Final Thoughts
Final Thoughts
Written by Tim Triplett
September 16, 2020
Nothing like a spike in steel prices to give the market a much needed attitude adjustment, one the mills and service centers can really use as the pandemic continues to weigh on day-to-day operations and individuals’ emotions. Steel prices have jumped by nearly $140 per ton in the last month. SMU’s Steel Buyers Sentiment Index, which measures how steel execs feel about their chances for success given the current market conditions, is back to levels prior to COVID and well above readings at this time last year.
Some folks are feeling better than others, of course. Those who stocked up in August find themselves with a big margin advantage in September. Yet almost two out of three of those responding to SMU’s questionnaire this week remain reluctant to add inventory. Here’s what a few of them had to say:
“There’s too much uncertainty as to whether this bump in demand is only temporary.”
“Mill capacity utilization is still in the low 60s, energy is flat, demand will not sustain an extended run-up in pricing.”
“This is a short-term situation not triggered by demand but by mill outages to artificially tighten supply. The only product that is really tight for the short term is Galvalume, and that will subside by early November.”
“There’s risk in getting caught with high-priced inventory when prices come down.”
“Buy only what you need. Trying to time the market leads to inventory hangovers. Plus, good luck trying to get anything additional from the mills right now.”
“My rule is 6-8 weeks of inventory. It has worked well for 26 years. No need to change now.”
On another note, the technical experts at CRU are in the process of migrating the Steel Market Update website to a new server. The server upgrade will take place on Friday and Saturday. We anticipate all will go smoothly and the changeover will be transparent to our readers. But in the event of an unexpected problem, be aware that the Sunday issue of SMU could be delayed or abbreviated in terms of the normal content. Thanks for your understanding.
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
Tim Triplett
Read more from Tim TriplettLatest in Final Thoughts
Final Thoughts
We just wrapped another Steel 101 Workshop, where you take what you learned in the classroom into the steel mill.
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.