Final Thoughts

Final Thoughts

Written by John Packard

Today I was on a conference call with steel buyers associated with HARDI, the trade organization whose members sell galvanized steel and other products to mechanical contractors. We have an article about the call in this evening’s issue, but there was one fact that was brought up by multiple executives: the price increases “have not created a flurry of activity” with customers. One of the steel buyers told those on the call that the increases “have not caused any of our customers to buy.”

These same companies reported demand as being “good” and they were not expecting their markets to collapse. As with our service center inventories report (provided to Premium members and data providers) we see inventories as balanced or will be balanced once inbound orders arrive (at lower prices than what is being quoted by the domestic steel mills now). As the wholesalers spoke about their inventories and demand, many of them reported that their company was not buying at the higher prices. The wholesalers discussed having orders placed through the end of the year, however we did not get a sense of any having placed orders for January or beyond at the new pricing.

John Packard Summit 18Having noted the above, I also heard one wholesaler say that the reduction in supply may help keep prices from sliding back into the abyss over the next few weeks (i.e. another dead cat bounce). The reduction in supply he referred to was the reduction in the number of operating blast furnaces. In that regard there are rumors floating within the steel community that one of the integrated mills is considering taking yet another furnace off-line. We will have to wait and see if the removal of another furnace comes to pass.

We have been inquiring about the removal of the ArcelorMittal USA Indiana Harbor #3 blast furnace. We wanted a better understanding as to whether it was going to be removed from the AISI capacity calculations. First, we learned from ArcelorMittal, “We are not idling the furnace and it should not be reported as an idling, which is something you might do purely for market reasons,” said the ArcelorMittal spokesperson. “It is being taken down because it has reached the end of its current campaign and requires significant capital investment for continued operation.”

SMU was curious as to how the removal of this blast furnace, which takes approximately 1.5 million annual tons of pig iron production out of the market, would impact the AISI capacity utilization rates. We inquired with the American Iron and Steel Institute and they advised us that it would have no impact when they told us, “So, this particular furnace isn’t in our calculation anyway as it makes iron, correct?  Our calculations include BOF and EAF only. But, for the bigger picture context that you are asking about, we take a mill out of our calculations when there is a statement from the company that they have officially closed down and no longer have any production capability at a particular mill.” What this means is the removal of the #3 blast furnace will not affect the AISI capacity utilization rate calculations.

BOF and EAF may be terms that are unfamiliar to you. Other terminology like pig iron and various commodities, and things like residuals, may also be subjects you don’t fully understand and can’t appreciate how they play in the steel industry. We have a workshop for you. Our Steel 101: Introduction to Steel Making & Market Fundamentals Workshop covers the steelmaking process from dirt (iron ore) to finished products. We explain the differences between a fully integrated mill versus a “mini” mill (electric arc furnace mill). We go into detail about “residuals” and how they impact the quality of steel. We talk about rolling and the rolling and coating processes, and then we show you in real time what a steel mill looks like, the size and scope of the equipment, the heat radiating from a slab prior to going through the hot strip mill, and much more.

Our next Steel 101 workshop will be held on the West Coast in California, located close to the Ontario airport and California Steel Industries steel mill. You can find more details at or you are welcome to send an email to or you can contact me in my office at 770-596-6268.

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

John Packard, President & CEO

Latest in Final Thoughts

Final thoughts

What's the tea in the steel industry this week? Here's the latest SMU gossip column! Just kidding... kind of. Yes, some of the comments we receive in our weekly flat-rolled market steel buyers' survey are honestly too much to put into print. Some make us laugh. Some make us cringe. Some are cryptic. Most are serious. We appreciate them all. Below are some highlights from our survey results this week. Some of the comments that we can share with you are also included, in italics, in the buyers' own words, with minimal editing on our part.