Final Thoughts
Final Thoughts
Written by John Packard
August 31, 2018
We sold out our first Steel 201 workshop which will be held next week at AK Steel in Middletown, Ohio. I am excited to conduct this workshop with the AK Steel team. It is the first time we have visited their Research and Innovation Center (RIC) and the fully integrated Middletown steel mill. Thank you for your support of this, our first Steel 201: Introduction to Advanced High Strength & Other New Steels workshop.
Steel Dynamics (SDI) advised their customers of their new coating extras today. Their extras are effective as of October 1, 2018. We will do an analysis of the new SDI extras as well as those of the other mills who have announced to see how they compare to the current extras as well as the previous extras from late last year. Look for this analysis later this week.
One of the interesting take-a-ways from last week’s SMU Steel Summit Conference was my one-on-one discussion with Nucor CEO John Ferriola. Our attendees learned that it was an “almost caught” baseball that changed the direction of Ferriola’s life that put him on the path to the steel industry. The ball hit him next to his eye and ended his sports career. One of our members who attended last week’s conference had some interesting observations regarding my talk with John Ferriola:
“I thought it was very telling during your interview with John Ferriola, that he was dumbfounded when you put up the slide with the audience survey results showing only 4% of the participants were going to switch from foreign to domestic as a result of the tariffs. I would offer the reason for that is the steel industry is very efficient, we import the products the domestics mills do not want to or cannot make. The domestic mills do not understand this and the government intervention solution with tariffs is the wrong solution to the wrong problem. The result of the 232 tariffs will be less manufacturing jobs in the US. The current “new” steel capacity is mostly old antiquated high cost production facilities, i.e. Granite City & JSW, and these facilities will be the first to fold up in the next down market.”
I continue to be flooded with comments about last week’s conference. Nothing negative yet. Next year the conference will be held at the same location (Georgia International Convention Center) next to the Atlanta International Airport. The dates are August 26, 27 & 28, 2019.
I expect our Steel 101 workshop in December to sell out very quickly. Let me know if you have any questions about the workshop, North Star BlueScope mill, our instructors, etc.
I want to thank everyone for their patience as we geared up for the 2018 conference and at the same time sold the company to CRU. Those of you who attended the end of the conference got to hear directly from the Executive Chairman as well as two of their top research analysts for steel and myself. CRU is a much different company than many of you may realize and it is those differences which has made the joining of our companies so compatible. We are working to bring some of the CRU/SMU video from the conference to you, so you can hear more from the CRU people about what they think of SMU (and what I think of them). Our product will continue to be independent. My voice will not change. I will continue to have an opinion on the market. I will continue to help bring relevant information to our readers to assist in your understanding of the market.
If you have questions, concerns, suggestions or just want to chat, I can be reached at 800-432-3475 or by email: John@SteelMarketUpdate.com
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO
John Packard
Read more from John PackardLatest in Final Thoughts
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?