Final Thoughts
Final Thoughts
Written by John Packard
December 13, 2019
New rounds of flat rolled price increases began on Friday with ArcelorMittal USA and NLMK USA taking the lead at $40 per ton. My expectation is the other mills will follow on Monday and Tuesday of this week.
Watch lead times – with some of the mills they are beginning to stretch. Steel Dynamics has been advising some of their customers that their galvanized order book for Columbus is in late February. Earlier in the week, the published SDI lead time sheet showed Butler as having mid-late January hot rolled, but all other products were either “inquire” or “closed” (P&O and painted).
Lead times indicate the strength of the order books and steel buyers need to stay close to their suppliers, and at the same time be aware of what the other mills are doing with their order books to make sure you don’t have a surprise.
SMU confirmed on Friday that Cleveland-Cliffs and soon to be AK Steel CEO Lourenco Goncalves will be one of our keynote speakers at the 2020 SMU Steel Summit Conference in Atlanta. Recently, Cleveland-Cliffs, an iron ore mining company, purchased one of their large customers, AK Steel. When the transaction is complete, Mr. Goncalves will be the CEO of both companies. He is always an entertaining speaker, and one willing to answer questions thrown at him from the audience. I think our 2020 attendees will enjoy hearing from Mr. Goncalves. The dates for the 2020 conference are Aug. 24-26 and it will be held at the Georgia International Convention Center in Atlanta.
As I mentioned the other day, SMU does have a limited number of seats available for the 2020 SMU Steel 101: Introduction to Steel Making & Market Fundamentals Workshop. The workshop is being held on Jan. 7-8 in Ontario, Calif. We will be touring the California Steel Industries steel mill as part of our workshop. We already have an interesting group registered to attend. If you have an interest in learning more about how steel is made, how it is rolled (flat, plate and long products), how various qualities of steel are made, how it is bought and sold, and what market forces influence pricing…you can find details on our website: www.SteelMarketUpdate.com/events/Steel101
On March 31 and April 1, 2020, we will conduct another Steel 101 workshop in the Portage, Ind., area. We will be touring the NLMK Portage electric arc steel mill as part of that workshop. Registration should be available sometime later this week, or by early next week.
A note about our publication schedule over the Christmas and New Year Holidays. We will not publish on Tuesday or Thursday (Dec. 24 and 26) as well as New Year’s Eve (Dec. 31). Our offices will be closed Dec. 24-26 and again on Dec. 31 and Jan. 1 for the holidays. We will publish on Sunday, Dec. 22 and Sunday, Dec. 29.
If you are looking to renew, upgrade or entertain getting your first subscription of Steel Market Update, you can do so through Paige Mayhair at 724-720-1012 or by email: Paige@SteelMarketUpdate.com
I am also available to answer any questions that you might have and can be reached at John@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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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?