Final Thoughts

Final Thoughts

Written by John Packard


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.

John Packard Summit 18We 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

Latest in Final Thoughts

Final thoughts

Last week was a newsy one for the US sheet market. Nucor’s announcement that it would publish a weekly HR spot price was the talk of the town – whether that was in chatter among colleagues, at the Boy Scouts of America Metals Industry dinner, or in SMU’s latest market survey. Some think that it could Nucor's spot HR price could bring stability to notoriously volatile US sheet prices, according to SMU's latest steel market survey. Others think it’s too early to gauge its impact. And still others said they were leery of any attempt by producers to control prices.