Final Thoughts

June 10, 2019

Imported steel prices are no longer competitive with domestic steel mill pricing – even on light gauge galvanized and other specialty products that normally have gone to trading companies. Lead times are short, but as one steel executive put it to me this afternoon, “It’s not that the mills have no business. [For this time of year] normal lead times at reasonable booking rates.” There is a rumor of a very large line pipe order in the works (not booked yet). The capacity utilization rates are above 80 percent (although at the lowest levels of the year this past week). On our HARDI steel conference call today, all of the wholesalers reported strong demand for galvanized by their mechanical contractors. These are all good things and should be supportive of steel pricing. That has not been the case.

John Packard Summit 18 Scrap prices surprised everyone with a strong $30 per gross ton drop for the month of June. The non-construction markets are reporting reductions in demand. As we moved around the industry today, we heard demand referenced as being stable to down as much as 7 percent year-over-year.

A service center executive told me during a phone conversation, “It is not pretty right now.” He went on to ask the question that is on everyone’s mind, “When do we hit a bottom?” With the sharp drops in spot pricing over the past few weeks, he was of the opinion it will be sooner rather than later. Our service center spot pricing (article above in tonight’s newsletter) also indicates we could be nearing a bottom.

Not everyone feels the bottom is near. A large service center buyer told us, “Bigger drops to come. I think $550 is very reachable if not lower before we stabilize [he reported their HRC price as being $560-$580 this week]. I believe there is a chance we hit $500 before this fall is over.” He also said he expects “further weakness” in demand from their customers.

What may slow the decline? One Midwest service center told us, “I fear we have a few more weeks of lower prices to come. Ultimately, I suspect a furnace (or more) may have to be idled – indefinitely – not just for maintenance.”

The head of purchasing for another major flat rolled service center said, “We all have questions, and no one has answers….”

He went on to comment that it is difficult to make purchasing decisions when the government, and a random tweet, could play havoc with his customers. Because of the government, he said, the market price was “artificially high to begin with. This is new to all of us.”

One thing is for sure, we will have plenty to talk about come late August when we host our 9th SMU Steel Summit Conference. We have 79 new companies registered that have not attended an SMU Steel Summit Conference before. We are closing in on 700 registrations. You can get a list of the companies registered, information about the agenda, speakers, costs to attend, hotels and links for registration at www.SteelMarketUpdate.com/events/steel-summit

Correction: the correct name of the Nucor Executive Vice President for Flat Rolled is Ladd Hall. Please excuse my typo in the sneak peek for day 2 of the SMU Steel Summit Conference.

CRU is hosting a Steel Briefing on Monday, June 17, in New York City. The briefing is free to our readers, and you can register by sending an email to: kaitlin.turnley@crugroup.com

One of our member companies had one of their Mexican subsidiaries approach us today to inquire about costs for their division to become a subscriber and to receive our newsletters and access to our website. It happens their parent company is a regional enterprise member, which means their employees in North America are eligible to be added to their subscription at no additional cost. Would you like to learn more about options for membership and what we can offer your company? Contact Paige Mayhair at 724-720-1012 or Paige@SteelMarketUpdate.com

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

John Packard, President & CEO