Final Thoughts
Final Thoughts
Written by John Packard
October 2, 2017
I am in Fort Wayne, Ind., along with members of my Steel 101 team, John Eckstein, Mario Briccetti, Steve Murphy, Steve Painter, Sandy Williams, as well as Tim Triplett who will be attending his first Steel 101 workshop. Over the next two days, we will be working with a large class of attendees and discussing the steel making and rolling process. We will also discuss how steel is bought and sold and some of the factors that are key to supply and demand, as well as costs.
I want to take a moment to thank Charlie Trowbridge and all of the management and employees at Steel Dynamics (SDI) as we will be touring their steel mill on Thursday morning. Later in the morning, we will tour the Paragon Steel service center operation, which is located on the campus of SDI. I want to thank Pete Henry for the invitation to tour their facility and for working with SMU to ensure that our Steel 101 attendees get the most out of our program.
For those who attended this year’s SMU Steel Summit Conference at the end of August, you are well aware of our manufacturing panel and the spirited dialogue between Barry Zekelman (CEO of Zekelman Industries) and Daniel Pearson of the Cato Institute. Shortly after participating in our panel, Mr. Zekelman was interviewed on camera and had some interesting things to say about Section 232. I think it is important for the industry to understand that the Section 232 investigation is not done and there could still well be significant ramifications come early 2018. Listen to what Barry had to say about Section 232:
Our next SMU Steel Summit Conference will be held Aug. 27-29, 2018. We will be at the Georgia International Convention Center (same as this year) where we will be occupying an even larger chunk of the facility. We are preparing for all of you to come to Atlanta in 2018. Don’t forget to put our conference in your budget. If you came this year, please try to bring someone new with you next year.
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
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?