Final Thoughts

Final Thoughts

Written by John Packard


What is accurate today will not be tomorrow.

Just last week I was writing about the cancellation rumors at the domestic mills as perhaps being a bit overblown.

As we collected pricing data for tonight’s flat rolled and plate index, we also asked our data providers to comment on whether they were pushing out and/or canceling mill orders. It was rare for a company to say they were not adjusting existing mill orders. The adjustments went from pushing orders out to outright canceling orders. Those that were cancelling orders went from a small number of tons (in the hundreds of tons) to some reporting thousands of tons of cancellations. Service centers associated with the auto and energy markets appear to be the most deeply impacted. They were the first to be hit, while other industries appear to be gathering steam, closing plants or pulling back on production.

Our SMU Community Chat Webinar slated for 11 AM ET tomorrow (Wednesday, April 8) is perfectly timed for what is happening in the market today. CRU Principal Analyst and Editor of the Steel Sheet Monitor Josh Spoores will be joining me to discuss the CRU Steel Forecast for 2020-2021 along with adjustments in mill supply. We have already been asked to respond to a question about data collection for the CRU HRC index (and SMU will respond as to how we are collecting data in the current market situation).

You can click on this link: https://zoom.us/webinar/register/WN_kRmOPpJeTam_JB3NeLs_Eg to register for the webinar.

John Packard Summit 18You do not need to be an SMU member company to register. You can open this up to others in your company who are not active readers of the SMU newsletters, and you can invite your customers or suppliers. The webinar is free and part of our “community” of services for the industry.

I am remembering what it was like to collect spot steel prices in late 2008 and 2009. The Great Recession left most of the industry over-inventoried and out of the spot markets for many months at a time.

The unknown to the Great Pandemic of 2020 is we don’t know how long business is going to be affected, how deep the impact will be and then how quickly business will rebound whenever we get back to the “new normal.”

There are some similarities to 2008/2009 and there are some differences. The Great Recession caught many companies by surprise. This time around, we could see the train coming back in mid to late February (didn’t mean everyone was paying the proper amount of attention, but I think most did). The steel mills appear to be working with their customers better today than 2008-2009 in that they are taking capacity down rather than flooding the market with unwanted steel.

This recession is being dictated by the virus – not a normal erosion in demand.

As we come out of lockdown, with most feeling it will be July 2020 or beyond (some earlier/some later), the question then becomes how much damage was done to core demand?

As the economy starts to rev up again, the key will be what kind of inventory levels are on the floor at the service centers and how much time will it take to burn off the excess?

We will continue to ask the important questions from around North America and to interact with the CRU steel and economic teams as they report what is happening around the world.

I believe the Steel Market Update newsletter, websites and now our webinars will prove to be key as you make buying and selling decisions over the next three, six, nine and twelve months.

I continue to recommend that Executive level members upgrade the number of members on your account and/or upgrade to our Premium level services (which include our survey data, key indicators, service center inventories/shipments and much more). You can get more information by contacting Paige Mayhair at 724-720-1012 or by email: Paige@SteelMarketUpdate.com

On the personal side, I want to recognize Brett Linton as having a work anniversary. Brett has now been with me for 10 years. He was my first employee, and I thank my lucky stars for finding him when I did and that he is still with me today.

Also, I want to let everyone know the SMU team is intact and so far virus free. We are working long days to make sure we get you the best possible market information.

As I mentioned at the very top – what we report today may not be accurate tomorrow. We are in a fast developing market and one that is not easily understood. It makes our jobs (and yours) more difficult, but at the same time rewarding.

We want everyone to be safe out there.

I will see you at 11 AM ET tomorrow.

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

I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.

Final thoughts

We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?