Final Thoughts
Final Thoughts
Written by John Packard
September 11, 2019
John Packard is on vacation…
Have the mills lost their pricing momentum on flat rolled? It sure looks that way, based on the latest Steel Market Update data.
About 38 percent of the OEM and service center executives responding to SMU’s market trends questionnaire this week report that the mills have lost their momentum and flat rolled prices are already moving lower. Nearly all the rest say the mills are struggling to maintain the price gains they saw when they raised prices back in July. Only 3 percent say the mills are in control and prices will continue to rise over the next 30 days.
Other SMU data corroborates that view. The vast majority of steel buyers say the mills are open to negotiating spot prices to secure orders, and lead times show signs of shortening, which suggests the mills are not as busy as they would wish. Adding to the downward pressure on steel prices is a $30-40 per ton decrease in the price of ferrous scrap this month as the mills anticipate weaker demand and shutdowns for fall maintenance.
“Lead times grew after the first two price announcements, but they’re now short again,” commented one respondent. “The lower cost scrap will not help steel pricing,” said another. “Hopefully the mills won’t break ranks,” added a third, though in terms of the last round of price increases, it appears the ranks are already broken.
SMU regretfully had to turn away some folks when the last Steel 101 workshop sold out. It’s not too early to sign up for the next one. Registrations are now being accepted for the upcoming Steel 101 in Ontario, Calif., Jan. 7-8. The program will include classroom instruction, networking opportunities and a tour of the California Steel Industries mill. Click here for more information.
Reach out to Paige Mayhair if you have any questions in John’s absence. Paige can set up new accounts, handle renewals and respond to most inquiries. 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.
Tim Triplett, Executive Editor
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?