Final Thoughts
Final Thoughts
Written by John Packard
June 3, 2016
I received a couple of notes from trading companies thanking me for my article on Thursday evening (The Sky is NOT Falling… at least not yet) as I tried to put into context some of the pricing available for foreign steel, correct some misinformation and look at the bigger picture. Even as questions arise about demand, as long as supply is constrained and inventories are balanced or less than balanced, the domestic mills will have the wind to their backs.
Even so, no one should become complacent and accept that the status quo will exist for the rest of this year or even into next year. There always seems to be something to drive the train off the tracks and I expect it will happen to this cycle as well.
Scrap prices – at least the obsolete grades of scrap – are falling across the country. Dealers are telling SMU that this may be a single month event as shredded scrap may have to fill the holes left behind from too little prime grades as we move into auto shutdown schedules. The headlines will be about the price drops on the east coast but, in the Midwest and South where most of the steel is made the price drop is much less notable.
Right now it is not in the steel mill’s interest to have scrap prices tank. Much lower scrap prices can put pressure on steel prices although, I don’t think they will during the month of June.
I included one of the Premium level articles we produced late last week. The article on Key Market Indicators and the Construction Put in Place (CPIP) article which was produced at the same time, provide a glimpse into why we continue to be bullish on the steel industry. Take a few moments to read the KMI article and if you would like more information about upgrading to a Premium level customer please shoot me an email and I will provide you more details: John@SteelMarketUpdate.com.
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
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?
Final Thoughts
With higher tariff rates on steel and aluminum set to go into effect on Wednesday, June 4, a new round of chaos across the supply chain is likely in store. Expect a significant impact on manufacturers and metal fabricators. But even before the latest round of Trump-tariff whiplash on Friday evening, there was a lot of interesting data coming out of SMU's steel-market survey.