Final Thoughts
Final Thoughts
Written by John Packard
May 27, 2019
Editor’s note: John Packard is on vacation.
It appears many steel buyers are holding off on purchases while they wait to see if imports resume from Canada, Mexico and Turkey now that President Trump has reversed himself on the Section 232 tariffs. “Lead times are stagnating/shortening and the mills are in full negotiation mode,” said one steel executive this week, which helps to explain the declining steel prices reported in this issue.
Other telling comments from SMU’s latest market canvass:
“Like most buyers, I won’t buy at this level for fear of prices going lower. I’m concerned about how weak the market is.”
“I am not buying much these days. Like everyone else, we are becoming more cautious about 2H19 and I am pulling inventory down. The shrinking mill lead times allow us to have less on order because we can get it more quickly now.”
“Lead times are shorter than normal. We’re seeing mill production orders at both EAFs and integrated suppliers producing early. The mills are willing to negotiate.”
“We haven’t seen any new offers on products out of Mexico, Canada or Turkey yet. I think they will be cautious and try to stay under the radar.”
“Suppliers representing Turkish tons have gotten in touch. However, given the falling domestic market, and the remaining 25 percent tariff, I don’t think Turkish steel will be competitive as of now on flat-rolled.”
“It’s a tough market. It does appear we are getting close to the bottom. The question is, what will be the catalyst to reverse the momentum?”
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John Packard
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Final Thoughts
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Final thoughts
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Final thoughts
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Final thoughts
Thanks to everyone who attended our Steel Hedging 101 workshop in Chicago on Wednesday. I learned a lot from StoneX Group’s Spencer Johnson, who instructs the course, and from your good questions. One thing that Spencer said sticks with me as I write this column. Namely, that momentum drives steel prices more than other commodity markets. If you watch steel futures, you’ll see up days and down days. But it’s rare to see the momentum shifting back and forth within any given day.
Final thoughts
SMU's prices ranges for flat-rolled steel were mostly sideways on Tuesday even as futures market shot higher. I got some questions as to why hot-rolled (HR) coil futures shot higher. As best as I can tell, it might have been in response to news that China plans to roll out stimulus measures. We have details on those measures here thanks to our colleagues at CRU. The chart below gives you some idea of just how sharply upward the move in HR futures was earlier on Tuesday: