Final Thoughts

Final Thoughts

Written by John Packard

We live in a time when nothing is as it seems and uncertainty rules the roost. This can make for a daunting task when considering when, what and how much steel you need to purchase at any point in time. It appears the second price increase announcement out of Nucor moved some of the end users into the market, which has caused lead times to tick up – slightly. However, as we explained in the last issue of Steel Market Update, lead times are nowhere near what they were one year ago, and this is at a time when foreign steel imports are waning.

cat bounceEarlier today, I received a message from a consulting friend of mine who spends much of his time in Europe working with European steel mills. I was asked my opinion as to whether the steel market was undergoing a “dead-cat bounce.” He went on to point out that in Europe prices are up 10 to 15 euros, but overall demand is falling. He told me, “Not a good combination, especially with the unknown of Brexit.” He also pointed to slow production numbers on automotive here in the United States.

Are we in a dead-cat bounce market?

Late last week, I received a call from an analyst who is seeing the market in a totally different light. I was told to anticipate a squeeze on steel during the second and third quarters of this year before falling back in Q4. I heard numbers referenced on benchmark hot rolled in the mid $800s per ton. Not quite to the highs of 2018 when SMU reported HRC peaking at $915 per ton.

CRU analysts have hot rolled coil forecasted to peak in April at $740 per ton before dropping back to $735 per ton in May. CRU told SMU, “Risks to the upside are higher costs and more momentum coming to the market. Downside risks seem to be the more visible push to end Section 232 for Canada and Mexico.” The CRU HRC forecast will be updated around March 22.

One of the end users with whom we communicate on a regular basis is a bit skeptical regarding any long-term trend for higher sheet pricing. “Weather is always a factor at this time of year and this year has not disappointed so far. The Vale iron ore issue could be a real influencer of H1 pricing and is clearly having an impact on the export price of Brazilian slabs coming to the U.S. Real demand in the U.S. has to pick up, though, or orders placed to catch the market bottom will be backed up in inventory and prices will correct down as quickly as they are rumored to be correcting upward. Auto demand is flat to down. Housing was down in December on consumer sentiment and interest rates. Energy demand appears to be off. Something has to give as we enter the spring or 82 percent capability utilization rates will just be a nice thought as the sting of reality sets in.” 

Not everyone is so negative in their evaluation of the strength of the market and what might be facing buyers in the future. A different end user told us, “There seems to be gaining strength in the current flat roll market. Mills are trying to stand firm at $35-$36/cwt base for HR. Seem to be succeeding on spot orders I am hearing, which should bring CRU up this week some. With scrap going up even a small amount, capacity utilization rates hovering at 83 percent this week and imports continuing to drop, we may be setting ourselves up for more of an increase in price than everyone is predicting. I’m starting to be more bullish on prices rising. I am very concerned import offers are just too high and very little will be coming heading into the summer.” 

So, what do you think? Are we in a dead-cat bounce market? You can send me your opinion:

We should have registration up and running for our next Steel 101: Introduction to Steel Making & Market Fundamentals workshop, which will be held in Davenport, Iowa, on May 14-15, 2019. As part of the workshop, we will be touring the SSAB Montpelier, Iowa, plate mill. We were last at SSAB in Iowa in 2015, and we are looking forward to returning. You can get to Davenport by using the Quad City International Airport (about 15 minutes away) or Chicago (about 2.5 hours away). Keep an eye on our website: as we will be posting information and registration on the site this week.

As you look through the SMU Steel Summit agenda you might have a few questions… Like, what is the Youth in Steel & Manufacturing Awards? SMU is committed to recognizing the new generation of leaders being developed (and taking the lead) at your company. We will have more on exactly what that means in the coming weeks. However, if we have peaked your interest, feel free to reach out to me to discuss. I am looking for input. You can reach me at or by phone at 800-432-3475. Oh, and registration is open for the conference, click here if you would like to register, or visit our website if you would like to learn more:

If you would like to become a new subscriber (we call them members), or if you would like to renew or upgrade your existing membership, please contact Paige Mayhair at 724-720-1012.

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

John Packard, President & CEO

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