I am here in New York City participating in the Cowen & Company Global Metals and Mining Conference. Day one was dedicated to the steel industry and the various commodities (scrap, iron ore, metallurgical coal). I thought I would provide a snapshot into some of the comments made during the conference by various CEO’s.
Lourenco Goncalves, CEO of Cliffs Natural Resources told the group that the preliminary countervailing duty results on the CORE trade suit “was better than expected.” He pointed to the 1998 hot rolled case that he was involved in saw much lower preliminary duties than what were announced last week.
Jim Wainscott, CEO of AK Steel (about to become Chairman of the Board) said, “There is no doubt in my mind that prices could pop back to previous levels [earlier he referenced $650 per ton].” He backed off the initial enthusiasm when he went on to say, “We will return to normal levels, whatever that means.”
Gregg Mollins, CEO of Reliance Steel & Aluminum said the service centers apparently did not learn their lesson in 2009 when it came to inventories. He said when distributors have bad years it is almost always related to inventory levels. He told the group that Reliance managed their inventories, they don’t speculate and they were able to raise margins during 2015.
Mario Longhi, CEO of US Steel said that they are spending time with the ITC commissioners as they want to make sure they have an understanding of “injury” which previously had been taken totally out of context.
Jim Wainscott told the group, “You have to play hardball with China.”
The CEO’s pointed out that the prices outside of China are $20 to $30 per ton higher than when China is involved in exporting steel to that country.
On a personal front I was able to secure one of our keynote speakers for next year’s Steel Summit Conference… (August 30-31, 2016 in Atlanta).
As always your business is truly appreciated.
John Packard, Publisher
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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.
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.