I don’t know if I have ever seen a market quite like the one we are living through right now. Supply is being constrained through the use of the trade suits coupled with US Steel taking down two blast furnaces at Granite City and AK Steel taking down their lone blast furnace at Ashland. There are two other mills that are making me nervous right now – Essar Steel Algoma and US Steel Canada – the union nixed the deal at Algoma as the union wants Essar to be allowed back into the bidding process. USSC is asking for more time and they have to prove to the Canadian restructuring court that they can be profitable. You would think that would be easy in a supply constrained market. I am nervous because it is not a sure thing that these two mills will actually be operating if they don’t find a white knight that can make the unions happy. To me this story sounds a little bit like Wheeling Pittsburgh where the union turned their back on CSN so they could be bought by Esmark. That did not end too well for the WP people.
A number of people have asked me why I haven’t moved my Price Momentum Indicator from Neutral to Lower. After all, they tell me, HRC prices have moved off of their highs. The issue I have continues to be about supply and surprises that we don’t get to see coming – like the change in the AD duties on corrosion resistant for Taiwan. What happens if the US DOC/ITC come down hard on hot rolled substrate from Korea, Japan and Australia? There are a couple of mills on the West Coast that might be hurting for supply.
So, i am waiting and watching to see what happens from here before I make a change.
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