Final Thoughts
Final Thoughts
Written by John Packard
March 28, 2018
I don’t know how to keep up with the changing winds associated with President Trump when it comes to trade, trade negotiations and the Section 232 tariffs (or threats of tariffs). According to Bloomberg, Trump said that he may delay the revamped trade agreement reached with South Korea that includes a quota and permanent exclusion on exports of steel into the United States. Bloomberg quoted Trump: “I may hold it up until after a deal is made with North Korea. You know why? Because it’s a very strong card, and I want to make sure everyone is treated fairly and we’re moving along very nicely with North Korea.”
It has been a hectic week here in Chicago. We had an exceptional group for one of our Steel 101 workshops, and I want to thank NLMK USA for hosting us at their Portage steel facility and assisting us in hosting last night’s networking and dinner for our group.
It has been a long day and week, so I am going to cut it short this evening. Have a wonderful Good Friday.
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?