Final Thoughts
Final Thoughts
Written by John Packard
September 9, 2019
I am technically on vacation this week so my Final Thoughts will be brief, and I will rely on Senior Editor Tim Triplett to handle these duties for the balance of this week.
I have heard from a number of buyers this week telling me that their business is slowing, and the interest by end users in requesting quotes has slowed. I heard from service centers that buyers were skeptical of paying the spot prices being quoted by the domestic mills, and the expectation is for much lower prices going forward.
One service center CEO told me it may be a week or a month, but prices would definitely move lower from here based on the activity rate he is currently seeing. This is something SMU will be watching closely, and we will report on the results of our flat rolled and plate steel survey later this week and over the weekend.
Many of you have seen a recent CRU analysis done by their Global Cost Analyst for steel mills, Ryan Smith. Ryan spoke about the “operational cost of production” and outlined how domestic producers compare to one another. In his analysis at the conference, and in the article sent out by CRU today, he pointed out the integrated steel producers—especially U.S. Steel and ArcelorMittal USA who control their own iron ore supply—had an operational cost advantage (prior to recent scrap price reductions) and that in the future the minimills would have higher operational costs than the integrated mills. This would be due to the new capacity coming online in 2021-2022, which will stress the supply (and thus increase the cost) of scrap.
I know there is some confusion amongst our readers on this subject, so I have asked CRU to provide more information—specifically to define “operational costs” versus other costs such as legacy costs, labor costs, R&D costs, etc., that are not part of the operational cost equation. I hope we have that to you later this week.
As I mentioned above, I am on vacation and my office phone has been forwarded to Paige Mayhair. Paige also handles all renewals, new accounts and can answer any SMU cost questions that you might have. She can be reached at 724-720-1012 or by email at: Paige@SteelMarketUpdate.com
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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