Final Thoughts
Final Thoughts
Written by John Packard
November 18, 2020
I am hearing the U.S. Steel Gary Works #4 blast furnace will be coming back up by the end of this year. According to AIST, the #4 furnace is rated at 1,390,000 tons of pig iron annually. So, this means we will have more supply added from USS and from Big River Steel as they ramp up production from their new EAF and caster. I do not believe the combination of this new supply will tip the market for a while. We still have to build back inventories, and demand is quite good in many steel intensive areas.
I had an interesting conversation with a trader who is familiar with quotas out of Brazil. He said the quotas have not yet been set on Brazilian slabs for the first quarter. They will be set by the USTR the first week of December. The assumption is the quota will return to normal, which for slabs would mean 1,050,000 metric tons for 1Q 2021. Most, if not all, of these slabs are already in storage at U.S. ports due to the elimination of the quota for 4Q 2020 by the Trump administration. There is no guarantee the USTR will revert to the 1,050,000 metric ton quota.
Timing is everything–I think we will have some interesting discussions at the upcoming Steel 101: Introduction to Steel Making & Market Fundamentals Workshop to be held on Dec. 8-9. The focus of this workshop is for the attendees to learn how steel is made (EAF and Blast/BOF), rolled, qualities produced, how it is used and sold. As one of the instructors, I will be discussing the key issues affecting the markets right now–supply, consolidation of the industry, new production, demand, inventories, etc.
“It was a pleasure attending the workshop. The information that I needed to learn was wrapped up in a single package. The workshop and the trainers were great. Just what I needed to be successful.” Brian K. Bohm, Regional Plant Manager, Morton Buildings, Inc. Brian attended our first virtual Steel 101 conference.
One of the strengths of our Steel 101 workshop is the diversity of our attendees. Every workshop has manufacturing companies, service centers, wholesalers, steel mills, toll processors, etc., and the December workshop is continuing that trend.
We still have room for a few more attendees for the Dec. 8-9 Steel 101 workshop. You can learn more about the program, instructors, costs to attend and how to register by clicking here. You are also welcome to ask me any questions you might have. I can be reached at John@SteelMarketUpdate.com
Timing is everything–How about a steel conference two weeks after the inauguration of President Biden! Learn more about the 2021 Tampa Steel Conference by reading the article in tonight’s issue (above). You can register for this one-day virtual conference by clicking here. I spoke with Dr. Walter Kemmsies this afternoon and was quite impressed with his grasp on the markets. He will speak about the economy, policy and infrastructure, and I think you will be impressed with his presentation.
Timing is everything–With the vaccines for COVID-19 beginning to be distributed by late this year and throughout 2021, we believe the next SMU Steel Summit Conference will be “live” and in-person in Atlanta on Aug. 23-25, 2021. Mark your calendars and put us in your budgets. I anticipate we will be the first live (safely live) event for the steel industry during 2021.
As always, your business is truly appreciated by all of us here at Steel Market Update.
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?