Final Thoughts
Final Thoughts
Written by John Packard
March 30, 2021
Market prices continue to rise, albeit not as quickly as what we were seeing a few weeks back. We cannot be sure as to when market prices will hit their peak. Market momentum is clearly on the side of the steel mills, lead times continue to be extended well beyond normal, and more orders are running 2-6 weeks late than are being delivered on time. At the same time, inventories continue to be low and companies have been unable to rebuild due to long lead times, late orders and the extremely high prices, which are too risky for many companies.
We are seeing companies that need inventory to manufacture parts going to non-traditional markets such as foreign steel, service centers or one of the trading platforms (Reibus, Felux, XOM, etc.) to secure enough material.
We are in the process of canvassing the flat rolled and plate steel markets this week through a survey. I glanced at some of the comments being made regarding pricing and it appears buyers are resigned to benchmark hot rolled steel prices continuing to move higher:
“Anyone who doesn’t think this thing gets to $1,400/ton hasn’t been paying attention.”
“Spot prices have a few more months to peak. Like the ‘worm’ full moon. Might never see this one again.”
“Low to mid $70s before settling into a more sustainable level [$1,400-$1,500].”
“This market has had a higher runup than I ever expected.”
“My idea of a peak [HRC top price] continues to extend.”
“Plateauing in May, not hitting a peak and falling lower.”
SMU Note: In my 44 years in the industry, I cannot remember prices plateauing for more than a week or two. Steel prices tend to be either heading higher or heading lower. For me, the question is not if prices will peak and move lower, it is when and how much? Having said that, I had a conversation with the steel buyer at a large service center this afternoon who believes prices will plateau this time and remain at the levels we are at now through the third quarter. When I asked what the difference was between now and the last four decades, he said, “We have a new sheriff in town and his name is Lourenco Goncalves.”
Today we conducted the first day of our Steel Hedging 101: Introduction to Managing Price Risk Workshop. The idea of managing risk, understanding your company’s risk portfolio, and developing a strategy seems to be quite important to those within the steel industry. The workshop we are conducting right now is 50 percent manufacturing companies, which means if you are a service center you had better be well-versed in hedging concepts and be able to offer hedging solutions to your customers.
We have three distinct hedging workshops: Steel Hedging 101, which is our introductory course. The next Hedging 101 workshop will be June 2 & 3, 2021, and it will be a virtual workshop. Steel Hedging 201: Advanced Strategies & Execution is taking what you learned in 101 and expanding into trading and trading strategies to accomplish whatever goal(s) you are trying to achieve. The next Hedging 201 workshop will be held on May 5 & 6, 2021 (virtual). Galvanized Steel Hedging is focused on cold rolled and galvanized strategies using the new HDG product on the CME, as well as other options available to cold rolled and galvanized companies that want to manage their price risk. Our first Galvanized Hedging Workshop will be held on April 21 (half day for $500 not including SMU discounts). To learn more about each workshop and how to register, our main training workshop website is: https://events.crugroup.com/steel101/home
SMU Steel Summit Conference continues to build momentum. We are pleased at the rate of the vaccinations in the United States and still feel comfortable (as comfortable as one can be in a pandemic) we will be live in Atlanta on Aug. 23-25. Please note we do not currently have room blocks at the Atlanta Airport Marriott Gateway, Atlanta Airport Renaissance Gateway, or the Atlanta Airport Springhill Suites Gateway hotels, which are all located next to the Georgia International Convention Center. I would recommend you make reservations on our own at these hotels ASAP to get the best possible rates. To register for the conference, please click here.
A quick note that the SMU newsletters will not be produced this weekend due to Good Friday and the Easter holiday on Sunday as our offices will be closed. We will publish on Thursday of this week as normal and then again next Tuesday.
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 has heard from some larger buyers who have stepped back into the market to buy at prices that, if not at a bottom, they assess to be close to one. Is it enough to stretch out lead times and send prices upward again? Or do we continue to scrape along the mid-$600s per short ton (st) as we have been doing for most of the last month?
Final thoughts
Cleveland-Cliffs Chairman, President and CEO Lourenco Goncalves had some insightful things to say today about the steel market and about a conference we suspect might be Steel Summit.
Final thoughts
They say a picture is worth a thousand words. Well, when you add in some commentary from respected peers in the steel industry to those pictures, that may shoot you up to five thousand words, at least. In that spirit, we’ve added some snapshots from our market survey this week, along with some comments from market participants.
Final thoughts
I thought we’d have more clarity this week on Section 232, Mexico, and a potential carve-out for steel melted and poured in Brazil. As of right now, the only official comment I have is from the Office of the United States Trade Representative (USTR).
Final thoughts
There are just 40 days left until the 2024 SMU Steel Summit gets underway on Aug. 26 at the Georgia International Convention Center (GICC) in Atlanta. And I’m pleased to announce that it's official now: More than 1,000 people have registered to at attend! Another big development: The desktop version of the networking app for the event has officially launched!