Final Thoughts

SMU provides a weekly range as reference points for you to review. The reference points come from steel buyers and from steel mills. However, we place the most emphasis on collecting data from steel buyers. This has been the focus of SMU since the inception of the company in August 2008.

We understand when our numbers are reviewed by the steel buying and selling communities there may be times when the lower or upper ends of our range seem to be out of line with what your company is experiencing. There are various reasons why this might occur:

1) Your company is not doing business with all of the producing mills for the product in question.

2) There may have been a short term “hole” that was filled and we managed to capture this transaction.

3) On the upside or higher end of the price range, buyers may be in need of steel that cannot be gotten elsewhere and are willing to pay any price to get it.

4) The size of your company, your purchasing patterns, the size of your inquiry, credit considerations, claims history and many other factors can impact your spot price on any particular week.

5) There can be regional variations as well.

6) And we capture “foreign fighter” pricing.

We always recommend that steel buyers keep in close contact with their suppliers, and to question their sources (and the information being provided to the market). We believe we do an exceptional job in what can at times be a very confusing market.

There’s a lot of variability at the high and low ends of the ranges. It’s the average, the midpoint of the range, that is most reliable, and that’s where we recommend you focus your attention. As for the price range SMU just published, one of the plate mills confirmed our range to be accurate for orders taken over the past week.

SMU’s Price Momentum Indicator is pointing Down for hot rolled, but we have kept it Neutral for plate because plate prices have not established a clear direction. And with scrap prices higher, we would not be surprised if mills announce another round of plate price hikes later this month.

Whatever happens, we’ll report to you the numbers you report to us. And if you’d like to become part of that process, please reach out to SMU production manager Brett Linton at Brett@SteelMarketUpdate.com.

Supply Chain Issues to Persist?

In SMU’s survey this week, we also asked: Do you see supply chain issues getting better or worse in 2022? Nearly half (45%) of those responding said they expect the supply chain problems to stay the same or get even worse next year. Of the 55% who expect improvement, most don’t see it happening before the second half.

“All indications are pointing to worse for 2022,” commented one respondent. “I think they’ll be worse (hard to believe!) in Q1 and then remain about as bad as they are right now. Watch out if auto comes back!” added another.

Climate Change Moves to the Front Burner

As expected, the U.S. rescinded the Section 232 tariffs on imports from the EU, replacing them with a tariff rate quota that should protect the U.S. industry from a flood of cheaper European steel. That’s this week’s headline, but it’s the small print that comes out of ongoing talks between the U.S. and EU on reducing harmful greenhouse gas emissions that could prove to be the real story.

Proceedings from the COP26 UN Climate Change Conference that concludes this week in Glasgow, Scotland, show the daunting challenge that lies ahead to avert widespread disaster from global warming. The tool most widely discussed is some form of carbon tax or carbon border adjustment mechanism. My simple understanding: it costs money for technology to cut CO2 emissions like those from burning fossil fuels or coke in steel blast furnaces. By placing a dollar value on carbon, producers in countries with lax environmental regulations will be penalized if they continue to pollute and will lose the competitive advantage they have enjoyed at the expense of planet earth.

It’s an extremely complex problem to solve. Let’s hope the discussions at COP26 produce real progress and not just a lot of hot air. One plus: as the most environmentally advanced steel industry in the world, the U.S. already has a big head start and stands to be least impacted by a carbon tax. As AISI President and CEO Kevin Dempsey said recently: “Governments have said they want to establish a measure that takes into account carbon intensity. The U.S. industry has the lowest carbon intensity of any major steel-producing country, so any mechanism that takes that into account will be positive for the U.S. industry.”

Upcoming SMU Events

• Jan. 11 & 12, 2022 – SMU’s popular Steel 101: Introduction to Steel Making & Market Fundamentals Workshop will be held virtually next month. Info on the agenda, instructors and costs is available by clicking here

• Feb. 1 & 2, 2022 – SMU’s Introduction to Steel Hedging Workshop is also a virtual event covering techniques to protect your company and customers from steel price volatility. More information is available by clicking here

• Feb. 14, 15 & 16, 2022 – The 33^rd Tampa Steel Conference, an in-person event, will be held at the Marriott Water Street Hotel in Tampa, Fla. You can learn more about the agenda, speakers, costs to attend, and how to register by clicking here

As always, we appreciate your business.

Tim Triplett, SMU Executive Editor, Tim@SteelMarketUpdate.com