The COVID-19 pandemic has clearly taken a toll on the attitudes of many industry executives. The pessimism is evident in some of the responses to polling conducted during the SMU Virtual Steel Summit this week.
We asked the hundreds of executives on the site: Where do you believe steel demand will be at this time next year compared with today? About 54 percent, the majority, said down more than 10 percent from where we are now. Really? Consider all the comments by the experts on various panels who suggested that the economy and steel market are on the rebound. We may not get all the way back to where we were before the pandemic in just one year, but surely we will make progress from where we are today.
We also asked the attendees: Where do you predict the U.S. price of hot rolled steel will be at this time next year? The majority view was under $400 per ton. Shockingly low. More than 80 percent predict the hot rolled price will be $475 or less. Even under today’s difficult market conditions, SMU pegs the current benchmark price for HR at $485. With the mills announcing increases on flat rolled and plate products this week, and scrap prices poised to rise in September, the price momentum is pointing upwards at the moment. Let’s hope the economy and steel demand continue to recover and can support even higher prices next year.
If you haven’t done so already, be sure to take in the two recorded presentations by Dr. Alan Beaulieu of ITR Economics. His theme: “Planning with Optimism.” I found his analysis of the economy quite encouraging, at least for the near term. As he said, “The government stimulus this year will create an afterglow in 2021 and 2022. You’re going to be fine.”
SMU’s virtual summit, featuring some 48 different speakers, was a lot to take in. Especially from your home or office (which is one in the same for most of us these days) where distractions abound. Not to worry, you have another three weeks to revisit anything you may have missed. The conference platform will remain open and live through Sept. 18. You can watch, or rewatch, all the presentations and the follow-up Q&As, and you can chat with anyone who happens to be online, including sponsors in the Exhibition Hall.
We welcome your feedback and constructive criticisms. Send a note to Info@SteelMarketUpdate.com and let us know what you thought of our first virtual event. We hope to see you all in person at next year’s summit, but with the way this scary virus is behaving, you never know.
For those who appreciated the political analysis and insights offered by Professor Dave Schultz of Hamline University, he is available and happy to speak to your company or other groups about the election and related topics. His contact information is below:
Professor David Schultz
Department of Political Science and Department of Legal Studies
1536 Hewitt Ave, MS B 1805
St. Paul, Minnesota 55104
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
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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.