Final Thoughts

SMU hosted an excellent Community Chat Webinar on Wednesday of this week. We wanted our community to get a better understanding as to how the war in Ukraine is impacting the supply of commodities, semi-finished, flat rolled, plate, and long products. Our speaker was Stanislav Zinchenko, CEO of the GMK Center, a think tank and consulting group headquartered in Kyiv, Ukraine. During the webinar he spoke in detail about exports of steel products out of both Ukraine and Russia. Stanislav also briefly discusses other supply chain issues created by the war. At the end of the webinar, he discusses what it is like to live in a war zone. I highly recommend taking 40 minutes out of your day to listen to what Mr. Kinchenko had to share with the SMU community. SMU members can view a recording of the webinar by clicking here.

Dr. Alan Beaulieu of ITR Economics will once again be a keynote speaker at this year’s SMU Steel Summit Conference which will be held in Atlanta August 22-24 (you can register for the conference by clicking here). Dr. Beaulieu will be providing his views on the economy, specifically on where we are in the business cycle, and what companies should be doing to prepare for what’s coming next.

Considering the meltdown of the stock market, I asked Dr. Beaulieu a few questions regarding the market and where we stand on the timing of the Great Depression ITR has forecast for 2030.

Regarding the Great Depression, Dr. Beaulieu told me, “We are still on track for 2030, not earlier. What we are experiencing was expected; inflation and the stock market is also not surprising. Neither change the timing.”

With many economists forecasting a deep recession for 2023, I asked him what his current thoughts are. “We have done our due diligence and so far, there is no need for us to change our forecast of a very mild rise in 2022 and a flat first-half 2023. Things could change because of Russia’s war on Ukraine but so far, the consumer, business activity, personal and business liquidity, availability of credit, growth in personal disposable income compared to pre-covid, wage increases, and job availability all bode well for now,” he said.

Regarding interest rates Dr. Beaulieu told me, “The interest rate rise so far is not a problem, but we will keep watching it. Talk a couple weeks ago about an inverse yield curve was nonsense. The Fed quantitative tightening is worrisome but not a near-term issue. Let’s hope they don’t go too far.”

Steel Market Update pegged the average hot rolled price at $1,350 per ton ($67.50/cwt) and galvanized base price average at $1,725 per ton ($86.25/cwt plus extras) this week.

I was speaking with the head of commercial for one of the domestic steel mills earlier today and he referred to the market as having “active competition.” In other words, the domestic mills are looking for orders, and prices are reflecting that need.

This mill made an interesting statement about the domestic mills “weaning” their customers off of foreign steel. I was told to expect foreign steel imports to shrink by somewhere between one-third and one-half of what they have been over the next few months. By later this year, this mill believes imports will drop by two-thirds.

When asked where they thought flat rolled prices would bottom, I was told $1,000/ton ($50.00/cwt) on hot rolled and $1,300 per ton ($65.00/cwt) base on coated products. Compared to where we are this week this would mean we could see a drop of another $350 per ton ($17.50/cwt) on hot rolled, and $425 per ton ($21.25/cwt) on coated.

I think we will have an exceptional panel on the changes we have seen within the trading community at this year’s SMU Steel Summit Conference. I plan on having three traders plus Lewis Leibowitz have a discussion on how imports and the act of importing steel has changed and how that impacts North American customers.

A quick note about our upcoming workshops: We will host one of our Advanced Steel Hedging: Strategies & Execution workshops virtually July 12-13. This is an excellent workshop for those who have a working knowledge of futures trading, and would like to lean more about how to use futures to protect inventory values, keep margins stable, offer long-term firm pricing, etc. You can learn more about this hedging workshop by clicking here.

Our well-known and respected Steel 101: Introduction to Steel Making & Market Fundamentals workshop will also be held virtually July 19-20. Come join us from the comfort of your office (or home). You can learn more about the agenda, instructors, costs to attend, and how to register by clicking here.

The 2022 SMU Steel Summit Conference will be held at the Georgia International Convention Center which is conveniently located right next to the Atlanta International Airport (ATL). There is no cost to you to go between the airport and the GICC as well as the four Gateway Hotels located next to the convention center. As you think about how to best use your sales, marketing, and purchasing resources, I recommend considering attending the SMU Steel Summit Conference. We anticipate 1,200 executives from manufacturing, distribution, steel mills, trading companies, toll processors, and suppliers at this year’s event. What makes our conference truly special is the high percentage of decision-makers in attendance. The people who are responsible for purchasing steel, and those responsible for selling steel, are able to speak to one another, hold meetings, and meet new potential suppliers or vendors. For a listing of companies currently registered, click here. You can learn more about the conference and join those already registered by clicking here.

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

John Packard, Founder, John@SteelMarketUpdate.com