Final Thoughts
Final Thoughts
Written by John Packard
April 19, 2017
Steel Market Update has been proactively writing about our expectations for Executive Orders and their impact on foreign steel imports. It is clear that the steel lobby has the ear of the president and this has to be quite frustrating to the same companies he is trying to convince to come back to the United States with their manufacturing jobs.
In today’s earnings call with Mark Millet of Steel Dynamics he admitted that the spread between Chinese hot rolled pricing and U.S. prices is $270 per ton. China is $270 per ton below pricing here in the U.S. I am not so sure that is a correct number. So, I looked at what one of my sources gave me earlier this week for HRC going to Africa and the Middle East at $395 per metric ton, FOB China ($359 net ton). When you take freight into consideration the spread between U.S. and China pricing is pretty close to $270 per ton…
As I started to say at the beginning of my Final Thoughts – we have been writing a lot about trade, trade cases and our expectations for Executive Orders. Trade attorney Lewis Leibowitz has been extremely helpful both in this evenings issue as well as in previous articles. I remind everyone to go back and look at the past couple of weeks issues of Steel Market Update as we have written about the Section 232 as being one of the risks (and why Leibowitz doesn’t think it will fly).
No matter what, it is important to stay on top of the news as it breaks. I think it is also important to attend our SMU Steel Summit Conference in Atlanta at the end of August (28, 29, 30) as we are well staffed with exceptional people to speak about trade from many different angles: mill, ITC, trade attorney and manufacturing companies. You can find more details and register online: www.SteelMarketUpdate.com/events/steel-summit.
This continues to be an interesting market. 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.
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?