Final Thoughts

Final Thoughts

Written by John Packard

ArcelorMittal USA probably surprised some customers with their announcement of a $30 per ton price increase on cold rolled and coated products. My opinion is ArcelorMittal is trying to increase the spread between the hot rolled base price and that of cold rolled and coated products. I also think they are trying to boost base prices on coated before they adjust coating extras lower. Historically, AMUSA likes to see a $120-$140 per ton spread between the HRC and CR/coated spreads. Which means if hot rolled is at $900 ($45.00/cwt base), then cold rolled and coated base prices would be approximately $1,020 to $1,040 per ton ($51.00/cwt-$52.00/cwt). In my opinion, the spread has perhaps over corrected a little more than the mills may have liked, coming off historical high spreads from earlier this year. The over correction being created from a strong hot rolled market and not weakness in cold rolled or coated. However, there does not appear to be any momentum to moving CR and coated prices higher in the current market environment. We may see coated transaction prices fall in the not-too-distant future as the mills will have to deal with zinc (used to coat galvanized, electrogalvanized and Galvalume steels), which has dropped from $1.60+ per pound at the beginning of this year to $1.11 per pound today.

Big River Steel is rumored to be on the block. We have heard Nucor and Steel Dynamics as potential suitors. With HRC prices close to all-time highs, it may not be a bad time for BRS to take the money and run. I imagine that the mill will not go at a bargain basement price. SMU has asked the BRS spokesperson for a comment and we have not yet received one prior to our publication deadline.

The CRU Group conducted a special webinar this morning and many of those registered to participate were Steel Market Update members. I thought CRU did an excellent job and shared a lot of information that was valuable to SMU members. CRU shared their North American price forecast for hot rolled and plate. Their economist did a very interesting analysis of the impact of the tariffs on GDP both in the United States and Canada. Some of this information will be available during our conference at the end of the month. We have the head of research for CRU, Chris Houlden, speaking about the global steel economy. CRU analyst Josh Spoores, who was on the webinar this morning, will be joining Chris and myself for a panel discussion about a variety of SMU/CRU subjects of interest to those attending this year’s conference. You will want to stay through the end of the conference as the last two programs–Ron Insana of CNBC and the SMU/CRU panel, including my discussion with CRU Executive Chairman Robert Perlman–will be worth the wait.

CNBC reported the U.S. collected $1.4 billion in steel and aluminum tariffs from March 23 until July 16 ($1.1 billion was from steel). The Congressional Forecasting Service is forecasting collections could go as high as $7.5 billion during calendar year 2018, assuming imports at 2017 levels, with $5.8 billion from steel. Revenues are also dependent on “…Commerce Department exclusions and President Trump’s change of heart.” As of Aug. 6, there were 33,099 exclusion requests with 1,428 being approved and 702 being denied.

I cannot confirm, but I have been told, that no exclusion request has been granted if it received an objection from a domestic steel mill. I will work with Lewis Leibowitz on this in the coming days (he is on holiday the remainder of this week). This is something that Lewis and Jean Kemp can discuss during the opening of the SMU Steel Summit Conference on Monday, Aug. 27. Please be aware that I am intending to move the start time to 1:00 p.m. ET from 1:30 p.m. ET so that Lewis and Jean get more time to deal with the wide array of trade-related topics. This means that we will have 75 minutes dedicated to trade, AD/CVD, circumvention, 232 and 301, etc. Keep this in mind when making transportation arrangements and lunch arrangements prior to the start of the conference.

Need a hotel room for the conference? Atlanta Airport Marriott has a few blocked rooms left for us. You can call 888-239-1203 and ask for Steel Market Update room block.

There are 12 days left before the start of the conference. Today, we broke through 870 registrations…

We booked a few more spots for our Steel 201 workshop, which will be held on Sept. 11 and 12 in Middletown, Ohio. Because this is a new workshop, we are providing our SMU members, as well as those who have attended a past SMU workshop or conference, a 50 percent discount. To receive the discount, use special201 in the discount box when registering. Or, you are welcome to call our office at 772-245-8630.

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

John Packard, President & CEO

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