Economy

Industry Comments from Importer of European Steel

September 27, 2020

The following comments were made by an importer of European steel as SMU was updated on their view of the industries they service in the United States. SMU thought the comments provide an interesting perspective for our readers:

“Auto has been coming back strong. I don’t see the impact on the domestic mills, but I hear that they are under pressure to meet the demand. The same is the case in the EU. Demand is coming back faster than the mills can keep up. This has been a surprise for us – good and bad. The movement in the market has been a welcomed surprise. It is also coming at a good time as many contracts are coming up for renewal between now and the end of the year. If lead times stay extended and scrap prices continue to move higher, it will mean better opportunities for auto and non-auto contracts that expire between now and December. We need that after two years of poor to mediocre pricing since 232 went into effect. The one thing that could hurt this is bringing capacity back on-line that is currently idled. That could be like dousing a campfire with a water tanker.

“Imports into the U.S. (slabs excluded) continue to be under pressure. In this market it is just not possible to make a living paying a 25% tariff unless you have an exclusion. Unfortunately, the bulk of steel products don’t qualify for these. I think if we look objectively at the 232 without considering COVID 19, the windfall that was expected was short lived and did not help the mills with pricing, capacity or in some cases longevity. Time will tell.

“We do have some energy business for product we developed. Over the years it has been very successful, but in the past year we have seen a sharp decline in this market due to less demand for drilling. I am not too optimistic about this returning to historical levels in the near term. For now, we are maintaining steady but small shipments and working on further enhancements to the product.

“Packaging steel has been a positive performer this year. A shortage of capacity and a higher than expected demand due to Coronavirus has made this product a winner for us in 2020. This is also a product that comes with a contract. I am optimistic that we will see improvements at the negotiating table this year as I expect our customers will as well because of a pricing improvements and an ongoing steady demand.

“As you know, our steel all comes from Europe. Until recently the market was in dire straits. However, like here, auto is growing stronger and healthier faster than we expected. There is still capacity out [offline} but discussions are underway to bring furnaces back on-line in the near future. Like here though, too fast can stop the momentum and we all want to avoid that. I hope the domestic market takes that same cautious approach.”