Final Thoughts

Yes, we have been hearing from other Big River Steel customers that the mill is controlling their order book for March, including with their contract customers who are only being allowed to place the minimum tonnage on their contract. The mill is advising their customers that they just want to catch up on orders that are late.

Another topic that we will be covering later this year (and that everyone needs to be aware of) was discussed with me in the following email: “John, with all the activity going on in the steel market, I think we all forgot about the United Steel Workers contracts expiring this summer. Many variables from politics, to imports, to profits, to mill closures, will all play a role this year. A completely different playing field for the union this year vs. last negotiation. At first appearance, it looks like the integrateds will need to give a lot to get a contract and the minimills will be operating at ever greater margins due to their even better cost structure. With all Trump has done to protect the U.S. steel industry, it would look very bad to not get a quick settlement with the union.”

One of our Premium level readers penned some comments after reading our recent projection for shipments and inventories of flat rolled steel out of the domestic service centers: “I read with great interest your summary on the apparent excess/deficit article. In looking at the projection, it assumes both rising inventories and rising prices, something that I don’t believe has ever happened. However, given the unusual dynamics at play, especially the potential for new government trade restrictions, this time might be different. I fear, however, that if the inventories build as your model shows, we’ll see a corresponding price drop, keeping the predictable inverse relationship intact. I think all should be leery of 2H ’18, and the higher the prices get, the higher the likelihood of a painful correction….”

SMU made an adjustment to our inventories forecast, moving away from the four-year average month-to-month change to a two-year average. The difference that made to the model was quite significant. The four-year average (which has not been working over the past few months, thus prompting our adjustment) was showing inventories moving into a deficit, while the two-year average has inventories rising.

The same Premium customer continued: “This particular report, despite using what’s become questionable data from MSCI, seems like one of the most correlated reports relating price to inventories. It’s obviously a great backward-looking report, and it seems like you guys have been pretty damn good overall in predicting especially the future trend (as opposed to specific months, etc). Part of this is probably a selfish desire on my part to sync with a narrative I have about 2H ’18, where I’m very concerned about a correction. To be fair, assuming imports move lower and stay lower, and assuming mills keep weekly production below 75 percent, then this thing could run for quite some time with only perhaps a small correction in summer.”

If you would like to learn more about our Premium level membership, please contact me at 800-432-3475 or contact Brett@SteelMarketUpdate.com and request a Premium trial.

I have been of the opinion that President Trump is close to making a decision on 232, maybe a soon as the State of the Union. Trade attorney Lewis Leibowitz possed some questions: Would you recommend announcing 232 restrictions before the State of the Union, at it or after it? Would your answer change if nothing was going to be done? Something to think about.

A quick note to those who have expressed interest in putting a banner ad at the top of our newsletter. We have been technically sold out for calendar year 2018, but the company that has the space for February advised their ad is not ready to go and asked if they could move it out. So, we have an opening for February should your company be interested. You can get details on what is required to fill that spot from Brett Linton at Brett@SteelMarketUpdate.com or by phone at 706-216-2140.

We also have a few sponsor spots left for this year’s SMU Steel Summit Conference. If you would like more information about conference sponsor spots or exhibition spots, please contact either myself or Jill Waldman at Jill@SteelMarketUpdate.com – 800-432-3475.

I want to welcome the newest members to Steel Market Update, including those of you who just went through our Steel 101 workshop in Mobile. We encourage our members to interact with us. If you have any questions or if you have any suggestions regarding our newsletter, website, conference topics and speakers, please reach out to us at info@SteelMarketUpdate.com or you can contact me directly at 800-432-3475.

As always, your business is truly appreciated by all of us here at Steel Market Update.

John Packard, Publisher