Final Thoughts
Final Thoughts
Written by John Packard
June 20, 2016
Two steel mills announced price increases today. This is the beginning of the 6th round of increases since the first announcement in early December 2015. However, unlike past announcements this one just doesn’t “feel” the same.
We are not seeing a rush to buy (unless it was a special deal at much less than the number suggested by ArcelorMittal). We will be working on where demand is on flat rolled products but, our initial read of the market is demand is “decent” but not necessarily as strong as expected. This is something we will be working on in the coming days.
I did do a quick check with a couple of trading companies to see what offers are out there. There is a belief among some buyers that there is a flood of import coming but we are not seeing it. We are not aware of any hot rolled offers in the market at this moment. With the U.S. being the highest priced market in the world to not have at least a few HR offers is quite unusual.
Cold rolled is being offered out of Vietnam and Turkey around $660 ($33.00/cwt). We have heard rumors of $30.00/cwt Houston but I haven’t been able to confirm the source.
We heard Vietnamese .019 G30 galvanized was being offered at $750 per metric ton, Ex Vietnam. To put that into some perspective the $750/MT + $100/MT (freight/insurance, etc.) = $771 Net Ton ($38.55/cwt). If you were to take coating extras into account, .019” G30 at $4.20/cwt + $2.00/cwt thickness extra = $6.20/cwt ($124/NT) brings the pricing down to a $32.35/cwt base. The ArcelorMittal announcement today of $830 per ton base on galvanized ($41.50/cwt+$4.20 + $2.00 = $47.70/cwt or $954 per ton). The Vietnamese .019 G30 galvanized product is at least $183 per ton below AM price (and NLMK is even higher than AM)…
Of course the question really is, what will the price of .019 galvanized be in January 2017?
A special thank you to Cargill which came on this week as a sponsor to our upcoming Steel Summit Conference in Atlanta. Cargill joins Pacesetter, Big River Steel, Mill Steel, Tennessee Steel Haulers, Steel Dynamics, Magic Coil Products, Alliance Steel and Kenwal as our other sponsors. We do have a couple of spots left should you be interested in becoming a sponsor or an exhibitor. Contact me at info@SteelMarketUpdate.com and we will provide more information as to what remains.
As always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher
John Packard
Read more from John PackardLatest in Final Thoughts
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?