Final Thoughts
Final Thoughts
Written by John Packard
February 7, 2020
I spent the second half of last week in Tampa where I was the master of ceremonies for the 31st Tampa Steel Conference hosted by the Port of Tampa.
John Anton, IHS Markit Director of Steel Analytics / Pricing and Purchasing Service, provided the key economic and steel forecast for the group. He told the attendees that 2020 will look a lot like 2019. What that means is, “We’re busy but we’re not as busy as we need to be.”
He pegged U.S. GDP growth at 2 percent, however, manufacturing growth is forecast to be minus (-) 1 percent.
Anton said auto production has been running at 17.3 to 17.6 million units for years. This was caused by the sharp drop in 2009-2010 and the subsequent rebound. However, his forecast for autos for 2020 is 16.5 million units. He put that into perspective by saying a good year prior to the crash of 2008 was 15.6 million units. So, 16.5 million is still a very sold year for automotive.
His forecast for benchmark hot rolled is $640 to $650 per ton by the end of the year (SMU was at $585 per ton last week).
Iron ore will settle around $70 per dry metric ton.
Despite who wins the election this November, Anton expects the Section 232 tariffs to remain in place.
Of course, the wild card (or black swan that is out there) is the coronavirus. If Chinese manufacturing plants remain closed through the end of February, there could be severe repercussions due to lack of parts here in the United States.
I also moderated a trade panel with Phil Bell, President of the Steel Manufacturers Association; Dave Sumoski, Executive Vice President, Merchant and Rebar Products for Nucor; Richard Chriss, President of the American Institute for International Steel; and John Foster, President of Kurk Orban Partners and Chairman of the AIIS.
The panel discussed a few trade-related topics – mostly related to Section 232 tariffs. There was a discussion about the AIIS challenge to the constitutionality of the Section 232 authority that President Trump used to try to prevent imports of foreign steel into the U.S. Recently, AIIS argued before the U.S. Court of Appeals. Most likely whoever loses will appeal the decision to the U.S. Supreme Court. This case could last for a while….
There was much conversation in the hallways of the Tampa hotel hosting the Tampa Steel Conference about the 2020 SMU Steel Summit Conference. Many of the companies at the Tampa conference plan on attending our conference on Aug. 24-26. Our registrations as of the beginning of last week already had exceeded the registration levels achieved in mid-March 2019. We have been putting together a great program from beginning to end. You can click here to register for the 2020 event (pricing has not changed from 2019).
We are also booking our next Steel 101 workshop, which will be held in Merrillville, Ind., on March 31-April 1, 2020. We will be touring the NLMK Portage steel mill. You can click here or go to www.SteelMarketUpdate.com/Events/Steel101 to register.
I will be in the office all this week. I am not traveling again until late the 27th of February.
If you need information about renewing your membership, upgrading or adding more people to an existing membership, or if you would like to subscribe, please contact Paige Mayhair at 724-720-1012 or by email: Paige@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?