Final Thoughts
Final Thoughts
Written by John Packard
July 12, 2017
What was it – Tuesday that I said I thought the Section 232 results would be much less than what the steel mills thought a few weeks back? Last night on Air Force One President Trump spoke about considering quotas and tariffs on steel imports into the U.S. According to excerpts of his conversation with reporters, Trump said, “There are two ways – quotas and tariffs. Maybe I’ll do both.” He continued with, “Not only China, but others. We’re like a dumping ground [for steel], okay? They’re dumping steel and destroying our steel industry, they’ve been doing it for decades, and I’m stopping it. It’ll stop.”
I read an article late today from World Trade Online, which was reporting how the domestic steel mills think the G20 steel committee is essentially “kicking the can down the road.” Philip Bell, president of the Steel Manufacturers Association (and another of our speakers at this year’s SMU Steel Summit Conference) told World Trade Online, “At the end of the day, the Global Forum produces a document with recommendations — we need action that has teeth in it.”
The steel mills and the steel lobby are pushing hard for the results of Section 232 to be announced soon (now) and to hit hard at the heaviest exporters of steel into the United States.
Wilbur Ross advised the Senate Finance Committee that he is in the process of finalizing the DOC recommendations to the President. The report should be out sometime next week. One should never wish for black swan events, but all bets are off until we see the recommendations and how President Trump (and the rest of the world) responds.
Steel stocks moved higher today…
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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?