Steel Markets

Notes from METALCON 2015

Written by John Packard

For weeks SMU procrastinated about taking the time to attend this year’s METALCON exhibition in Tampa, Florida. We ended up flying to Tampa yesterday morning (Wednesday) for the opening of the show and then returning to our offices last night.

With all of the uncertainty which has enveloped the flat rolled steel industry over the past few weeks, in particular, we felt it would be good to rub shoulders and have discussions with many buyers and sellers of steel to see what issues were the most pressing at this point in time.

Here are snippets of some of the topics discussed with manufacturing companies, steel trading companies, steel mills and service centers over the course of the six hours spent at the convention center or one of the nearby hotels:

 – Although we did not speak directly to the Vietnamese steel mills it quickly became evident that they were in attendance and actively soliciting business from the metal building and roofing industry (galvanized, Galvalume in bare, acrylic and pre-painted forms). We learned there were two main Vietnamese mills interested in doing U.S. business. The reason behind their interest being the U.S. selling prices were at much higher numbers than other countries around the world. One Vietnamese mill was reported to have 4,000 tons per month available for the U.S. market and the second mill, which was pegged as being a 1 million ton per year mill, had 60 percent of their capacity dedicated for exports (all locations). There were a number of discussions about the quality of the Vietnamese material which one trader referenced as “2nd Tier” compared to YP out of Taiwan. There has not been much flat rolled from Vietnam received to date. There was no coated coming from Vietnam in June. July had 189 tons of galvanized and August 1,397 tons of GI and 85 tons of Galvalume.

– -We spoke with one of the domestic mills who told us that their executives and legal team was looking into the both Vietnam and Brazil coated steels. They did not say that a suit was imminent but, the threat was clearly understood. Neither Brazil or Vietnam were named in the CORE trade case (corrosion resistant).

 – We spoke with another domestic mill who told us that we may be returning to a point in time where “normal” was relatively low (by the last 10 years standards) for flat rolled pricing and with moderate volatility instead of the wild swings we have lived with since the mid-2000’s.

– -The question on everyone’s mind was how much lower could prices go and, what will be the catalyst that kicks prices higher. At $410 per ton (SMU HRC average) we are within $30 per ton from our 2009 Great Recession low of $380 per ton. Is $380 HR the price level which instills fear in the hearts of the domestic mills and creates an environment that will ultimately push prices higher? The buyers and sellers of steel with whom we spoke were trying to find that one thing that can turn this market higher. One suggestion given was to have USS or ArcelorMittal lockout the USW…

 – We heard from many of the metal building related companies that there businesses are doing reasonably well in the current market. One manufacturing company told us, “Business has been good until the last 3 weeks when it dropped off….” A number of service center made reference to their business having been good through the first six months 2015 and then tapering off over the past couple of months.

 – There is a belief that if prices drop hard for a few weeks (double digit declines and breaking through $400) that is a sign the bottom is at hand.

 – We spoke with a number of trading companies who continue to take orders for products produced by countries which were hit by the U.S. steel mill’s antidumping petition. The reason given was the countries (or the producing mill) did not believe they were dumping steel as defined by trade law. A couple of traders told us the producing mill had taken on the responsibility of being the importer of record and they were being protected should duties be leveled against that country.

METALCON continues on Friday from 10 AM until 2 PM.

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