Final Thoughts
Final Thoughts
Written by John Packard
February 26, 2016
Happy Academy Award (Oscar) Night…
We will begin our early March flat rolled steel market trend analysis on Monday morning. If you receive an invitation to participate please take a few moments to click on the button contained in the message which will take you to our questionnaire. If you would like to participate in our questionnaire and are not yet on the invite list please send me an email: John@SteelMarketUpdate.com.
We heard from one of our scrap sources that there is a shortage of scrap in the Chicago and Detroit markets – especially obsolete grades. Negotiations will begin this week on for March scrap pricing. Last week many dealers were expecting a sideways market.
I was looking at the Nucor Berkeley lead time sheet late last week. Cold rolled lead times were out to late May/early June and galvanized was on an “inquire” only basis.
Plate lead times are much different than cold rolled and coated products. We learned over the weekend that Nucor and SSAB plate lead times were 2-3 weeks max while ArcelorMittal was out 6 weeks. Plate prices are negotiable for offers of 500 tons or greater.
I will take a deeper look at lead times, changes in production/capacity, etc. this week. If you have information about specific mills production capabilities, what maintenance is scheduled and where lead times are for individual plants please shoot me an email at: John@SteelMarketUpdate.com.
Do I think it is shocking that steel prices haven’t move much in the past few weeks? You have to remember that I started in the business when a $10 per ton move over a few months was considered a big move… The second question is can the spread between hot rolled and coated products (in excess of the traditional $100-$120 per ton) continue, I think as long as the demand for hot rolled continues to be challenged and other products are doing well then the spread can continue. I go back to a comment made to me by a mill executive who pointed out to me that the spread at $100-$120 has been too low when considering the actual costs to produce the upstream products.
Will the economy weaken as the year progresses? There is some talk in the financial press of a “recession” that is being caused by the actions of the Federal Reserve… I am going to answer the question with a video link from HARDI to comments being made by Dr. Alan Beaulieu of the Institute for Trends Research (ITR). Dr. Beaulieu is one of our Keynote Speakers at this year’s Steel Summit Conference. The second is to say stay tuned as another one of our Keynote Speakers is Chris Oakley, Vice President and Regional Executive for the Federal Reserve Bank of Atlanta…
We will have more about demand and what we are learning from our latest survey later this week – stay tuned.
As always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher
John Packard
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Final Thoughts
We just wrapped another Steel 101 Workshop, where you take what you learned in the classroom into the steel mill.
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Steel equities and steel futures fell hard after news broke earlier this week that the US and Mexico might reach an agreement that would result in the 50% Section 232 tariff coming off Mexican steel. The sharp declines didn’t make much sense, especially if, as some reports indicate, Mexico might agree to a fixed quota. They didn't make sense even if steel flows between the US and Mexico remain unchanged.
Final Thoughts
Even before the news about Mexico, I didn’t want to overstate the magnitude of the change in momentum. As far as we could tell, there hadn’t been a frenzy of new ordering following President Trump’s announcement of 50% Section 232 tariffs. But higher tariffs had unquestionably raised prices for imports, which typically provide the floor for domestic pricing. We’d heard, for example, that prices below $800 per short ton for hot-rolled (HR) coil were gone from the domestic market – even for larger buyers.
Final Thoughts
I want to draw your attention to SMU’s monthly scrap market survey. It’s a premium feature that complements our long-running steel market survey. We’ve been running our scrap survey since late January. And over just that short time, it’s become a valuable way not only for us to assess where scrap prices might go but also to quantify some of the “fuzzy” indicators - like sentiment and flows - that help to put the price in context.
Final Thoughts
I think there is an obvious case for sheet and plate prices going higher from here. That’s because, on a very basic level, the floor for flat-rolled steel prices, which is typically provided by imports, is now significantly higher than it was a week ago.