Final Thoughts
Final Thoughts
Written by John Packard
January 9, 2017
As expected, the domestic steel mills began 2017 right where they left off. Another $30-$40 per ton of price increases on top of the $140 per ton of increases leveled on their spot customers since late October through the end of 2016. The key from here is if business, both at the steel mills, as well as at their customers, is strong enough to sustain momentum through a building of real demand. My initial reaction is that the steel mills will be able to collect these increases as they are (somewhat) psychologically justified with the rising cost of scrap here in the United States.
We have also seen international prices rising as well (not necessarily in tandem or to the same degree). The impact of the trade suits has not yet been totally felt and there could be further tightening of flat rolled and plate supplies in the coming months.
The real question now is where is real demand? What affect will the Trump administration really have on infrastructure, manufacturing and the U.S. consumer? Many of these questions will not be answered during the first six months or maybe even during this calendar year. However, a couple of the economists that we follow and that we show-case in our Steel Summit Conference are forecasting a better year this year for the steel industry than last. The economists don’t follow trade cases the way we do or, the ups and downs of the daily markets – they are looking at the big picture and the big picture is for growth for the industry. Anything that the Trump administration adds to the mix will be gravy.
So, I warn buyers and sellers of flat rolled steel to remain vigilant and remain connected to your suppliers, customers and quality sources of market intelligence (and we hope SMU is considered one of those). This industry has a way of surprising even the most education and experienced in both directions (up or down). The degree of surprise and how nimble you are able to react will depend on your knowledge of the market (in my opinion). Either that or dumb luck. I know one thing for sure, the ride will be wild and that’s one reason why I love the industry and those who make a living in it.
We will publish one of our Premium Supplemental issues tomorrow afternoon (Wednesday).
Just an FYI – Steel Market Update (and me personally) are available to do special training or presentations to private groups be they manufacturing, distribution or financial in nature. If you have an interest in either myself, part of the SMU team or a combination of the two please contact me at John@SteelMarketUpdate.com to see if what you are trying to accomplish is a good fit for us. We can do onsite presentations as well as phone presentations. Contact me for more details.
We are ironing out the final dates for our next Steel 101 workshop. We know what mill will be involved we are just finalizing the dates. We anticipate the dates ultimately selected will be in early April 2017. Our Huntsville, Alabama workshop in conjunction with Nucor Decatur has been sold out for many weeks and I want to thank everyone who is registered for that workshop as well as the patience of those who have been waiting to see if space will open up. We are hoping to conduct four Steel 101 workshops this year (normally we do three).
We also are looking to conduct our first Service Center/Wholesaler sales and purchasing training workshop which right now is being targeted for late spring 2017 in Atlanta.
AND, the dates you need to have written on your business calendar are August 28, 29 and 30th of 2017. You will want to be in Atlanta for our 7th Steel Summit Conference. Watch this newsletter and our website for more details, registration, hotel and conference information, etc. We will be starting the registration process very soon.
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?