Final Thoughts
Final Thoughts
Written by John Packard
November 21, 2016
First, I want to wish every one of our USA readers a safe and pleasant Thanksgiving Holiday. Due to the holiday Steel Market Update will not publish a newsletter on Thursday. We do expect to publish an issue on Sunday evening that may be a little lighter than normal and we will return to our normal publishing schedule on Tuesday of next week.
We asked one of our scrap sources to provide some insights into what the expectation is for prices as we move into early December negotiations between the steel mills and their suppliers. There have been rumors out there that prices could move by as much as $40-$50 per ton. Our sources are saying we should see a total of $40-$50 per ton by early January. Whether it is all collected in December remains to be seen. We were told, “There are a handful of mills here and there that might have a decent amount of inventory on the ground, and some dealers do as well, but that is about where the headwinds for scrap prices end. Plenty of other mills and the export docks, as well as many other dealers, do not have deep inventories. Frankly I am not sure how much scrap is in the available reservoir ready to be shipped to mills now that the demand dynamics have changed. The Turks seem to have taken a pause in buying but it’s pretty clear they will be back shortly. As US demand picks up and pig iron prices sky rocket we are settling in for stronger markets and better volumes than we have experienced in our industry for some time.”
I got a note from Crunch Risk this evening advising me that first quarter and second quarter 2017 HRC (hot rolled coil futures on CME) traded at $605 per net ton on 500 net tons/month and 260 net tons/month respectively. Later in the day calendar year ’17 traded at $600 net ton on 300/NT per month.
BUS (busheling scrap on the CME) traded first half 2017 at $270 per gross ton which is higher than the $260 level many expect for actual trades for December 2016. With the strong move in hot rolled prices the expectation is for BUS prices to move up as well. Expect $300/GT on BUS if HR gets close to $600 per net ton.
I got a few notes today advising me Timna Tanners, metals and mining analyst at Bank of America Merrill Lynch, has raised her forecast for calendar year 2017 HR to average $650 with it going as high as $750 during the first half.
My opinion is we are potentially in a market where prices could very well surprise to the up side.
Stay tuned…
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.
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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
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Final Thoughts
We're about to hit 50% Section 232 steel tariffs. What could happen?