Final Thoughts
Final Thoughts
Written by John Packard
April 15, 2016
This week’s newsletters may seem a little “muted” compared to the past, this is due to my right hand man – Brett Linton – being on vacation. Brett is the one responsible for keeping track of all of the data points and graphics in both the newsletter and website. He is also responsible for crunching many of the data points we collect out of our surveys and other proprietary products we have. Brett will be back next weekend so please bear with us as we push on without his talents adding the explanation points to our articles.
There will be a larger than normal Premium supplemental issue of our newsletter first thing tomorrow morning. The issue will include extra analysis of the service center inventories and shipment data including our Apparent Excess forecast.
We will begin our next flat rolled steel survey first thing in the morning as well. If you receive an invitation to participate please take a few moments to click on the button to go to our questionnaire.
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
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.
Final Thoughts
We're about to hit 50% Section 232 steel tariffs. What could happen?