Final Thoughts
Final Thoughts
Written by John Packard
September 6, 2017
I want to recognize the Steel Market Update writers who have been doing stellar work through a grueling work schedule. Last week, it was our conference where we had all hands on deck in order to make sure the conference ran smoothly. This week and this coming weekend (and probably all of next week), the schedule will be tough due to Hurricane Irma as it is impacting our offices. So, I want to thank Tim Triplett, Sandy Williams, Brett Linton and Peter Wright for all of their hard work.
Steel Market Update headquarters is in Hobe Sound, Fla., and we are part of the mandatory evacuation area as Hurricane Irma moves towards the east coast of Florida. We have buttoned up our house and our office and we have left south Florida and are currently located in Gainesville, Fla., on the campus of the University of Florida. After driving 264 miles over seven hours, we have decided to hunker down here. There are essentially only two ways out of Florida if you are coming up from the south, I-95 on the east coast and the tollway to I-75 through the central and west coast. We are about 60 miles north of Orlando and a little west of the center of the state.
As of 5 p.m. today, the weather channel is reporting a split in the Euro and U.S. GFS models with the Euro moving more toward the west coast than the east and the U.S. still aiming at Miami. If it goes further west, our office and home will be better off. (However, we may not be so good sitting in Gainesville). If it aims for Miami, then our office and house are probably in trouble.
Stay tuned, Sunday should be a very interesting day for us…
In the meantime, Florida has their home opener football game at noon on Saturday. I was all set to go see if I could get a ticket and they cancelled the game (rightfully, in my opinion).
USS/POSCO advised their customers of their new galvanized zinc coating extras. We will try to do an analysis of the differences between the old and the new extras for Sunday evening’s issue.
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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We just wrapped another Steel 101 Workshop, where you take what you learned in the classroom into the steel mill.
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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.
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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.
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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.