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
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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.
Sheet prices have fallen again this week on shorter lead times, higher imports, and potentially higher inventories. (We’ll see for sure when we release our service center shipment and inventory data next week.) I remember reporting almost exactly the same thing about a month ago and getting a fair amount of pushback. Not so much these days.