Final Thoughts

Final Thoughts

Written by John Packard

For those of you who participate in our bi-weekly steel market analysis questionnaires, or if you are a Premium level member, the results from the last few weeks would suggest service centers are at a point where they will support new price increases by the domestic steel mills. We collect data from manufacturing companies and steel service centers regarding spot prices being offered into the market by the steel distributors. In the past, when 75% of the service centers reported lowering spot prices, we found they had reached a point we called “capitulation.” This meant the distributors were seeing their inventories being devalued at an alarming rate.

John Packard Summit 18The rise in prices that we saw beginning in late 2020, which continued for the greater portion of 2021, was not normal, and we can expect spot numbers at service centers to reflect the overall market trend for some time to come. We will continue to closely watch this data and other data points we collect to determine at what point the pain of sliding prices reaches a threshold that can no longer be tolerated.

This will help us to better understand where the new normal for prices will be set. The expectation by many in the marketplace is for steel prices to normalize closer to $1,000 per ton than the $600-$650 per ton average we saw for decades. I am looking forward to Timna Tanners of Wolfe Research (formerly with Bank of America) and Todd Leebow of Majestic Steel discussing what they believe the new normal will be at the upcoming Tampa Steel Conference.

We are now less than three weeks away from the start of the Tampa Steel Conference with networking events scheduled for Feb. 14 and the morning of Feb. 15, with the program beginning on the afternoon of the 15th and concluding the following afternoon. The events team and I have been interacting with all our speakers as we prepare for what promises to be an interesting and informative conference.

There has been much misinformation floating about regarding supply and demand. This includes a misunderstanding regarding how much old capacity has been taken out of the market, and how much new capacity is being added. If your company buys or sells steel, it is imperative that you understand how perception and reality come into play when evaluating capacity. We have a couple of programs on the agenda that will cover the subject of supply and demand, which we think will put the new capacity coming online into a different light.

The steel industry in North America (and around the world) is fundamentally changing as countries begin to grapple with climate change, and industries – especially the steel industry – work on producing greener steels. We are seeing the changes with the building of new electric arc furnace mills; in Canada, we have Algoma moving away from blast furnace production to EAF; in the United States, we have USS building a new EAF mill in Arkansas; and there are suggestions that Cleveland-Cliffs may be positioning itself to move in that direction as well.

Large end users are beginning to conduct conversations with their suppliers as to where they stand regarding Scope 1, Scope 2, and Scope 3.

Decarbonization is not a “sexy” program for a steel conference. However, I have been around the industry long enough to know those companies that embrace change and figure out how to use it to their advantage will be the survivors and thrivers in the decades to come. It is important to understand how Scope 1, 2 & 3 will impact your company and how to work on being able to provide that information to your customers and suppliers.

Of course, at the Tampa Steel Conference we will have Lourenco Goncalves, who will be able to answer our questions regarding how he is positioning his mill, the largest sheet producer, for the new normal to come. At the SMU Steel Summit Conference, he let the industry know Cliffs would be buying scrap assets. What will Lourenco say at the Tampa Steel Conference about his company and the industry at large?

Registrations continue to grow as we approach our goal of 350+ executives which will make this the largest Tampa Steel Conference since 2008. You can view the companies that are registered by clicking here. You can learn more about our agenda, speakers, costs to attend (and discounts), and how to register by clicking here.

Please be advised that the Marriott Water Street Hotel is sold out during our conference. There are several hotels located close by that include the JW Marriott Water Street, which is a brand new 5-star hotel. Other hotels for you to consider include the Embassy Suites Hotel by Hilton, which is located across the street from the Marriott Water Street Hotel. Here are some other hotels you might want to consider: The Westin Tampa Waterside, Hilton Downtown Tampa, Sheraton Riverwalk Hotel, Hyatt House Downtown Tampa and the Hampton Inn Tampa Downtown (Ybor City). Be aware the Marriott Water Street Hotel is located on the trolley line, so there are other options available in other parts of the greater Tampa area.

On the afternoon of Feb. 14 and the morning of Feb. 15, Steel Market Update will conduct one of our Introduction to Steel Hedging Workshops with our instructor Spencer Johnson of StoneX. The workshop will be conducted in person at the Marriott Water Steel Hotel in Tampa. This will be the first time we will conduct a live workshop since prior to the pandemic. You do not have to attend the Tampa Steel Conference to participate. With steel prices sliding, and no one knowing what the “new normal” will be for steel prices in the coming months, now would be a good time to attend this workshop. You can learn more about the agenda, our instructor, costs to attend, and how to register by clicking here.

Tomorrow we will conduct one of our SMU Community Chat Webinars with trade attorney Alan Price. You can register for this free webinar by clicking here.The webinar will begin at 11 a.m. on Wednesday, Jan. 26.

If the Tampa Steel Conference was not enough, I am already booking speakers for the 2022 SMU Steel Summit Conference. I am thinking the 2022 conference will be a celebration for those of us involved in the industry. Registration is open for the conference, which will be held on Aug. 22-24 at the Georgia International Convention Center next to the Atlanta International Airport (ATL). You can keep tabs on what we are planning for this year’s conference, costs to register, and how to register by clicking here.

As always, your business is truly appreciated by all of us associated with Steel Market Update.

John Packard

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