I got a note from one of my Asian trading sources yesterday explaining the reason for some of the price volatility seen in the Chinese markets earlier this week. He told us, “We see Ore at below USD50/mt in 2017. Reasons being that China is shutting down capacity big time, probably about 150 million MTS will disappear in 2017, and that will make a big impact on iron ore pricing John. Yesterday the Government, unannounced, mandated ALL Medium to Small sized EAF and Induction furnace mills to be closed within June 2017 effective immediately. Integrated mills are TRYING to close out around 100 Million MTS in 2017. The EAF/Induction Medium/Small sized mills are geared to produce 100 Million MTS per year (Total all mills), but they are running at 50% capacity now, 50 Million MTS and closing out those mills l along with Integrated mills, you are looking at 150 million MTS disappearing in 2017. That announcement was one of the factors in the uptick in Chinese prices yesterday and today.”
So, I continue to be optimistic about the steel industry for calendar year 2017. I am a little concern about the “mixed messages” I am seeing in the marketplace. For example, one mill in the Southeast announced a $30 per ton price increase on cold rolled but over the past few days has been offering the product up $10 not $30. At the same time their galvanized products are on an inquire only basis and are rumored to be sold out (commitments) through June.
I am also concerned about the weakness of the hot rolled markets. We have new tons coming into the market although I am discounting them as not being large enough to be disruptive for at least 3 to as many as 6 months into the future. Big River Steel is producing the orders that it has on the books for hot rolled. All new mills have a period of time to ramp up production and my expectation is that will be the case for BRS. USS Granite City is bringing back production but I am not concerned about those tons yet as USS has commitments with its California joint venture mill USS/POSCO to provide feed stock to the mill since POSCO was hit with dumping duties. There could be as many as 1 million net tons per year going to UPI out of Granite City which is displacing the import tons that are currently being blocked. The other mill reported to be coming back to life is the old Mingo Junction plant. The new mill, Acero Junction, has an answering machine answering their phone and I tend to be skeptical about operations running by answering machine… If anyone has a good number to speak to management or the head of sales for Acero Junction I would be interested in speaking to them (John@SteelMarketUpdate.com).
We have opened registration for this year’s Steel Summit Conference. We are expecting a full house and that we will sell out our room block long before the conference begins. There are now three hotels in the complex so we are not concerned about being able to serve everyone, just the early bird gets the worm…
As always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher
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