Final Thoughts

Final Thoughts

Written by John Packard

I have received a few messages wishing me well on my retirement. I don’t want to disappoint anyone, but word of my retirement from Steel Market Update and the steel industry is a bit premature. I have transitioned from a full-time employee to that of a consultant to SMU. I will continue to speak to the industry, write occasional articles, organize the SMU events (SMU Steel Summit Conference, Tampa Steel Conference, Hedging Workshops and Steel 101 Workshop), and I will be working on special projects on behalf of SMU. Being independent will also allow me to pursue other interests that don’t conflict with SMU/CRU.

SMU has an excellent team independently interacting with the market, and with me, and they have been doing a great job. That will continue and improve as the company moves forward.

The subject of market momentum is always one of interest to our readers. Having been involved in the steel industry in sales, purchasing, management and now an analytical role, I realize there are many perspectives as to the strength or weakness of market prices. Each product can take on a life of its own. Each mill works independently of the others. Not everyone or every product moves in lockstep. Our Price Momentum Indicator was never meant to be on the “leading edge” of prices because of the variances that exist within the industry. We intentionally do not want our indicator pushing market prices in one direction or another.

We received a comment this week from a steel buyer that I would like to address. The initial comment stated, “CRU and SMU can continue down their path of leading people to believe steel prices are in for a large downward correction….” The assumption that we believe prices are in for a large downward correction is not correct. SMU does not forecast or predict future price levels, and never has. There is a wall between SMU and CRU with an understanding that price forecasting is within their scope and not ours. All we do is try to provide information about how we see the short-term direction (no more than 60 days into the future), and we certainly do not forecast whether prices will move $5, $10 or $100 per ton. That is not our focus.

In this week’s webinar with Mike Lerman of Steel Warehouse (webinar can be viewed by clicking here), when asked about future pricing, he made a statement that is probably germane to this conversation: “Man makes plans. God laughs.” This is why SMU has not gotten into the forecasting business….

2008 SMU NewsletterWhen markets are in transition, there are always going to be those who believe prices will continue on the path they have been, others who believe the opposite, and some who believe stability is on the horizon. Out of curiosity, I asked Brett to provide to me the oldest newsletter he had in his possession. It was from Aug. 11, 2008. The photo to the left may bring back memories to some of our early members.

At the time of that publication of Steel Market Update, steel prices were at historical record high prices. SMU was not yet publishing HRC prices, so I referenced prices published by The Steel Index and Platts. One referenced the price as being $1,080 per ton, the other $1,070 per ton for hot rolled coil. Quoting from the article, “A reader of Steel Market Update asked me a question, which has prompted me to go back to the first week of June and do a comparison of prices from that point in time. HR, according to The Steel Index, was selling for $1,080 per ton ($54.00/cwt) or essentially equal to today’s price. The price of HR has bounced around for the past 9 weeks and still has no firm direction one way or the other.”

As we all know now, the market crashed at the end of September as we entered The Great Recession.

Do I think the same is going to happen now? I can’t answer that question. There are too many unknowns. How has consolidation affected the ability of the steel mills to keep pricing tight? What will demand be six months from now? How much foreign steel is being applied to future contracts? Will inventories continue to grow (which they have been doing for many months now), and if they do, at what point will service centers start dumping steel into the marketplace? Will lead times shrink further? Is there a Black Swan event out there we are unaware of that will impact the market?

As the market transitions, it becomes even more important to stay close to your suppliers, study the market, know your customers, read SMU and other sources that you trust, and then make decisions that are in the best interest of your company and customers. SMU will continue to provide insights that we develop from multiple sources as we try to make sense of the forces influencing buyers and sellers of steel.

We will be discussing many of the issues I raised at the 2022 Tampa Steel Conference. You can read more about the conference in another article in tonight’s newsletter. You are also welcome to go to the Tampa Steel Conference website to learn more and to register:

2022 Market Volatility Will Continue: Hedging Price Risk Workshop

If there is anything certain about the steel industry, it’s that there will be volatility in steel prices. There will be unexpected twists and turns. There will be surprises.

The CME HRC Futures forward curve right now has hot rolled trading at a huge discount to current offers out of the domestic steel mills. Now is a good time to understand how steel buyers can use the financial instruments available to protect them from falling prices while not interfering with their domestic steel mill relationships. If you don’t understand this concept, I highly recommend attending one of our steel hedging workshops.

Our next hedging workshop will be held virtually on Nov. 2 & 3. The Introduction to Steel Hedging: Managing Price Risk Workshop (used to be called Steel Hedging 101) will provide insights into the basics of how financial products work for the steel industry. Spencer Johnson of StoneX Financial is our instructor. He, along with individuals associated with the CME Group and CRU, will walk you through hedging basics, terminology, and knowledge of the market structure needed to build a risk management strategy for your company. You can learn more about this workshop by clicking here. If you have questions, please send them to

As I mentioned above, I am still involved in the industry, and I can still be reached at

As always, your business is truly appreciated by everyone associated with Steel Market Update.

John Packard

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