Final Thoughts
Final Thoughts
Written by John Packard
June 19, 2020
Happy Father’s Day to all the dads out there. I hope you got to enjoy some quality time with your kids earlier today.
There has been a call on the Commerce Department to review exports of steel and aluminum from Canada and Mexico. There is a question if exports of these products have “surged” since the two countries were eliminated from Section 232 tariffs.
We did a quick review of the products we cover on a regular basis, and the only product that comes into question is semifinished (slabs), which cannot (or are not) being supported by the domestic steel mills. Please review the following two tables (one Canada and one Mexico) and you can come to your own conclusions:
A reminder, SMU will not host our Wednesday SMU Community Chat webinar this week. Instead, we are deferring to the free CRU Steel Briefing webinar that is scheduled for 10 AM on Tuesday. This webinar will focus on the CRU steel outlook with Chris Houlden (Head of Steel for CRU), Josh Spoores (Principal Analyst), Ryan McKinley (senior analyst) and Anissa Chabib (economist). I think you will find it quite interesting. You can register for the CRU webinar by clicking here.
On Wednesday, July 1, our Community Chat speaker will be Eddie Lehner, President & CEO of Ryerson. We will have registration available later this week.
I am not going to spend time this evening providing information about the 2020 SMU Virtual Steel Summit Conference; you can find more details, including the companies that are currently registered, by clicking here.
On Wednesday, July 8, we will take a portion of the time allocated to our SMU Community Chat webinar to give some insights into our conference.
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?