Final Thoughts
Final Thoughts
Written by John Packard
September 11, 2017
Our SMU team has been pretty lucky as those of us who live in Florida did not suffer significant damage to our homes. The Florida residents ended up escaping and being essentially unaffected by Hurricane Irma. However, Brett lives in Georgia and he lost power yesterday as a large tree took out the power line and blocked his street, as well. He has been stranded for more than a day as they wait for the power company to come cut the tree and replace the downed lines. Diana and are working toward being back up and running in our offices on Thursday as we move back from the Florida panhandle to Hobe Sound. We have been advised that our office building has no power or internet service, but our home office does. Thank you for your patience, and we will try to get caught up with any outstanding issues on Thursday and Friday of this week.
I have been advised that CRU is adjusting the zinc coating extra they are using in the .060″ G90 index from $78 per ton ($3.90/cwt) to $86 per ton ($4.30/cwt). SMU has not yet made the change for a number of reasons: not all of the mills have made the change. U.S. Steel’s website still references a $3.90/cwt G90 extra on .060″ minimum galvanized. We are also hearing mixed information from steel buyers. Some are saying that the new extras announced by their suppliers are being collected beginning with October orders, while others are reporting no change from their suppliers as some mills are waiting for the higher zinc costs to be in effect for three months before making the change. We will watch the extras closely and will make a change in our calculations when we think the time is appropriate. For those doing your own comparison between SMU and CRU galvanized, be aware of the extras difference.
We are going to take a look at galvanized extras in either Thursday or Sunday evening’s issue of SMU.
I want to take a moment to welcome all of the new members we have gotten over the past few weeks. I apologize for not reaching out to you sooner–our conference and a couple of hurricanes has kept us extra busy. I want you to know that if you have questions or would like to make a suggestion regarding a potential article, please feel free to contact me: John@SteelMarketUpdate.com.
As always, your business is truly appreciated by all of us at Steel Market Update.
John Packard, Publisher
John Packard
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Final Thoughts
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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.
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.