Final Thoughts
Final Thoughts
Written by Tim Triplett
October 16, 2020
Steel Market Update’s service center inventories data for September shows supplies on hand at very low levels. At the same time, the percentage of inventory on order is at very high levels. That suggests, say some observers, that some service centers may have waited too long to replenish their inventories, then did some panic buying to catch up, pulling demand forward. The result may be lower demand than expected from the distribution sector for the rest of the year. On top of seasonal weakness and lower scrap prices, that could add to the challenge the mills face in collecting higher prices.
Mills reportedly are pushing for $700 per ton hot rolled, but only 27 percent of buyers polled recently by SMU believe prices will get that high before correcting. About 38 percent believe steel prices are already peaking around the $650 level. As one skeptic commented to SMU: “Pricing at over $650 in this market cannot be sustained. The air is too thin at that elevation.”
Homebuilding has been surprisingly resilient during the pandemic, but the more steel-intensive commercial side of the construction market has been a disappointment. In a recent blog, the experts at ITR Economics point to one sign of life for nonresidential construction, the U.S. Architecture Inquiries Index. Published by the American Institute of Architects, the index rose to 51.6 in August, above the neutral level of 50 indicating an increase in inquiries to architects across the country. This is the first monthly score above 50 since the metric cratered in March, noted ITR, and it’s encouraging because inquiries would naturally precede an increase in actual architectural services. None of AIA’s other indexes have topped the 50 threshold yet, however, and ITR still projects fewer new nonresidential construction projects in 2021.
It’s still not too late to register for our virtual Steel 101: Introduction to Steel Making & Market Fundamentals Workshop this Tuesday and Wednesday, Oct. 20-21. For more information click here. If you miss this one, the next Steel 101 workshop will be conducted in less than two months, on Dec. 8-9.
Registration is also open for the CRU Ryan’s Notes Ferroalloys 2020 Virtual Conference scheduled for Oct. 26-29. This is the ferroalloys trading event of the year, to run on the same virtual platform as the SMU Steel Summit. The agenda includes an impressive lineup of speakers, whose presentations will be available to registrants on-demand for three weeks after the live dates. The virtual conference will include “speed networking” sessions at several points in the agenda to enable introductions among attendees. Click here for more information.
Steel Market Update will be working with the Port of Tampa on the Port of Tampa Steel Conference which is slated for Feb. 2, 2021. More details on the virtual event will be available soon.
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
Tim Triplett
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Final Thoughts
Another day, another massive gap between the news and market sentiment. On the news side, we’ve got war in the Middle East. The devastation facing western North Carolina coming into tragic focus. And the outcome of the presidential election remains a coin toss, according to current polling.
Final thoughts
There are markets where the headlines and the prices are both crazy. This does not appear to be one of them, at least not yet.
Final thoughts
Washington loomed large in our surveys this week. Two things actually: the upcoming presidential election and the trade case against imported coated products from 10 nations.
Final thoughts
Thanks to everyone who attended our Steel Hedging 101 workshop in Chicago on Wednesday. I learned a lot from StoneX Group’s Spencer Johnson, who instructs the course, and from your good questions. One thing that Spencer said sticks with me as I write this column. Namely, that momentum drives steel prices more than other commodity markets. If you watch steel futures, you’ll see up days and down days. But it’s rare to see the momentum shifting back and forth within any given day.
Final thoughts
SMU's prices ranges for flat-rolled steel were mostly sideways on Tuesday even as futures market shot higher. I got some questions as to why hot-rolled (HR) coil futures shot higher. As best as I can tell, it might have been in response to news that China plans to roll out stimulus measures. We have details on those measures here thanks to our colleagues at CRU. The chart below gives you some idea of just how sharply upward the move in HR futures was earlier on Tuesday: