I am aware that on October 23, 2015 the domestic steel mills filed allegations of critical circumstances on exports of hot rolled coil from four countries: Brazil, Australia, Japan and The Netherlands. I will have more details and statements from both buyers and sellers later this week. I wanted to spend time studying the affirmative critical circumstances finding by the US DOC on galvanized, Galvalume and other corrosion resistant steels. This decision was made just a couple of days before the preliminary determination on countervailing duties (CVD) on CORE which is due for a vote on Monday (we should know more on Tuesday, November 3rd.).
On Thursday of this past week I made the following statement in my Final Thoughts:
This area of our newsletter, my “final thoughts” exists so that I have a forum to give my opinion on topics I deem important at that time. Tonight I want to address those of you who are negotiating 2016 contracts – my opinion is now might be an excellent time to cut your deal… In my mind it seems that the market is waiting for the catalyst that will stop the price slide. If scrap bottoms and begin to move higher as we move into the winter months… If US Steel or ArcelorMittal (or both) decide that they have no option but to lockout the USW in order to achieve the concessions needed… If the trade case rulings end up in favor of the domestic steel mills (and end up being large enough to stem the flow of imported steel)… If AK Steel, US Steel and possibly ArcelorMittal take out the capacity being discussed (publically or privately)… If we have a harsh winter which tends to play havoc with those blast furnaces located in the North (as in all of them since USS Fairfield has shut down its blast furnace)…
There are reasons to not wait too long trying to catch the last drop of price erosion (however, others will still say it is never safe to catch a falling knife…).
That statement prompted a number of responses from our readers. Most agreeing with what I had to say. However, one reader added a little twist that I feel I need to address. I received the following note from a long-time reader (and former steel customer of mine):
I am glad that you used your Final Thoughts to really include a Thought. None of us knows what the answer is but I am in agreement. I don’t look for a significant bounce but the domestic and (known) foreign markets are fairly close. There are a lot of unknown names out there on the foreign side – I am sure some of them are great and some of them are probably not.
I agree that there are perhaps too many occasions where I have straddled the fence and not provided my opinion on subjects where our readers could have benefited (or at least been prompted to think of reasons as to why they disagree). Going forward I will try to provide my opinion on subjects that can/will affect your business. I will not always be right and as I learn more about various subjects I may change my mind. I will always entertain differing opinions which can be sent to: John@SteelMarketUpdate.com
I have been asked over the past couple of days to elaborate further on the status of negotiations between USS/ArcelorMittal and the USW. I do not have any direct information that allows me insights into the process. I remember conversations that I had with Rolf Gerstenberger when he was the president of the USS Hamilton Works USW local. I can remember how that union was locked out due to “principle” regarding taking benefits away from retirees. It was obvious (at least to me since their sister plant had just settled with USS after being locked out for almost a year) that they were fighting a losing battle. They ended up being locked out for almost a year and still lost.
I have been told the same USS negotiators who worked on the USS Canada contracts are negotiating the USA contracts. Are the union workers in the USA of the same mindset as those in Canada (we won’t give in at any cost…)? I don’t know the answer to that question and if any of you have any insights please send me your thoughts.
At the same time – if the union is not willing to bend (no matter the costs) then AM and USS have to be careful regarding any lockout. Neither of them could afford to have the mills out for three, six, nine months or more.
I don’t know what direction this will ultimately go. It seems to me (my opinion) that the two mills have no choice but to get concessions to the health care issue. Since the union workers supported Obama for president – maybe the answer is for the unions to also accept the consequences of the Health Care Act that penalizes “Cadillac plans” and for the union to absorb any extra costs associated with penalties that come from those plans in the coming years?
Your opinions and suggestions are appreciated: John@SteelMarketUpdate.com.
And, as always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher
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A clear consensus has emerged among respondents to SMU’s latest steel market survey that hot-rolled (HR) coil prices will bottom this month or in April. Seventy-five percent of respondents to our latest survey think that prices will find a floor before May as the chart below shows:
I want to give a big shoutout to the good folks at the Fabricators and Manufacturers Association (FMA) for inviting me to their annual conference this week in Clearwater, Fla. I also want to give a special thanks to the FMA for awarding SMU founder John Packard with a lifetime achievement award – on that also gave me a chance to catch up with my old boss in person.
What are some “Black Swans” to watch out for? With the war in Ukraine entering its third year, your mind might understandably move to conflicts overseas. Here is one closer to home to consider: US trade relations with Mexico taking a turn for the worse. I mention that because the Office of the United States Trade Representative (USTR) dropped a (virtual) bombshell earlier this month.
Domestic prices have been sliding since the beginning of the year, and I don’t see any obvious reasons why the slide might stop this week. But let’s put the timing of a bottom aside for a minute. The question among some of you seems to be whether we’ll see another price spike, or at least a “dead-cat bounce,” before the typical summer doldrums kick in.
I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.