Final Thoughts
Final Thoughts
Written by John Packard
October 14, 2019
I thought John Ferriola’s comments at the World Steel Association would be of interest to our readers. Joe Innace of Platts interviewed Nucor’s Ferriola and reported him saying, “The rest of this year will be pretty flat. Going into next year, it’s really a crapshoot.” He told Platts Nucor’s downstream businesses have seen prices drop, but they still have good demand.
There is an international scrap conference in Budapest this week. I heard from one of my sources that the talk is for maybe one more month of lower scrap prices. This is different than what I have been hearing from some of the U.S. sources who believe prices will move sideways in November.
That’s something to think about in light of international events in Turkey and Syria and how the Trump administration may react to the pressure to apply sanctions on Turkey. If the government applies some real pressure on Turkey (raising steel tariffs back to 50 percent has essentially zero impact), Turkey could respond by blocking U.S. scrap from coming into their country. If that were to happen, scrap would move from the U.S. coast inland and probably negatively impact scrap prices here.
My opinion: the low end of our hot rolled range this week could very well be a “firm” low. You need tons to get there, and once order books are sufficiently full for the remainder of the year, I would expect those deals to disappear. Watch scrap pricing for November, your customers demand levels and steel mill lead times for keys as to where pricing will be headed come December lead times and 1Q 2020.
Another item to watch carefully—the General Motors strike may be coming to an end. That would be good news for the steel mills and could be the catalyst for the mills to announce steel price increases (remember 1962?).
I have mixed emotions about the mills’ ability to collect much of an increase if it were to be announced now. It might be better to go back to the old model of increase announcements just prior to Thanksgiving (mid-November). Again, this is my opinion and you should not base your purchasing decisions on just my opinion.
Our next Steel 101 workshop will be held in Ontario, Calif., on Jan. 7-8, 2020. We will tour the California Steel Industries mill in Fontana as part of our workshop. Information can be found on our website: www.SteelMarketUpdate.com/events/steel101
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John Packard, President & CEO
John Packard
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Getting back to the price increases I mentioned at the top of this article, to what extent are they aimed at raising prices and to what extent are they aimed at stopping the bleeding that was happening in the second half of May, before President Trump announced the 50% tariff?
Final Thoughts
We just wrapped another Steel 101 Workshop, where you take what you learned in the classroom into the steel mill.
Final Thoughts
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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.