Final Thoughts

Final Thoughts

Written by John Packard

I am keeping the SMU Flat Rolled Price Momentum Indicator at “Neutral” as I do not yet see any clear-cut signs of a solid push higher on pricing. What I have seen is a possible short-term bottom to the lower end of our range. This helped take our hot rolled index average from $805 to $820 per ton this week.

However, we continue to collect commentary from steel buyers suggesting that the increase will ultimately fail. “The announcement is two weeks to 30 days premature,” is what the president of one service center told us late this afternoon. “It stopped the slide, but I wouldn’t bet against all prices going lower from where they were at the time of the announcement.” He went on to say, “The other scary thing is Trump is talking nice about Turkey now.” The belief by some in the trading community is that the Turks could see their 50 percent tariffs be reduced to 25 percent, which would put them back into the export business sending steel into the United States.

The general manager of another service center said, “It’s maybe a week longer on lead-times. Mills all seem to be asking about what their competition is doing, which usually is a sign they’re trying to discern how much strength is out there. When times are solid, they never ask about competition, because they don’t care.” He went on to say this about mill negotiations, “Still negotiating and it doesn’t feel like there’s a lot of conviction for this particular round. I think the changes may be on the very low end of the price curve, where ‘deals’ are no longer available, but the normal volume levels seem to be mostly sideways. I think we’ll possibly move more sideways before a new direction becomes more apparent.”

At the moment, Steel Market Update agrees that prices may well move sideways for the next few weeks until there is a better sense of the strength of the market as we move into 1Q 2019.

The SMU Plate Price Momentum Index continues to be pointing toward higher prices over the next 30-60 days. A large plate service center told me, “Two of the plate suppliers raised spot prices by $40 per ton over the past 48 hours. SSAB announced up $40 on plate yesterday, Nucor followed today. Mittal’s quiet so far, but they were a little on top of the market due to their lack of production at Burns Harbor lately. If it sticks, the floor price in the market is $50/cwt. We need a couple weeks to see how it shakes out. Mittal and SSAB have effectively closed December, Nucor Hertford is probably close. Nucor Tuscaloosa is always a wildcard, no further comment there… Mills say they are still booking project tons, and that energy, rail, bridge, barge and construction markets are still solid.”

The issue I hear out of the plate service centers is that sentiment tends to follow hot rolled, which is not walking in tandem with plate. “Plate’s going along for the ride with the negative HR news – but HR has added capacity (Big River, USS Granite City 2 BF’s restarted) while plate has lost capacity (Conshohocken, small, but measurable). The supply-side story is very different in the two products, but HR controls the news and the sentiment. I’ll let you know about the price increase in a couple weeks. SCs need to get the resale price up – not too much import out there, and the domestics just don’t seem to need the SC tons right now.”

Our December Steel 101 workshop is sold out and we have a waiting list. We have spoken with Steel Dynamics in Columbus, Miss., and they have agreed to move our tour to Tuesday, Jan. 29, 2019. So, the workshop following our Dec. 11-12 one in Toledo, Ohio, will be Jan. 29-30, 2019, in Columbus, Miss. We will make changes to our registration pages, and the workshop should be available for registration later this week.

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

John Packard, President & CEO

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