Final Thoughts
Final Thoughts
Written by John Packard
October 12, 2020
Nucor Tubular Products led the pipe and tube manufacturers announcing a $50 per ton price increase this morning on HSS, pipe, mechanical and piling products. EXLTUBE advised they were following the Nucor lead and announced their fourth price increase on HSS and A53B products matching the Nucor $50 per ton.
New orders for foreign steel are growing as domestic steel prices rise and lead times extend. The combination of both is making foreign more attractive to domestic companies. Trading companies have advised me that coated steel, especially Galvalume, is seeing quite a bit of activity. One trader of Galvalume told me his order book was as strong as it has been since just prior to Section 232’s being announced. We will be doing more reporting on imports in the coming days. Foreign steel offers may cap (or at least pressure) how high domestic prices can go up from here.
An item of interest in this week’s survey is about what the industry thinks will happen to Section 232 tariffs come March 2021. Here is a sneak peek – only 2.5 percent of the respondents (so far) believe the tariffs will be removed. The majority believe they will remain as is, with about 45 percent of those responding believing there will be adjustments to the exclusions (such as eliminating slabs or adding European countries to the list of countries excluded from the tariffs). Many of the comments referenced a President Biden “having bigger fish to fry” in the early days of his potential administration….
We may be in a pandemic, but the need for education about the industry continues. SMU will conduct our first “virtual” Steel 101: Introduction to Steel Making & Market Fundamentals Workshop on Oct. 20-21. We are using the same instructors as our live event and have replaced the mill tour with videos of the equipment, which in many ways is more instructive than going to an actual steel mill (albeit less exciting). We have plenty of spots available for those who would like to learn about the steelmaking process, understand the differences between EAF and fully integrated steel mills, know what residuals are and how they impact the quality of the steel you may be buying (or selling). You will also learn about the futures markets, how steel is bought and sold, and some of the key issues that affect steel prices, supply, etc. If you would like to learn more, or if you would like to register for next week’s event, please click here. You are also welcome to ask me questions. I can be reached at John@SteelMarketUpdate.com
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John Packard, President & CEO
John Packard
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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?