Final Thoughts

If the average steel sheet usage is 1.25 tons per vehicle prior to scrap (trucks would be higher, cars lower) then a ballpark tonnage per day would be 9,250 net tons of sheet usage taken out of the market by the GM strike. However, with 12-week rolling production schedules, the steel to be used for today’s vehicles is already on the floor either at the mills, service centers, toll processors or the manufacturing plants. Remember, GM is not necessarily tied to a single steel mill supplier, so these tons are most likely spread over a number of mills.

The question becomes – at what point do the integrated steel mills have to go to the spot market to replace some of these lost tons? I don’t have an answer to that question, but it is something we will need to watch carefully as this strike unfolds. For now, let’s hope there is a quick settlement, because any strike lasting much longer than a week or two could be very disruptive to the spot markets. Maintenance schedules and other measures could be used to minimize the short-term impact. So, stay tuned. No need to panic right now.

We are hearing rumors (and we are identifying this information as nothing more than a rumor at this point) that the Koch brothers, and potentially the Arkansas teachers’ pension fund, are looking at selling all or pieces of their investment in Big River Steel. This rumor has been circulating and continues to do so without much substance associated with it.

I will make this comment – from my viewpoint and opinion (not from any mill perspective) it would make sense for an integrated producer to purchase Big River Steel (if it is indeed being marketed at this time). Why it makes sense to me is: 1) location, 2) EAF production flexibility, 3) allows for closure of outdated capacity, 4) competitive reasons.

At the same time, there are a lot of questions that go along with any of the integrated mills buying controlling interest in BRS: 1) financing the purchase, 2) union vs. non-union, 3) management style, 4) integration of sales. I am sure there are many more issues that could prove to be sticking points to any potential deal.

As I said at the beginning, this is just a rumor and there have been many about Big River Steel over the past two years. For now, I suggest you stay tuned.

For the first time since we started analyzing service center flat rolled and plate steel inventories, we reported the results to our Premium level members yesterday as well as our data providers. Every month we will report on the number of days of supply of flat rolled and sheet to those subscribing to our Premium service. If you are interested in learning more, I recommend you speak to Paige Mayhair who can be reached at 724-720-1012 or by email at Paige@SteelMarketUpdate.com

Our October Steel 101 workshop is totally sold out and has a waiting list. Registration is open for our next workshop, which will be in Ontario, Calif., on Jan. 7-8. We will be touring the California Steel Industries steel mill as part of that workshop. You can find more information about the workshop at www.SteelMarketUpdate.com/Events/Steel101

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John Packard, President & CEO