As I look at today’s hot rolled average of $440 per ton (-$10 from last week) I feel it’s my duty to provide some context to our number. SMU captured transactions placed late last week at, or slightly below, $400 per ton for spot hot rolled. Since Monday of this week we were capturing higher offers as the mills have filled their order books and extended lead times, in the process taking some of the pressure off the product.
The offers we are seeing for volume HRC this week are in the $420-$460 range. There are outliers at $480 per ton, and we decided to allow those in the mix this week.
Scrap is rumored to be heading higher in September. One steel buyer told me today he expects scrap up $20-$30 per gross ton. If correct, this will support higher prices. The question this buyer had was how much demand was taken out of the market with the low deals being cut this past week? Will lead times on hot rolled come crashing back in?
We continue to reference our Price Momentum Indicator as being Neutral, although my expectation is we have seen the bottom with the most recent transactions. If there is any uptick in demand, we may well see HRC reaching $500+ per ton during the month of September. Of course, there is an ongoing pandemic and who knows how strong actual demand will be 30 days from now?
We have a great speaker tomorrow for our free SMU Community Chat webinar. The Chief Economist for the American Iron and Steel Institute, Tim Gill will provide us his insights into the economy and the steel industry at 11 AM ET. You can register for this free webinar by clicking here or going to www.SteelMarketUpdate.com/blog/smu-community-chat-webinars
I spoke with Big River Steel CEO David Stickler yesterday. We had quite an interesting conversation about the expansion of the existing mill, we spoke about Brownsville and we spoke about electrical steels. He will have plenty to say during our one-on-one fireside chat at this year’s SMU Virtual Steel Summit Conference.
We shared our platform with Mr. Stickler, and he was quite impressed. You will most likely find him wandering about the event, as will many CEO’s from mills to manufacturing to distribution. When asked if he wanted us to block people from reaching out to meet him, he said absolutely not, his door is open, and he is open to the technology our virtual conference is bringing to the steel industry. You can join the Big River Steel CEO on our platform by registering here or going to www.smusteelsummit.com
We are now 12 days from the official start of the conference. In reality, we are about one week before the platform will be open to all attendees. We will open the platform early so those registered can begin the process of reaching out to make appointments with other attendees, review the latest schedule and confirm to your work calendars what speakers you want to see live, and who you want to see on an “on-demand” basis. You will also want to update your profiles and provide keywords to help people find you (for example, if you are a galvanized buyer, you would put galvanized in your profile), and you will want to search your keywords to find others with similar interests.
We are planning on introducing the “live” platform next Wednesday during our SMU Community Chat webinar at 11 AM on Aug. 19. You will then be able to see what and some of the who you will be missing if you are not registered for this year’s event. Of course, you can rectify that by clicking here.
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
A clear consensus has emerged among respondents to SMU’s latest steel market survey that hot-rolled (HR) coil prices will bottom this month or in April. Seventy-five percent of respondents to our latest survey think that prices will find a floor before May as the chart below shows:
I want to give a big shoutout to the good folks at the Fabricators and Manufacturers Association (FMA) for inviting me to their annual conference this week in Clearwater, Fla. I also want to give a special thanks to the FMA for awarding SMU founder John Packard with a lifetime achievement award – on that also gave me a chance to catch up with my old boss in person.
What are some “Black Swans” to watch out for? With the war in Ukraine entering its third year, your mind might understandably move to conflicts overseas. Here is one closer to home to consider: US trade relations with Mexico taking a turn for the worse. I mention that because the Office of the United States Trade Representative (USTR) dropped a (virtual) bombshell earlier this month.
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.