SMU Data and Models

SMU Q&A: Trade, Trucking Top List of Troubling Topics

Written by Tim Triplett

Steel executives canvassed by Steel Market Update this week reported that demand remains strong, though they are less confident about conditions later in the year. Many expressed concern about the tariffs and trade issues unfolding in Washington, difficulty with trucking and logistics, and the impact of high steel prices on their customers. Following are some of their more insightful comments:

Q: What do you think is the most important issue now for the flat rolled and/or plate steel markets?

A: “Our main concern is the credit lines and payments stretching out from many customers. There seems to be a correlation between higher cost steel and slower pay as credit lines get tested.”

A: “Nobody is going to build inventory at the current prices.”

A: “Trucking continues to become a big problem, inbound and outbound.

A: “Outside of the tariffs, shipping is becoming a bigger issue. Trucking is not only getting more expensive, but it’s hard to get enough trucks.” 

A: “Lead times at some domestic mills some seem to have shortened. Temporary or a warning sign?”

A: “The overall level of imports will be critical to watch going forward. Given that demand seems robust, imports seem to be the only pressure-point to reducing pricing.”

A: “We have been plagued by late mill deliveries for HR, HRPO and plate due to a combination of late mill production and extended freight times (rail and truck). Despite the belief by many that we’d see a quick resolution to the Canada/Mexico tariffs, reality is settling in that it is more likely to last for some time. The same for the EU. Because these three legs represent the majority of U.S. imports/exports, the effects of the tariffs (both ways) will start stacking up with negative impacts growing by the week. Therefore, any actions/changes in this arena stand to have the biggest impact.”

A: “The latest happenings in the trade cases are the most important issue. They are the only reason prices are where they are.”

A: “Section 232 tariffs/retaliatory tariffs, what is the final picture? There’s too many moving pieces and too much uncertainty.”

A: “Understanding, if we can, the tariffs and circumvention cases and truly how they are affecting the mills. Do the mills really need to be continuing to increase prices, but increase without documentation?”

A: “Stabilizing trade issues and future rules of engagement [is most important]. The inability to do any sort of longer-term planning for supply chains keeps all parties (mills, OEMs, service centers and traders) from making meaningful plans and investments, which in the long run will impact industrial growth and investment. We know this is all about a reduction of trade deficits and steel is a pawn in a larger game, but the interim results of this policy could have negative side effects that result in unintended consequences for years to come. Remaining flexible to each event and anticipating those events will continue to be the challenge we all face.”

A: “When is the political posturing regarding Section 232 going to end and settle?”

Q: Do you have any concerns about demand in any of the market segments your company covers?

A: “Demand looks solid in the markets we serve.” 

A: “We have no concern about demand in any market. We’re shipping significantly ahead of last year on all product lines. We’re more concerned about getting enough trucks to meet that demand.”

A: “Demand is strong and looks to remain that way at least through Q3.”

A: “Market demand remains strong. Inventories are decreasing due to hesitancy to buy spot material at today’s pricing levels.” 

A: “We are concerned that general demand will be impacted by the rising costs of steel, although we have not seen that effect to date. Will OEMs reduce projected inventory builds in the fourth quarter in hopes of pricing relief in 2019?”

A: “Demand is starting to slow due to the high prices of steel. The number of customers with stretched credit lines who can’t pay their bills on time is growing. I continue to hear that more consumers aren’t accepting the huge increases in product cost due to steel prices rising so rapidly.”

A: “June demand surprised us to the downside, dropping 17 percent year over year. No one is explaining the lower demand to us as anything other than the summer lull. Our sense of caution is heightened, but we continue to expect supply to remain tight.”

A: “Will there be a seasonal adjustment to demand as usual and will the buildups in inventory affect it this year.”

A: “Ag is a concern if markets for exports are closed off. Also, retail stores are closing at a rapid pace.”

A: “We’re getting import offers on flat roll at high prices, but very little import activity on plate as the Koreans are bumping into their quota for Q4. We see no real risk in Q3 due to very lean supply chains, but Q4 is when the risks increase.”

A: “We have been watching import offers as a guide to future supply direction. While cold rolled and galvanized offers remain steady, if not growing, hot rolled and plate still remain low. If we see an increase in hot rolled and plate, it will be a bellwether.”

The SMU Steel Summit Conference will have an excellent panel addressing trucking and trucking related issues. You can learn more about our schedule, attending companies, costs to attend and how to register on our website:


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