Final Thoughts

Final Thoughts
Written by John Packard
November 27, 2017
The U.S. Department of Commerce and its Secretary Wilbur Ross did something today that has not been done in the last 25 years–they self-initiated an antidumping (AD) and countervailing duty (CVD) suit. In this case, it was against aluminum imports from China, but steel buyers should take note. The DOC already has a Section 232 investigation under way on aluminum, on the same essential time table as the steel section. So, be prepared.
As trade attorney Lewis Leibowitz said to me in an email shortly after the DOC announcement, “Commerce announced initiation of new cases on common alloy aluminum from China. It’s the first self-initiated case by Commerce in more than 25 years. It portends, possibly, new self-initiated cases on steel products, as well. I’m speculating, but it may be an alternative to Section 232 relief for both industries.”
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A note that I will be in Las Vegas for the HARDI annual conference. I will not arrive until late Sunday evening as I have prior commitments late this week and over the weekend. I will address the steel committee on Tuesday morning. Tony Taccone will also speak to the group. Tony has been a speaker at our Steel Summit Conference and he is well worth a listen. If you are attending HARDI and would like to meet, send me an email: John@SteelMarketUpdate.com or text me at 770-596-6268. I would love to spend some time with members and non-members alike.
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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.