Final Thoughts

Final Thoughts

Written by Michael Cowden


I’ve been writing a lot lately about steel prices going down. It’s hard at a certain point to find a new way to write about the same thing.

So let’s talk about logistics, heat waves, and electricity for a little bit. First, I want to draw your attention to our Community Chat earlier this week with Mercury Resources CEO Anton Posner.

Michael Cowden

I thought it was one of the better chats we’ve done lately. And it was great to get some expert insight into what’s going on at the ports, along the railroads, and just with trade flows in general.

Posner and I had talked previously on a panel at the Tampa Steel Conference in February about the “chaos” stemming from congested ports, the driver shortage, and the lack of indoor warehouse space (to name just a few contributing factors).

Some of those issues are still with us. Bringing in a cargo of galvanized steel from abroad? Good luck finding indoor warehouse space for that.

Trying to rail steel out to the West Coast? Your carrier might ask you to find a truck instead. To get an idea of just how nuts that is, think of it this way. That would be like an aluminum smelter going to Ford and suggesting that the next F-150 use more steel.

And there might be the potential for more chaos at West Coast ports should contract talks between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) fall apart. Those talks cover 22,000 dock workers at 29 West Coast ports, including Long Beach, Calif., which had become the posterchild for port congestion.

There is plenty of reason for disagreement. Shipping companies, like steel mills, (some of which are also underway with contract talks) have been posting record-smashing profits. Workers no doubt want a bigger slice of that pie, especially with inflation running at its highest rate in decades. (You could also make the case that no one involved wants to further damage the reputation of West Coast ports. But I digress.)

Labor issues aside, though, the chaos at ports appears to be easing. Case in point: Late this afternoon the ILWU put out a press release noting that union members at the ports of Los Angeles and Long Beach cleared more cargo in June than in any month in the port’s 115-year history.

I was visiting in-laws in that area late last year. And I was shocked to see so many ships – stretching out to the horizon – waiting to be unloaded. It’s one thing to read about it, it’s another to see it in person.

Posner reminded me at the Tampa conference that chaos is not all bad. It means there is a lot of volume to move. Volume means money and economic activity.

I hope I’m wrong about this. But it sure does look like the economy is slowing, for now. Will we one day look back on the chaos of early 2022 with fondness?

Another non-steel-price issue worth paying attention to is a heat wave baking homes and businesses everywhere from Texas to Europe. I had been gloating about how at least we have aircon here. Maybe I shouldn’t have.

Reuters reports that Toyota is cutting production at its assembly plant in San Antonio, Texas, citing “emergency measures” enacted to keep the grid stable.

That got me thinking to manufacturing operations on the West Coast. The Colorado River is in the midst of a record drought. That means trouble for hydropower generated by the Hoover Dam.

What happens to manufacturers in that area if that situation continues to get worse? Perhaps we’ll look back fondly, too, on the days when the chip shortage was among our primary supply chain concern.

By Michael Cowden, Michael@SteelMarketUpdate.com

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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.