Final Thoughts

Final Thoughts

Written by John Packard


On Thursday I provided some of the feedback I was getting from those involved in both the sales and purchasing of flat rolled steel into the North American markets. The comments continued to flow in and here are a couple more that I found interesting:

The general manager of a service center provided these insights to me late on Thursday: “I think one needs to realize that the mills have in fact gotten prices on sheet up to a level we haven’t seen since Aug/Sept last year. They’ve recouped all of the last down-cycle drop, and then some. Current mill prices are now ‘good’ by any recent measures. So, it’s hard to see where further upside comes from. With scrap looking like it will be sideways to down, it’s causing a pause in sentiment. I think, too, that the pace of domestic output has caught the market by surprise to the high side. The same could be said for the Dec/Jan imports, when considering slabs into the mix. There’s a sense that buyers are very comfortable with where their inventories are and there’s no sense of urgency. I hope that we see a period of relative stability in the weeks ahead given the current dynamics.”

This same GM went on to talk about whether he was seeing any “holes” in mill order books: “I don’t see holes and I certainly hope that we don’t receive lower offers so that we can absorb this latest barrage of increases, convert our metal, and raise our prices in kind. If prices begin to fall any time soon, it will be extremely painful and disruptive for the mills’ customer base.”

A southern-based distributor provided this information: “I have never been so confused about the direction of the market. The mills are pushing to get spot transactions to $600 consistently, but I don’t see that happening, especially if scrap remains flat or down. Cold roll and hot roll are still available with five-week lead times or less. Not a good sign for a strong market. I am not hearing any enthusiasm from the end users regarding any real growth in demand over last year.” 

John Packard Summit 18The following came from a large service center buyer: “There are more than a few of us out there trying to read where we are and where we are headed. If you look at futures, it appears the party may be over soon. If you talk to some upper level mill people, you would think this market has legs into the summer at $600 plus. We are watching lead times closely. Never have I seen such disjointed regional and product lead time differences.”

He continued: “Additionally, no service center or OEM I have spoken to are in any immediate need of more inventory. Most seems to be in good shape. No one I have spoken to has paid more than $600 for HR as of today. It is becoming more apparent that scrap will be down $10 or more for February.

“Since we have been dealing with largely a psychological approach to this latest cycle, I think the scrap factor may stall this rally. As buyers note that drop in input cost, and the fact that demand is largely flat, I think we begin the next game of chicken between the mills and buyers. Who can wait the longest to make their move?”

This buyer also discussed the amount of steel being produced: “The other factor that is in play is the recent weekly production figures. Mills are making A LOT of steel. Where is it going? Are there massive buys out there over $600 ton? None of this adds up in a sensible manner. Hence, we start questioning the metrics and our guts to try and reconcile which direction we are headed. Based on my conversation over the past week, I would say 70 percent believe we are near a peak and will see a decline in 30-60 days, and the balance believe we can go to $640+ for several more months.”

President Trump’s move to hit “derivative” products made out of steel and aluminum is going to make things even more interesting as we head into the election (and our conference at the end of August). Yes, we will have a segment of our agenda dealing with trade issues. I am holding off on specific speakers as I struggle to identify exactly which issues will be the most pressing. Maybe you have some comments on the subject? Do you think the biggest trade issue will be Section 232 (steel), Section 301 (China), Section 232 (auto), USMCA, trade cases (AIIS or other)?

If you would like to register for the 2020 SMU Steel Summit Conference, you can click here, or you can go to www.SteelMarketUpdate.com/events/steel-summit for more details.

Registration is also open for the March 31 and April 1, 2020, SMU Steel 101: Introduction to Steel Making & Market Fundamentals Workshop, which will be held just outside of Chicago and will include a tour of the NLMK Portage, Ind., steel mill. You can register by clicking here, or going to www.SteelMarketUpate.com/events/steel101

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 Paige@SteelMarketUpdate.com

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.