Final Thoughts
Final Thoughts
Written by John Packard
December 4, 2017
Late this afternoon, the U.S. Department of Commerce released their positive determination that Vietnam and China circumvented existing antidumping (AD) and countervailing duties (CVD) on cold rolled and corrosion resistant (galvanized/Galvalume) steels. This is a significant ruling and will create issues for some trading companies and steel buyers as the ruling goes back to November 2016 in order to collect duties.
The bigger story may well be the definition of “significant transformation.” It has been understood to mean that when steel is transformed to another product (hot rolled to cold rolled or cold rolled to coated), the country of origin changes to the conversion country. That rule appears no longer to be in effect, and any country that buys Chinese substrate (or substrate from any country under AD/CVD penalties by the U.S.) will need to worry how their business could be impacted in the coming months.
We will have much more later this week about the circumvention ruling and how it may (or may not) impact your business.
I am also working on articles gathered during my stay here at the HARDI annual meeting. I will post articles about statements made by Economist Alan Beaulieu of ITR Economics, information garnished from the Majestic dinner where they spoke about the Jobs Creation Network, and my general comments about the industry.
I will be flying back to Florida most of the day tomorrow (Wednesday) and will return to my office on Thursday morning.
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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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?