Economy

Bits 'N Pieces

May 19, 2017

Steel Market Update (SMU) had a number of conversations with steel buyers late last week during our trip to Chicago. Benchmark hot rolled prices offers have slipped below $600 per ton with one service center executive discussing a spot offer of $560 per ton coming from one mill (and complaining that they lost of the order by $20 per ton).

The Section 232 investigation is creating a tremendous amount of angst among the trading community and steel buyers in general. The mood at the Metals Industry Boy Scout Dinner was subdued as buyers and sellers of steel tried to get a handle on what was happening to the industry. Uncertainty is not good for making decisions.

One trading company commercial director told SMU that he didn’t know what they would do should the government rule in favor of blocking foreign steel into the country. He told us, “Do I shut the doors…?”

Steel buyers were also worried not knowing if those items sourced overseas that are not popular with the domestic steel producers would be able to be sourced in the future.

Here is an article about the world’s steel overcapacity by Daniel Pearson of the Cato Institute and former chairman of the International Trade Commission. He speaks about the transfer of wealth from countries like China to the United States as a good thing, not bad. In his opinion once China realizes that is what they are doing they may change the way they do business. That is, I am sure, the opinion of many manufacturing companies who have to compete in the world markets. If they are unable to get their hands on competitively priced product (based on the world price for steel) then how can they compete against those who do?

The Boy Scout Dinner was, once again, well attended with more than 1,000 steel and metals people in attendance. Other than the SMU Steel Summit Conference the Boy Scout Dinner is perhaps one of the best networking events for the steel industry.

Galvanized steel buyers need to keep an eye on zinc pricing on the LME. Zinc closed the week at $1.1728 per pound down from the $1.30+ levels seen back in February. If it gets much lower and stays down we can expect the domestic mills will adjust coating extras on galvanized steel…