Final Thoughts

Final Thoughts

Written by John Packard


A note to our Premium level members, we will have another supplemental issue out tomorrow which will contain our Apparent Excess/Deficit forecast for carbon flat rolled service centers in the United States. We also expect to have our Power Point presentation regarding this week’s flat rolled steel analysis (survey) online by early afternoon. We will most likely provide some insights into the Power Point in tomorrow’s supplemental issue.

I am being asked by almost every person I speak with on a daily basis if I believe we are at the bottom. Price wise, with hot rolled being offered to medium and smaller sized buyers at $19.00/cwt ($380 per ton) we are at the levels last seen during the height of the Great Recession. In the last issue of SMU I laid out some of the green shoots. Today I will mention some of my concerns:

 – Spot iron ore pricing is dropping in China. Today’s rate was $45.1/dmt for 62% Fe fines. This is down about $10/dmt over the past few weeks. Iron ore is expected to continue to fall and could breach the $40/dmt level due to slowing conditions in China.
 – The domestic steel mills lead times and order books are still not quite at the levels they need to be. This may be changing as I mentioned in the last issue of SMU. This is the one item buyers need to watch very carefully.
 – Sentiment is down and the market psychology is negative – even though many customers expect 2016 to be a good year (better than 2015).
 – Inventories are still too high at the service centers. I will address this issue tomorrow to our Premium customers when I provide how we did with our last forecast and what we expect going forward. We do anticipate inventories dropping and I do have a mild upward trend in our HR pricing forecast going into 2016.

You will notice that we are beginning to role out pieces of our Leadership Summit program. Registration is open for both the conference and the hotel. Both the conference and the hotel are limited so we recommend that you register as soon as possible. We have broken out details regarding the pricing for the conference in the article announcing Diane Thieldfolt pf The Learning Cafe as one of our presenters.

We will have more coming on the Leadership Summit in the coming days. If you have any questions please contact either Ray Culley (Ray.Culley@SteelMarketUpdate.com) or myself: John@SteelMarketUpdate.com (800) 432-3475.

As always your business is truly appreciated by all of us at Steel Market Update.

Latest in Final Thoughts

Final thoughts

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.

Final thoughts

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?