I had an interesting conversation with a former trading company executive who was reflecting on the number of tons of Chinese galvanized steel that hit the U.S. shores in August, September and October 2015. Depending on when the preliminary determination on countervailing duties is published in the Federal Register, the Chinese mills are subject to critical circumstances which means duties are due on products received into the United States 90 days PRIOR to the publication of the preliminary determination. This is also true of the other countries/mills hit with critical circumstances (such as ILVA out of Italy). Our executive was surprised at the risk being taken on these tons and if a small trader is involved it could put them out of business.
We will have more on this subject in the coming week.
Flat rolled steel prices are now $5 per ton away from the low achieved (albeit very briefly) in May 2009. Our Price Momentum Indicator continues to point toward lower prices as we wait for the catalyst that will push prices higher from here. With scrap dropping again the psychology of the market continues to be “don’t catch a falling knife” and wait for the bounce. It will come and the risk of prices crashing much lower are becoming less and less. The mills will have no choice but to close more capacity (such as USS and Granite City). However, Mario Longhi kept using the words “potential idling” when speaking of Granite City which (to me) means that it is not yet a done deal.
We appreciate your thoughts, suggestions and opinions. You can reach me directly by sending me an email: John@SteelMarketUpdate.com or you can reach me by phone at 800-432-3475 (it is once again going to my office).
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John Packard, Publisher
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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.
We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?
Everyone knows the old saying that “a picture is worth a thousand words.” Just because it’s a cliché doesn’t mean that it’s wrong. A lot of inked has been spilled trying to figure out why prices are falling now. I thought it might be as simple as this: Market dynamics in the fourth quarter (UAW strike, companies buying ahead of an anticipated post-strike price spike, etc.) pulled forward restocking activity that typically happens in the first quarter.
What a difference a month makes. There are a few full bulls left in the room, but their numbers are dwindling. We’ll release results of our full steel market survey tomorrow afternoon. I took a sneak peak at the data on Thursday. And more people than I expected think that US hot-rolled (HR) coil prices will be in the $700s per short ton (st) two months from now. Vanishingly few think prices will be above $1,000/st in mid-April.
Sheet prices have fallen again this week on shorter lead times, higher imports, and potentially higher inventories. (We’ll see for sure when we release our service center shipment and inventory data next week.) I remember reporting almost exactly the same thing about a month ago and getting a fair amount of pushback. Not so much these days.