend a few moments with me during the show on Wednesday you can email me at: John@SteelMarketUpdate.com or text me on my cell phone: 770-596-6268. I will only be at the show on Wednesday, October 14, 2015.
I was talking with one of the steel analysts this afternoon and we were debating where we thought the industry was in the cycle. We both were of the opinion the market was close (closer) to a bottom and the question was what would cause the market to rise? An announcement of a lockout was one tipping point mentioned. Another tipping point could possibly be the Preliminary Determination announcement on corrosion resistant steels which is due November 2nd. I mentioned that another tipping point could be a rush to buy as the market players know we are close to a bottom and that the domestic mills – especially US Steel, ArcelorMittal and AK Steel – will have to take down capacity.
We could see a short-term rally in prices, which our analysts put at +$40 per ton and not much more, in the coming weeks. That would put benchmark hot rolled average in the $440-$460 per ton versus our $410 per ton. This is not to say that $390 or $400 is out as a possibility within the next week to two weeks.
Something to think about: Since the beginning of January 2007 the lowest price average on hot rolled coil measured by Steel Market Update was $380 per ton which was reported on June 9, 2009. The market has been in a slow free fall since May 2014 when prices were reported at $685 per ton.
I spoke with a service center executive today who told me it is not demand that is driving prices lower. He said supply is what is driving prices. Supply includes foreign steel at cheap numbers as well as too much domestic chasing the remaining orders.
One of the Galvalume producing mills told me today that prices for AZ have come down $200+ per ton (domestically) and the same $100-$150 per ton spread between foreign and domestic pricing still exists. They questioned me as to how can that be?
I hope to learn more at Metalcon tomorrow.
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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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.