Final Thoughts
Final Thoughts
Written by John Packard
October 19, 2016
One of my habits when writing this newsletter is to hold my Final Thoughts until after the vast majority if not the entire newsletter is complete. At that point I try to absorb what has transpired through the day and many times that day flows well into the evening. I think this is one of the differences between what Steel Market Update does and what happens at other periodicals.
This evening Jack Marshall of Crunchrisk, LLC and the author of this evening’s hot rolled futures article, spoke with me about the change in the HRC futures market over the past week. We went from there being too many sellers and not enough buyers to too many buyers and no sellers. Something has changed. Something to watch.
This evening I traded texts with a large service center that is active in the futures market and their comment was “demand is bad” which is not an endorsement for higher prices anytime soon…
I became aware this evening that Essar and Cargill have teamed up regarding a “structured load” or potential bid on US Steel Canada. I will work more on this story in the morning to see if we can understand exactly what is happening and any impact that it might have on the USSC operations.
I don’t know about you but I am glad the presidential debates are over and we have less than 3 weeks to the election. When we held our 6th Steel Summit at the end of August we did a straw poll of attendees using our App to see how many were Trump vs. Clinton supporters. At that time 48 percent of those voting (148 responses) were Donald Trump supporters, 22 percent were Clinton supporters and the balance were either other or didn’t care. I am curious how the results may have changed over the past couple of months…?
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?