Final Thoughts

Final Thoughts

Written by John Packard

NOTE: Steel Market Update will be moving to a new Azure server tomorrow. Most of the day our website will be down as we make the transition. The website should be back up on Saturday and we intend to publish on Sunday as usual, barring any technical difficulties.

We are in an interesting time for the steel industry. The pandemic is just one factor behind the stress in the market. The price increase announcements by the integrated steel mills, U.S. Steel, AK Steel and ArcelorMittal, have created another issue for steel buyers.

An executive with U.S. Steel saw the slides associated with yesterday’s SMU Community Chat webinar where we indicated early comments from market participants had the increase pegged as DOA (dead on arrival). The USS exec told me this morning: “Look forward to reading your edits of the DOA comment and instead citing that the increase is alive and well in upcoming newsletters. Increase has taken hold…already transactions at up money taking place. You yourself can look at the inventory numbers and see that there has been a large drop at service centers, and you know what is going on at the end-user segments in autos and appliance, and a few other ones. Yellow goods are beginning to pick up, and construction remains extremely busy; you have no idea how many people are looking for additional tons. SDI said the same thing on their call. There are buyers out there who recognize that prices need to go up and will go up from here; not sure your sample size was large enough to say DOA is a consensus, so disappointing to read.”

John Packard Summit 18I agree that the data points we had yesterday morning were not indicative as to what the broader market was feeling about the increase, and whether the increase had a chance to be collected. One of my concerns, which I expressed during the webinar, is that the electric arc furnace mills such as Nucor had not made a move to follow. This is unusual if Nucor felt the market would support such as move.

Nucor had their earnings conference call this afternoon and was asked about the U.S. Steel price announcement. They said, “Our pricing decisions are independent of our competitors and we will evaluate ourselves where the market is.”

Those of you who have been active readers of Steel Market Update know that I spend a lot of time speaking with actual steel buyers, both in manufacturing and service centers. We went out late this morning asking for feedback and got an earful in response to our request.

“Well, the integrateds never really sold $22 spot. AMUSA never went under $25 asking spot. Although [they did] negotiate a little…they did still push mins [minumum tonnages] on contracts, although they adjusted them a little lower.” Midwest service center

“Unfortunately, July is not the best time to try to implement an increase.  While there is no doubt that pricing is lower than sustainable, there just isn’t anything to hold it up right now. Many OEMs were really soft on production in July, and so any uptick due to inventory replenishment has run out of gas. At this point, stability in pricing is as optimistic as we are willing to go for right now. I’d be surprised if anyone is actually buying at the increase. Most will wait if possible, purchase off of programs, etc. We would rather just sit tight than buy at these levels.” Large service center

“Do you believe the domestic mills will be able to collect the $40/ton price increase? Yes, price is going from $450 to $490, no doubt.” Southwest service center

“No. With EAF mills apparently not joining the club, there’s zero chance for an increase since they are serving the vast majority of current spot orders at this time. Even if they did join, the current conditions are not very favorable for an increase to stick, particularly with the expectations for scrap to fall further still holding up. As the many recent cycles have shown, we need capitulation to arrive, usually caused by large buyers finally pulling the trigger, at prices typically $60+ below the public index levels in place at the time. I think we’ll see a similar situation in this cycle, but it may take a few more weeks or so before it occurs.” Large national service center

“Not likely. Depends on what the baseline is. USS announced and the mill basically has no spot availability. So, the announcement was somewhat irrelevant. Mittal and AK following, but I see this as only an opportunity to create a bottom to the current slide. Few true ‘spot’ transactions are taking place. Demand remains flat and uncertain with new Covid restrictions. Automotive’s improving, but energy is a complete disaster, so HRC will continue to remain under pressure. JSW shutdown is irrelevant since they were a small, uncertain, poor-quality market player. If we were to see a demand bounce, even small across a broader segment of end users, I think we’d see significant upside price pressure with inventories quite low. But we do not see that near term. We had a more positive outlook a few weeks ago, but with governments creating further Covid restrictions, we have turned more cautious/negative again. We see mills holding firm for small transactional truckload orders, otherwise negotiable. I believe we are coming to a short-term bottom due simply to the price/cost relationship.” Midwest service center

“The only mills to announce are mills that do very little spot. Other mills in South including Calvert are beating each other up for price for HRC; still more downward pressure with short lead times; buyers can sit on the sidelines and only buy spot needs and get it quickly. I just booked 750T order [for hot rolled] for $21/cwt yesterday from a mill in the South.” Southern manufacturing company

“I think pricing is going to be more governed by minimill cost than by price increase collaborations. Coil pricing is reflecting the low end of production costs. Larger bulk buyers will be active this week at plus/minus ~$420 (similar to late April/May). Certainly the integrated mills are in a loss-making zone, and conversion amounts over scrap are pressing even the EAF cost levels.  At the light demand levels, prices are linked to costs.  Scrap prices should indicate the changes. USS is employing an interesting strategy of both raising prices and adding supply to the marketplace. Regardless, some producer had to signal that cost levels were too low. Increases without establishing an actual price benchmark are less meaningful to the marketplace, and don’t lend themselves well to the idea of “are the mills holding firm?” or “is the increase sticking?” It’s early to gauge any change in the market, but you might estimate the minimills are likely willing to keep taking market share with a $200 conversion rate. If so, scrap pricing would determine if the marketplace changes direction due to the current round of pricing announcements.” Large Midwest service center

“It may stop the fall and perhaps they will get a portion of it.  But we do not think the market supports the full amount at this time. Our regular suppliers are still accepting orders at pre-announcement pricing (so far, anyway).” Midwest service center

“I don’t think the mills will be able to collect this increase. At best, they may stop the slide that is going on, which I think was their intent. The integrated mills need the increase, but I don’t see the minimills supporting it.  Iron ore is down in price and scrap dropped in July and may drop another $10-$20 in August. Demand doesn’t seem to be keeping up with the additional capacity that is coming on.” Manufacturing company

Next week’s SMU Community Chat Webinar will feature Paul Terry of CRU and me. We will open up our platform for the 2020 SMU Virtual Steel Summit Conference and give it a test ride. We will highlight how networking will work, some of the surprises we have planned and demonstrate why you (and your whole team) will want to participate in this unique conference. To register click here or go to

Steel SummitRegistrations for the 2020 SMU Virtual Steel Summit Conference continue to come in. Here are some of the newest registrations we have received. Those with an * after their name indicates more than one person will be attending: Behlen Manufacturing*, Dongbu USA*, Honda of North America*, Steel and Pipe Supply, Merit USA, Stelco*, Bilstein Cold Rolled Steel*, Famous Enterprises, Heating & Cooling Products*, Delta Metals*, B&W Trailer Hitches*, Grand Steel Products, Eaton Corporation, Worthington Industries, Great American Group*, Precoat Metals*, Manchester Tank & Equipment, Bradesco BBI*, Midmark Corporation, and Steel Warehouse.

I want to say thank you to Nucor and Big River Steel as both companies are sending 10 or more of their executives to this year’s virtual event.

We are closing in on 500 registrations on our way to (we hope) 800+ executives at this our first virtual conference. If you would like to join them click here or go to

We continue to ask companies to nominate aspiring leaders, exceptional employees, creative young people for the 2020 SMU NexGen Leadership Award. The award will be presented during the SMU Virtual Steel Summit Conference on Aug. 26. Qualified nominees will receive a complimentary ticket for this year’s conference. The winner of the award will receive a mentorship day with Charles Schmitt, President of SSAB Americas, a free pass to the 2021 SMU Steel Summit Conference in Atlanta, a free ticket to any SMU training programs during the remainder of 2020 or during 2021 (Steel 101, etc.), a trophy, recognition during this year’s conference and recognition in the SMU newsletter. The award is sponsored by the Steel Manufacturers Association and will be presented by Phil Bell, President of the SMA. For more information and directions on how to register, please click here or go to and click on the award tab. Those nominated last year are welcome to be nominated again this year (as long as they are 35 years of age or under).

As always, your business is truly appreciated by all of us 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?