Final Thoughts
Final Thoughts
Written by John Packard
January 22, 2018
We have mentioned this elsewhere in today’s newsletter, but it bears repeating. The recent Section 201 decision by President Trump on residential washers and solar equipment may well be a blueprint for what we might see when the Section 232 decision is made on steel. The formula seems to be pointing toward some form of quota followed by punitive duties of 20 percent or higher in the first year.
The issue is the difference between products like washing machines and steel. It’s relatively easy to regulate washers, where there are a small number of manufacturers to control. With steel, you have countries (like Vietnam) that have many steel mills and then dozens of trading companies offering their steel into the United States. The country is not the importer of record, it’s the trading company here in the United States. How do the various trading companies know how much Vietnamese steel (or if it is by product, how much galvanized) is committed to be imported into the U.S.?
My opinion is you need to look at Jan. 30 as a potential target date. That is the date of the state of the union speech to be delivered by President Trump.
I am with my team of Steel 101 instructors in Mobile, Ala., where we will be conducting our workshop over the next couple of days. The weather is good (low 60s) and we are looking forward to our tour of the SSAB steel mill on Wednesday afternoon.
The next Steel 101 workshop will be outside of Chicago in Merrillville, Ind., on March 28-29. Go to our website for more details.
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO
John Packard
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Final Thoughts
We just wrapped another Steel 101 Workshop, where you take what you learned in the classroom into the steel mill.
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.