Final Thoughts
Final Thoughts
Written by John Packard
March 15, 2019
I will be traveling all week as I head to Monterrey, Mexico, to tour the Ternium training facilities and steel mill. I will also be meeting with Cesar Jimenez, the CEO for Ternium Mexico, to discuss the new capacity they have coming onstream over the next 12-24 months.
We are also working with Ternium to conduct one of our Steel 101 workshops in Monterrey either late this year or early next year. One of the purposes of my trip is to get a better understanding of the mill, hotels we could work with and to make sure that all attendees for this potential workshop will feel secure. I will have more to report later this week or early next week.
Our next Steel 101: Introduction to Steel Making & Market Fundamentals workshop will be held in Davenport, Iowa, on May 14-15 (perfect time of the year to be in Iowa). We will be touring the SSAB steel mill. You can get to Davenport by flying into either Moline, Ill. (Quad Cities) or through one of the Chicago airports. From Chicago, Davenport is about a 2.5 hour drive. You can find more details about the workshop, costs to attend and how to register on our website: www.SteelMarketUpdate.com/Events/Steel101.
I will be taking a few vacation days later this week as I go from Monterrey to Los Angeles to visit my daughter.
I will respond to emails and texts as soon as possible while I am away. Covering my office phone will be Paige Mayhair. She can be reached directly at 724-720-1012 or by email: Paige@SteelMarketUpdate.com
We have completed our SMU Service Center Inventories Analysis and the full report has been sent to the data providers. We continue to add new data providers on a monthly basis and the total tonnage we are now covering has become quite significant. The number of months of supply for flat rolled at the end of February was reported as 2.5 months, up from 2.3 months at the end of January. Plate inventories were reported to our data providers as 3.3 months of supply, up from 2.8 months from the prior month. If you would like to learn more about what we are covering in our analysis, and if you would like to become a data provider, please contact Estelle.Tran@crugroup.com or by phone at 724-759-7876.
We are closing in on 200 registrations for the 2019 SMU Steel Summit Conference, which is ahead of our booking rate at this time last year when we had 912 attendees. CRU has put together an incredible brochure about our conference on their website. You can view it by clicking here. I highly recommend making plans early to attend. Remember, this year the conference will have a Price Risk Management Workshop hosted by the CME Group beginning at 10:30 a.m. on Monday, Aug. 26. That workshop will be at the Marriott next to the convention center. The conference will begin at 1 p.m. in the Georgia International Convention Center and will kick off with Chris Houlden and Josh Spoores from CRU, along with me, discussing a number of CRU/SMU proprietary indices. CRU will give a first look at the price forecast for the balance 2019 and all of 2020. To register and learn more go to: www.SteelMarketUpdate.com/Events/Steel-Summit
Happy Saint Patrick’s Day to our Irish friends.
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO
John Packard
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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?