I am back from my “stay-cation.”
Is it just me or is time standing still?
I don’t know about your neighborhood, but the landscaping in mine has improved over the past 45 days. I understand there are a lot of home projects ongoing.
From a steel executive email to me earlier today, “I told a guy yesterday – business is somewhere between winning the lotto and being dead, much closer to being dead.”
There are some winners out there – those working on the wall at our southern border… (what else?).
I spoke with Alan Beaulieu of ITR Economics yesterday. He believes that we will see a “V” shaped recovery – however, not a sharply rising “V” but one that takes until late 2021 before we return to pre-COVID-19 levels. Dr. Beaulieu will be participating in the 2020 SMU Steel Summit Conference on Aug. 24-26.
I noticed Goldman Sachs raised its estimate for WTI crude oil prices for 2021 to $51.38 per barrel as they expect a gradual recovery in global oil demand as well as production cuts from OPEC and shuttering of capacity elsewhere. Today oil was hovering around $24 per barrel.
I also spoke with Ryan Avery who will be one of our keynote speakers during our youth-focused program. He made an interesting comment to me that I ascribe to as well. “Good companies are optimistic in trying times, THE Company is creative….”
Our next SMU Community Chat webinar will feature Timna Tanners, the metals and mining analyst with the Bank of America. I will be chatting with Timna about the disruption of supply, who are the winners and losers, what surprises is she seeing from her vantage point, what are the similarities and differences between what is happening now and the Great Recession of 2009/2010, what is the status of all the mill projects and is Steelmageddon moot or more relevant than ever? Our Community Chat Webinars are held every Wednesday at 11:00 a.m. ET and you can register for this week’s webinar by click here.
Next week (May 13) SMU will welcome Dr. Chris Kuehl of Armada Corporate Intelligence as our guest speaker.
We will publish our Service Center Inventories “Flash” Report to our data providers on Thursday of this week. Our Premium members will get their copy of the full report around the 15th of this month. This report will be quite valuable in determining how badly steel distributor inventories are being impacted by the rapid change in demand. It will also give us a good look at order patterns and potential adjustments. If you would like to become a confidential data provider, please contact Estelle.Tran@crugroup.com or myself: John@SteelMarketUpdate.com If you would like to learn more about becoming a Premium member, please contact Paige Mayhair at Paige@SteelMarketUpdate.com
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO
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Latest in Final Thoughts
Domestic prices have been sliding since the beginning of the year, and I don’t see any obvious reasons why the slide might stop this week. But let’s put the timing of a bottom aside for a minute. The question among some of you seems to be whether we’ll see another price spike, or at least a “dead-cat bounce,” before the typical summer doldrums kick in.
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.
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?
Everyone knows the old saying that “a picture is worth a thousand words.” Just because it’s a cliché doesn’t mean that it’s wrong. A lot of inked has been spilled trying to figure out why prices are falling now. I thought it might be as simple as this: Market dynamics in the fourth quarter (UAW strike, companies buying ahead of an anticipated post-strike price spike, etc.) pulled forward restocking activity that typically happens in the first quarter.
What a difference a month makes. There are a few full bulls left in the room, but their numbers are dwindling. We’ll release results of our full steel market survey tomorrow afternoon. I took a sneak peak at the data on Thursday. And more people than I expected think that US hot-rolled (HR) coil prices will be in the $700s per short ton (st) two months from now. Vanishingly few think prices will be above $1,000/st in mid-April.