Final Thoughts

Final Thoughts

Written by John Packard

I have been spending time looking at market momentum, lead times (real, not from our survey), who is buying and who is not (and why), and what the market should be concentrating on over the next couple of months (not just today).

I am going to start with comments I got from a couple of top commercial people at two different mills.

EAF scrap charging“I am seeing more signs of strength than weakness in today’s market,” said one mill exec this afternoon. He noted many positive statistical data points – housing, automotive, border wall bid (approximately 50,000 tons) and especially the December housing data. “Housing has hit the breakeven threshold for needed builds to cover annual teardowns and population growth for the first time since 2008.” He went on to point out how this is good for the steel industry with half of the appliances going into new homes. He also pointed out that garage doors, heating and ventilation equipment, water heaters, gutters and downspouts all are expected to do well going forward.

This mill reported, and our readers need to be aware, “Short-term interruptions like the explosion at Indiana Harbor #4 BOF and flooding at USS Gary took tons out temporarily. The announced idling of AM #3 BF at IH and announced plans for permanent closures at USS Great Lakes have not really been felt yet and will take out a few million tons per year of melt. Added to the decline of imports with not much new capacity until late this year and next year, this is significant. Dofasco has an HSM outage in Q2. Stelco is pushing out a complete relign until late summer, but will be down from melting for three months whenever they go down. They have to build slabs ahead of that outage so they will be limited on spot volumes now and throughout the outage. JSW seems to be backing off aggressive HR sales prices out of Mingo and is focusing on sending slabs to their plate group in TX. GI demand is the strongest I have seen in a decade and we have no tons left for Q1. CR is busy. HR is recovering with lead-times out about two weeks longer than they were a month ago.”

The second mill told me, “I feel we fared better in GLUM [Galvalume] this week than I hear people fared in HRC. Maybe that is because we are getting closer to spring. Maybe it is because construction is better than say the pipe makers/energy sector, which impacts HRC more. Dunno.”

Staying with the mills for a moment, late this afternoon I got an email from an end-user who advised that galvanized lead times out of ArcelorMittal Nippon Sumitomo Calvert were pushed to the week of April 12 as of today. That is a 12-week lead time.

A large manufacturing company and buyer of hot rolled who normally is on the cutting edge of spot pricing told me, “Hopefully you are not dodging falling iguanas in Florida. Regarding the steel market, we are getting mixed signals. For the spot HRC numbers, we are being quoted $30/cwt base. Lead time is late February to early March ship date. There is a sense that a new price announcement will come out before January ends.” 

This manufacturing steel buyer went on, “We are not seeing holes in the order books at the moment. We have a couple of our orders pushed out at an integrated steel mill. It appears that the BF issue has a greater ripple effect than reported [ArcelorMittal Indiana Harbor #4].  We have not received any import offers for a few weeks now. The last import offer was higher than the domestic. Until imports become attractive again, the domestic mills will continue to push prices up.”

Many steel buyers tend to be looking at the market differently than the two mills referenced above. A Midwest service center told me this afternoon, “We support higher prices.” At the same time, his company was holding off on making any further spot price transactions. “We are sitting pat, too much too fast [prices moved higher too quickly and too much].” The problem with the steel mills, in this buyer’s opinion, is, “It’s all gas and no brake.”

This service center related a conversation he had recently with a steel mill (name deleted) who told him they were only getting the “oh, s _ _ t” tons. As in, “oh, s _ _ t, I forgot to buy steel.”

John Packard Summit 18With inventories starting to grow, and now there is fuel in the tank, in this steel buyer’s opinion, “it feels like it is ending [higher prices].”

That buyer is not alone. I mentioned in Tuesday evening’s Final Thoughts the comments of the owner of a flat rolled service center who is convinced steel prices have plateaued and will soon go down…unless demand is stronger than he thinks.

Another service center provided this today, “People are very nervous. The belief is that with scrap about to go down and mills’ capacity utilization so high that the pricing is unsustainable. People are now starting to sit on their hands as long as possible. John, the one thing I have learned is that as soon as it stops going up, it starts going down. Very rarely is pricing stable. My fear is that the mills lose steam, raw materials go lower, people stop buying and pricing goes down. Second quarter is thus a big worry for us.”

Then there are those who are struggling to figure out exactly where the market is going from here. A manufacturing company told me, “John, I am struggling as well. This just is not adding up for now. I hear scrap will go flat in February, then other sources say down $20-30/ton. Futures are tanking. It’s a very hard market to understand. Inventory levels in December were the highest in over 12 months–cause for concern. I have been preaching about concerns for demand across all sectors; that concern is still real.”

This manufacturer went on to say, “Demand is pretty good, however, for the agriculture side of business. That is after two solid years of contraction in sales. So, ther’s some glimmer of hope. We are staying busy and hiring once again (almost a year hiatus from hiring). We are not investing again in expansion, though, just like we didn’t in 2018/2019. Too much volatility and political uncertainty.”

Then this buyer told me he made the following spot purchases this week: 100 tons of hot rolled at $30.50/cwt base, 200 tons cold rolled at $39.00/cwt base and a large purchase (more than 1,000 tons) of galvanized at a $38.00/cwt base.

We also learned today of new HRC purchases at $580 per ton into a couple of service centers.

Our survey this week is showing a higher percentage of steel buyers reporting hot rolled spot prices at the domestic steel mils as being “negotiable.” Not enough to freak out over. But a slight change in the trend.

It is not an easy market to read. It appears there are steel buyers sitting on their hands. We learned that during our call with the HARDI wholesalers, who reported their galvanized inventories as being balanced or higher than normal due to some speculative buys during October when prices were at their lowest.

SMU’s Price Momentum Indicator is remaining at Higher, but we are less confident than we were a few weeks ago. We will continue to watch and review the market carefully and will report what we are finding. Stay tuned.

On a more somber note, I received a note from Andre Marshall of Crunchrisk, LLC advising me of the passing of Patrick James Cullen of an apparent heart attack. Patrick was 47 years of age. Patrick was originally from Detroit and services will be held on February 3 at the St. Fabian Catholic Chuch in Farmington Hills, Mich. Visitation is at 10 AM and mass at 11 AM.

Our next Steel 101 workshop is beginning to fill. If you would like to learn more details about this March 31 and April 1 workshop, please go to

Also moving briskly are registrations to the 10th SMU Steel Summit Conference. In only nine years we went from 110 attendees to 1,078 in 2019. We anticipate 1,200 executives at this year’s event. Since I am busy working on the agenda, I can tell you it will be the most professional, informative and interesting steel conference in North America this year. You can learn more by going to and you can register by clicking here.

I want to recommend to those of you who purchase aluminum as well as steel, the CRU team is conducting their Aluminum Steel Summit on Thursday, Aug. 27, and Friday, Aug. 28, at the Marriott hotel next to the Georgia International Convention Center where the SMU Steel Summit is being held. The event is co-located with the Aluminum Market Update, a time-efficient meeting for aluminum leaders, traders, buyers and sellers; to gather and take the temperature of the market, do business and hear from some of the most respected and well-informed speakers in the industry. SMU Steel Summit attendees get 20% off the registration price to attend Aluminum Market Update*.   

*Please note the discount is only applicable to fully paid SMU Steel Summit registrations. Details on how to get the discounted price will be given in the confirmation email attendees receive once they register.

Steel Market Update will be raising our subscription pricing by approximately 9 percent as of Feb. 1, 2020. You may renew at the existing pricing no matter when your membership expires provided it is paid for prior to Feb. 1. To do so please contact Paige Mayhair at 724-720-1012 or you may reach her by email at

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

John Packard, President & CEO

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