Final Thoughts
Final Thoughts
Written by John Packard
March 22, 2021
Steel buyers believe benchmark hot rolled prices will peak at $1,350 to $1,400 per ton ($67.50/cwt-$70.00/cwt) based on our canvassing of the flat rolled and plate markets this week. We are seeing spot HRC orders at $1,300 per ton with a few buyers telling us there are offers up to $1,340 per ton from the domestic steel mills. There are mills whose order books are currently closed and are not offering spot tons, which is also helping to keep the range of pricing tight. Our range on HRC is shrinking, which leads me to believe, barring any “black swan” event, we may be very close to the peak of the market.
Prices remain high due to limitations in supply (same story over past six months). Steel buyers have been advising SMU that contract tons are limited by most mills to lower or median levels. Spot availability was limited in March and April mill order books and continues to be constrained in May and June mill order books. There are some mills offering more tons in May and June, but not enough to allow service centers to build inventories.
“I thought $1,300 would be the peak here in March for the past 4-6 weeks. Now I think it might get to $1,400 next month before beginning to head the other way in May, with increased import on the way for June/July delivery putting some downward pressure on prices. New hope is that the March monthly average doesn’t pass $1,300 by too much,” said one manufacturing company exec explaining where he believes prices will peak. “At some point, sales will start to dry up at the end-user level as continual price increases start to convince consumers to spend on something else. With all of the supply chain challenges we’ve been facing, we have customers looking at competitors who might not have as good a product but can get their slightly inferior product to them in four weeks instead of eight. When we now have to add another price increase on top of that extended lead time, we could start seeing real demand destruction that goes beyond our typical slow spring/summer months,” he added.
An owner of a medium-sized Midwest service center told me this morning, “I don’t see anything in the near term, over the next couple of months, that is going to change the direction of this market.” He went on to point out that Cleveland-Cliffs CEO Lourenco Goncalves is “a different breed” and that he apparently is following through on what he has told SMU in the past, that his philosophy is “value over volume.” Cleveland-Cliffs, having purchased AK Steel and ArcelorMittal USA assets (except Calvert), is the largest flat rolled steel producer in North America.
Late mill deliveries continue to plague the industry with service centers and end users both reporting mills as being anywhere from two to six weeks beyond their original promise dates. Steel buyers tell us the electric arc furnace (EAF) mills are running closer to on time than the integrated steel producers. Resolution of the late delivery issues will help cap prices and ultimately help to increase inventories.
Inventories, lead times, negotiations and weekly steel prices are all factors that SMU watches carefully.
Today we are running an article that originally went to our Premium level members last week. We thought our Executive level members might be interested in reviewing our revised Key Market Indicators. If you have any questions about that article, please reach out to David Schollaert at David@SteelMarketUpdate.com
I was speaking to a service center executive this morning who said he watched the recording of last week’s SMU Community Chat Webinar with Ryan Smith of CRU. He found the subject fascinating and was impressed with the depth of knowledge CRU had on the subject of decarbonization, carbon cost curve and possible carbon border taxes. You can watch this recording along with all of the other recordings of past Community Chat Webinars on our website. They are all free and available to the broader steel community. Go to www.SteelMarketUpdate.com/blog/smu-community-chat-webinars and select the one you would like to view. You can also register for our next webinar, which will be next Wednesday, March 31, with economist Ken Simonson of the Associated General Contractors (AGC). He will speak about the construction industry, latest internal survey and projections for the coming months. Click here to register.
If you would like to hedge cold rolled or galvanized steel and you are unsure how to go about it, what tools are currently available, and what new tools exist on the CME for the future, I highly recommend a new workshop called Galvanized Steel Hedging which will be conducted over a half day on Wednesday, April 21, 2021. Our instructor is Spencer Johnson of StoneX. You can find more information about this inexpensive workshop by clicking here.
If you have any questions about your membership, would like to add more people to your account, perhaps upgrade from Executive to Premium or would like to become a member for the first time, please contact Paige Mayhair at Paige@SteelMarketUpdate.com or 724-720-1012.
Please note that we are going through our website and updating/upgrading many pieces of information that may have become a little dated or that need more detail. One of the items we are working on involves the blast furnace information. There is quite a bit of information in our site, and I highly recommend that all members spend some time reviewing what we are putting into the website to assist you. If you have any questions about the website, please reach out to Brett@SteelMarketUpdate.com
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO, John@SteelMarketUpdate.com
John Packard
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Final thoughts
SMU had the pleasure of attending the American Iron and Steel Institute's (AISI's) annual general meeting in Washington this week. It was a slow week in our nation's capital, so we were able to take a leisurely stroll around the National Mall and take in the sights. Just kidding. In fact, the meeting coincided with significant trade actions announced by the Biden administration. It included, among other things, additional tariffs on Chinese steel and aluminum.
Final thoughts
Our spot price is little changed this week after moving sharply lower last week on the heels of Nucor’s unexpected price cut. Here’s one thought on that trend: Nucor's weekly HR price (aka, its “Consumer Spot Price” or CSP) has to date functioned almost more like a monthly price.
Final thoughts
What's the tea in the steel industry this week? Here's the latest SMU gossip column! Just kidding... kind of. Yes, some of the comments we receive in our weekly flat-rolled market steel buyers' survey are honestly too much to put into print. Some make us laugh. Some make us cringe. Some are cryptic. Most are serious. We appreciate them all. Below are some highlights from our survey results this week. Some of the comments that we can share with you are also included, in italics, in the buyers' own words, with minimal editing on our part.
Final thoughts
Last week we wrote about a brief lull in price movement, labeling it a period of wait and see. It did, in fact, turn out to be pretty brief. This week... things are little bit different. Perhaps right now we are more in a period of "hope and pray" or "Here we go, hold on to your hats."
Final thoughts
Unless you've been under a rock, you know by know that Nucor's published HR price for this week is $760 per short ton, down $65/st from the company’s $825/st a week ago. I could use more colorful words. But I think it’s safe to say that most of the market was not expecting this. For starters, US sheet mills never announce price decreases. (OK, not never. It has come to my attention that Severstal North America rescinded a price increase back on Feb. 14, 2012. And it caused quite the ruckus.)