Final Thoughts

Final Thoughts

Written by John Packard


A couple weeks back we were beginning to think the rise in spot prices would soon slow and we were close to a tipping point. We no longer have that opinion due to Snowmageddon, the winter storm that exacerbated the already late deliveries out of multiple steel mills. On top of that, we are seeing mills scheduling maintenance on equipment or downtime on furnaces during the months of April, May and June. This will shrink supply even further at a time when we thought prices could be vulnerable to a slide.

“Now we believe we’re heading north of $1,300 before topping out. The market has actually tightened further in the last week or so,” is what we heard from the general manager of one service center. “The USS-announced BF outage, and now AM/NS Calvert outages in May, are examples of why it’s difficult to get the capacity utilization rate much higher in this environment. With HR Futures now over $1,000 through November, capitulation seems to have emerged and high prices may be here for a long time….”

John Packard Summit 18When speaking with a salesman who represents a large hot rolled supplier earlier today, I was advised the spot number between service centers was now $1,400 per ton ($70.00/cwt). A truly historic number for HRC.

It appears that number could rise in the coming weeks as the domestic mill spot number breaks through $1,300 per ton average (which means there will be numbers much higher than $1,300).

Our Price Momentum Indicator continues to point toward Higher spot prices over the next 30 days. We continue to warn steel buyers to remain vigilant, keep in touch with your mill suppliers, watch lead times and inventory levels, and be aware of any changes you might see in demand out of your customers.

Other items to watch (and ask questions of your customers) are: How much foreign steel is on order and how will those tons affect the domestic order books? Also, how much material has been double ordered by end users as they try to navigate the late mill and service center deliveries? The answer to those questions will have an impact on inventories and the pace of the decline once the market tips over.

SMU Events

The next workshop on the docket is on March 30 and 31 when we will conduct our virtual Steel Hedging 101: Introduction to Managing Price Risk Workshop. We have plenty of room to add those who want to learn more or wish to be introduced to the subject of hedging/managing price risk. You can find more information by clicking here or visiting the SMU/CRU Steel Training website.

I received my second COVID vaccine last night (Monday). I must admit I have some localized soreness and general aches and pains, but nothing that I would consider severe or disruptive to my daily routine. I continue to recommend, when your slot opens, you get the vaccine. Especially if you are considering attending this year’s SMU Steel Summit Conference at the end of August. Some of you may have noticed the CDC (Centers for Disease Control) is now saying vaccinated people can mingle without needing to wear masks. Our hope is the numbers of those being vaccinated continue to rise and our conference will go off as a live event. You can learn more about this year’s conference online by clicking here.

As always, your business is truly appreciated by all of us here at Steel Market Update.

John Packard, President & CEO, John@SteelMarketUpdate.com

Latest in Final Thoughts

Final thoughts

I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.

Final thoughts

We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?