Final Thoughts
Final Thoughts
Written by John Packard
May 15, 2020
The United States is beginning to go back to work. Automotive plants are scheduled to begin opening this week. The U.S. is working with Mexico to ensure automotive suppliers in Mexico are deemed “essential businesses” and return to work.
From my perch here in Florida, traffic has returned to normal, restaurants are open (50 percent of capacity) in all but a couple of counties, beaches are opening as are many stores. Exactly how big an impact there has been to the economy is unknown, but very much in debate.
That debate will continue Wednesday at 11 AM as our SMU Community Chat guest speaker will be John Anton steel, purchasing and pricing expert for IHS Markit. You can register for this free webinar by clicking here.
Being the parent of a professional musician and another in the food service business, their jobs are not returning anytime soon. I can only keep my fingers crossed that people remain smart, social distance, invest in a fun mask (and wear it when in public) and that someone in the world finds a vaccine that will work (and be safe).
Click here if you want to learn more about what each state is doing regarding remaining in lockdown or reopening.
In our latest flat rolled and plate steel market trends survey, we are seeing early signs of life, early signs of a growing optimism. Our SMU Steel Buyers Sentiment Index left the pessimistic portion of our index and is now +15 (based on a single week’s data point) for Current Sentiment. Future Sentiment never dropped below +10 (barely in the optimistic range) and has now rebounded to +30. Both are good signs that buyers and sellers of steel feel conditions are improving.
Demand is the area of concern for everyone. The data collected during our survey suggests there are hurdles to overcome ahead of us. We did see general demand improve…well, maybe a better way to say it is fewer respondents reported declining demand this past week than in the prior six weeks (see graphic below).
The vast majority of those responding to our survey last week (74 percent) believe the domestic mills will announce another price increase on flat rolled before the end of May.
One reason for another increase by the domestic mills can be seen in the responses we received regarding the amount of the first increase that is being collected now. Only 5 percent of those responding to our query reported mills as collecting the full increase. Slightly more than half of the respondents reported a portion of the increase was being collected.
Our Premium members can get the full details on these and many other questions asked last week by going to our website. On the Home Page (you must be logged in to your Premium account) click on the Analysis tab and pick “Latest Survey Results” from the drop-down screen. Executive members can view a sample survey, but are not able to see the latest and the full history of surveys that are on the site. If you would like information about how to become a Premium member, please contact Paige@SteelMarketUpdate.com
Paige Mayhair is also your contact if you would like to renew your membership, add new members (many companies are not utilizing all of the licenses they have available to them), upgrade your account or to add a new account. She can be reached at 724-720-1012.
I am in my office all week. You can reach me at John@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
We just wrapped another Steel 101 Workshop, where you take what you learned in the classroom into the steel mill.
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.