Final Thoughts
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Final Thoughts
Written by Tim Triplett
September 2, 2020
The benchmark hot rolled steel price has jumped back over the psychological line of $500 per ton, to $515 by SMU’s current estimate, which is a positive sign for steel demand, but it begs the question: How high will it go and for how long?
SMU asked steel buyers how much of the $40-60 per ton in price increases announced last week they expect the mills to collect. Roughly one-third said, “all of it,” while the remaining two-thirds said, “some of it.”
Some buyers’ comments:
“There are so many issues right now and planned outages on the horizon that should allow them to grab it all.”
“It might take a second increase to get the full amount, but limited options will allow the mills to have their say.”
“Inventories are low and lead times are stretching. They will collect for a short period of time.”
“They’ll collect in September and October, then give it back in December.”
“Of course, there will be very little ‘spot’ business. Mills will be shipping a significant portion of their September production at much lower CRU minus and/or previously booked, deeply discounted numbers. The gap between spot and CRU minus contract pricing will be over $100 per ton.”
SMU also asked: Where do you expect hot rolled steel prices to be by the end of September? About one-third put the price in the $450-500 range, which would be down from the current price, suggesting the upturn may be short-lived. The largest group, more than 60 percent, forecast the number at month’s end in the $500-550 range, only modestly higher than today. Only a small percentage of optimists predicted the HR price could climb over $550 in the next few weeks.
SMU’s Steel Buyers Sentiment Index has jumped by 27 points in the past month to a reading of +61, which is even better than at this time last year when the pandemic was not an issue. It’s worth noting that the results may have been influenced to some degree by last week’s SMU Virtual Steel Summit. Summit attendees who filled out this week’s market trends questionnaire may be feeling a bit more optimistic than others. Analysis presented by the experts at the summit was certainly not all good news, but on balance presented a hopeful outlook for the coming year.
It’s difficult to assess how President Trump’s decision to amend the quota on imports of semifinished steel from Brazil for the rest of the year will impact the market. The administration contends the change was necessary “in light of recent deterioration in market conditions brought on by the COVID-19 pandemic affecting domestic steel producers.” But, certainly, restricting imports of slabs and billets to 60,000 tons, down from 350,000 tons, stands to hurt the companies that are dependent on them. Taking 290,000 tons out of the flat rolled supply chain at a time when several mills have planned fourth-quarter outages and demand is on the upswing could end up hurting other people as well.
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
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Tim Triplett
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Final thoughts
SMU has heard from some larger buyers who have stepped back into the market to buy at prices that, if not at a bottom, they assess to be close to one. Is it enough to stretch out lead times and send prices upward again? Or do we continue to scrape along the mid-$600s per short ton (st) as we have been doing for most of the last month?
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Final thoughts
Cleveland-Cliffs Chairman, President and CEO Lourenco Goncalves had some insightful things to say today about the steel market and about a conference we suspect might be Steel Summit.
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Final thoughts
They say a picture is worth a thousand words. Well, when you add in some commentary from respected peers in the steel industry to those pictures, that may shoot you up to five thousand words, at least. In that spirit, we’ve added some snapshots from our market survey this week, along with some comments from market participants.
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Final thoughts
I thought we’d have more clarity this week on Section 232, Mexico, and a potential carve-out for steel melted and poured in Brazil. As of right now, the only official comment I have is from the Office of the United States Trade Representative (USTR).
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Final thoughts
There are just 40 days left until the 2024 SMU Steel Summit gets underway on Aug. 26 at the Georgia International Convention Center (GICC) in Atlanta. And I’m pleased to announce that it's official now: More than 1,000 people have registered to at attend! Another big development: The desktop version of the networking app for the event has officially launched!