Final Thoughts
Final Thoughts
Written by Tim Triplett
August 26, 2020
Claiming national security concerns over a slump in the U.S. steel market, President Trump issued a proclamation late Friday that appears to amend the quota limits on Brazil, further restricting steel imports from South American nation. While it’s unclear at this point which products will be affected and to what degree, one source tells SMU the change may further limit imports of Brazilian slabs in the fourth quarter.
The president’s proclamation states: “The United States will lower, for the remainder of 2020, one of the quantitative limitations set forth in Proclamation 9759 applicable to certain steel articles imported from Brazil. In my judgment, this modification will preserve the effectiveness of the alternative means to address the threatened impairment to our national security by further restraining steel article exports to the United States from Brazil during this period of market contraction.” Click here to read the entire proclamation. Look for further details in Tuesday’s SMU.
On another subject, here’s some of the more quotable quotes from SMU’s Steel Summit this past week:
“We are all in an international market riding a bus where the driver of the bus is China, and he is taking us wherever he needs to go.”
Jose Gasca, Metrading International AG, on China’s dominance in the global steel market.
“I don’t know of any steel company in the world that is aiming to have a smaller participation in the auto industry.”
Lourenco Goncalves, Cleveland-Cliffs CEO, when asked if Cliffs’ subsidiary AK Steel is too dependent on the automotive market.
“Go ahead and underestimate us, that is going to be fun.”
David Burritt, president of U.S. Steel, on his company’s “best of both” strategy to combine integrated and EAF steel production.
“Seventeen million tons came offline abruptly during the crisis. We think only about half will come back and will offset the 6-7 million tons of real capacity that is actually coming onto the marketplace. We don’t believe there is anything to worry about.”
Steel Dynamics President Mark Millett, downplaying concerns about a “Steelmageddon” scenario in which mills like SDI’s planned expansion in Texas will oversupply the market and drive down steel prices.
“If EAFs can crack exposed body panels, it becomes tenuous to be an integrated mill.”
Analyst John Anton of IHS Markit on the possible competitive shift among suppliers to the auto sector if minimills succeed in producing sheet products of high enough quality for the most demanding vehicle applications.
“It’s not an expectation, it’s a reality.”
Big River Steel President David Stickler on the likelihood minimills will compete for the automotive market’s exposed panel business.
“The economy is not broken.” And: “Don’t assume the election will make or break your world.”
ITR Economics President Alan Beaulieu, offering a reassuring forecast on the U.S. recovery.
Thanks again to all those who attended and supported our virtual steel summit. Remember, the conference platform remains open and the programming accessible until Sept. 18.
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
Tim Triplett
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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?