Final Thoughts
Final Thoughts
Written by John Packard
April 5, 2017
I had a question from one of our readers regarding capacity utilization rates and if the Big River Steel tonnage is part of the AISI calculation. I have not spoken directly to the AISI on the subject (as of yet) but, I do know that Big River Steel is not a member of the AISI… I expect that when we get the monthly raw steel production report for April we will have our answer about changes in capacity for the U.S. market.
SMU completed our early April flat rolled steel market trends analysis earlier today. We are crunching the numbers and creating the graphics which will go into our Power Point presentation for our Premium level members as well as those who participate in our survey. If you have never seen one of our presentations and you have an interest in the data, or in potentially becoming a Premium level subscriber, please shoot us an email and we will share the report with you. You can send an email to: info@SteelMarketUpdate.com
I have been struggling with whether I should adjust our SMU Price Momentum Indicator from Higher to Neutral. I have decided to give the market a little while to sort itself out as scrap prices are settled, we see if the met coal situation has any impact on the Asian markets, if iron ore reverses course (it has been dropping in China) and how the mill order books hold up over the next couple of weeks. We already have lowered our indices and, in many cases, have widened our spreads. So, we probably should be at Neutral as just a recognition of reality. I would appreciate it if my readers would weigh in with your opinions. You can reach me at: John@SteelMarketUpdate.com
Ray Culley, who works with me on our SMU Steel Summit Conference, told me today to make sure to inform those of you who are interested in attending that the Marriott Gateway Hotel room block is already more than 50% sold out. We will not be able to hold the special pricing that we have at the Marriott for an extended period of time. We have a specific room block and then our special pricing will be at the SpringHill Suites across the street. There is a link on the website to the hotel registration site. It is now 143 days until the start of our conference.
I got notes from a number of people that another conference held in late June has told their potential attendees that they have Wilbur Ross as a possible speaker. We have an invitation to the Commerce Secretary as well and we will advise if his assistant advises us if he will be able to make our conference. I will let you know as soon as I have something a little more concrete than what we have now.
A note that I will be in Toledo, Ohio for one of our Steel 101 workshops on Monday, Tuesday and Wednesday of next week. We are taking registrations for our California Steel 101 workshop which will be held in Ontario, CA on June 22nd and 23rd and will include a tour of the California Steel Industries (CSI) steel mill. You can find more information on our website or you are welcome to contact me at 800-432-3475.
For our Premium level members – we will have our Power Point presentation on the website on Friday afternoon. We will also be publishing a Premium edition of our newsletter tomorrow.
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?