Economy

Letter to the Editor: WSD’s Prediction of a $200 Price Drop Not That Farfetched

July 6, 2018

I would like to comment on the letter from the Midwestern Service Center Executive published in Steel Market Update’s July 5 newsletter. First, to call a decrease of $200/ton a “decrease of that magnitude” may have been the way to describe it 10 years ago, but in times where domestic mills have made increases in the range of $50-80/ton in one week, such a change in price is not unthinkable.

Sure, domestic supply is currently in good shape, but with prices above $1,000/ton compared with prices around the world that are $300/ton lower, one should expect more steel production to be built in the U.S. Isn’t that what the president wants? Several producers have already announced they will install additional capacity, and I wouldn’t be surprised to see a foreign steel producer build a mill in the U.S.

Although demand seems strong, it is not the main reason for these price increases. Even Commerce Secretary Wilbur Ross has realized that much of the price increases were based on the fact that imports have decreased substantially.

The big factor, obviously, is the uncertainty of the tariffs. I don’t quite understand why the Midwestern Executive stated that “termination of tariffs is highly unlikely.” Most of the programs of the past decades to protect the domestic steel industry have been short-lived, and I can’t see these tariffs lasting even one year.

Steel Trader

(Name withheld on request)