Final Thoughts

Final Thoughts

Written by Tim Triplett


It was one of those days. Publishing a newsletter is like giving birth three times a week anyway, but the labor pains for the SMU staff were particularly acute today. John Packard was ostensibly taking the day off, but that did not stop him from writing a big story and sending untold emails.

Keeping abreast of the latest market developments stemming from the havoc wreaked by the coronavirus has made our normal news coverage even more challenging. The changes we report on are much bigger and far more frequent. Much of the news comes from the mills’ attempts to right-size their companies and match production with today’s woeful demand. The mills are scrambling to stop the bleeding, almost reinventing their companies on the fly as they make painfully difficult decisions about which assets to use and which to put on the back burner. Which employees to support and which to lay off or furlough. It’s to their credit that they have managed to react so swiftly and effectively. We spent hours today trying to verify rumors that Cleveland-Cliffs is planning to idle the hot strip mill at AK Steel Dearborn. (The company has not confirmed, but it looks like that is the case.)

That was not the only rumor on the street that cost some shoe leather today. Some folks are speculating that U.S. Steel may be looking to divest its mill in Kosice to raise cash to complete its purchase of Big River Steel. Others say they have heard that USS plans to close Great Lakes and Granite City permanently and that the Mon Valley project will be terminated. We cannot confirm. U.S. Steel executives will no doubt be asked to respond to these questions during their second-quarter earnings call tomorrow.

Steel Market Update’s Price Momentum Indicator has been pointing firmly Lower since late March, but there was a subtle shift in the wind this week. With reports of mills firming their offers and scrap prices possibly increasing in May, we opted to move it to Neutral. That does not mean we believe prices have found the bottom or that they will soon begin to rise. It just means that we believe it’s prudent to wait until the market establishes a clear direction before we report on momentum.

John Packard made the prescient decision to move the Price Momentum to Neutral a few hours before we learned that ArcelorMittal was raising prices. AM notified customers that it was setting a base price of $500 for hot rolled and $700 for cold rolled and coated, effective immediately. Expect other mills to follow. If successful, that increase would amount to about $40 per ton from the current prices published by SMU.

Mills seem to have a way of always announcing price increases late in the evening (as if we won’t notice), right when we are on deadline. Makes for a long day.

Given all the craziness in the steel market, don’t forget to log in to our next SMU Community Chat at 11 a.m. ET on Wednesday, May 6. Guest speaker will be Timna Tanners, highly respected metals and mining analyst for Bank of America. You can register by clicking here.

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

Tim Triplett, Executive Editor

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?