Final Thoughts
Final Thoughts
Written by Michael Cowden
May 25, 2023
What’s up with galvanized coating extras?
Galvanized lead times and prices have been falling since April, according to SMU data.
SMU’s galvanized base price stands at $1,170 per ton ($58.50 per cwt), down nearly 12% from $1,325 per ton last month and down 31% from $1,700 per ton from a year ago.
Lead times are at weeks 6.69 weeks on average, down from 7.57 weeks last month and down from 8.00 weeks a year ago.
It’s not just sheet prices that are falling. Scrap prices were down in April, in May, and are widely expected to be down again in June.
Did zinc prices magically buck the downward trend seen in ferrous markets? Nope. Zinc prices have been falling along with steel prices.
The zinc spot price as of Thursday was $1.02 per pound, according to Kitco Metals, down about 14% from $1.18 per pound last month and down 48% from $1.95 a year ago.
Steel is not in uncharted territory. Galvanized base prices are back to roughly where they were in early March. But zinc is in territory it hasn’t seen for a while. We’re now at the lowest point since $1.01 per pound on July 28, 2020, according to Kitco.
Check out the chart below:
Despite the big zinc price declines, most mills haven’t updated zinc extras since last summer.
I thought maybe we’d missed something and so reached out to some of you to see whether anyone had put out new coating extras. To the best of our collective knowledge, no one has.
What gives? I realize it’s not uncommon for mills to adjust extras only one or two times a year. Or certainly it was in the past. But if zinc prices were going up, would there be reluctance to raise extras?
We arguably saw sheet prices decouple from scrap costs when sheet tags surged earlier this year. We’ve seen plate price decouple from coil since about January 2022. Are we now seeing zinc coating extras detaching from zinc prices?
I doubt it. If we’re getting back to more normal times, always a big if these days, I wouldn’t be surprised to see mills announce reductions in coating extras in the not-so-distant future.
By Michael Cowden, michael@steelmarketupdate.com
Michael Cowden
Read more from Michael CowdenLatest in Final Thoughts
Final Thoughts
Steel equities and steel futures fell hard after news broke earlier this week that the US and Mexico might reach an agreement that would result in the 50% Section 232 tariff coming off Mexican steel. The sharp declines didn’t make much sense, especially if, as some reports indicate, Mexico might agree to a fixed quota. They didn't make sense even if steel flows between the US and Mexico remain unchanged.
Final Thoughts
Even before the news about Mexico, I didn’t want to overstate the magnitude of the change in momentum. As far as we could tell, there hadn’t been a frenzy of new ordering following President Trump’s announcement of 50% Section 232 tariffs. But higher tariffs had unquestionably raised prices for imports, which typically provide the floor for domestic pricing. We’d heard, for example, that prices below $800 per short ton for hot-rolled (HR) coil were gone from the domestic market – even for larger buyers.
Final Thoughts
I want to draw your attention to SMU’s monthly scrap market survey. It’s a premium feature that complements our long-running steel market survey. We’ve been running our scrap survey since late January. And over just that short time, it’s become a valuable way not only for us to assess where scrap prices might go but also to quantify some of the “fuzzy” indicators - like sentiment and flows - that help to put the price in context.
Final Thoughts
I think there is an obvious case for sheet and plate prices going higher from here. That’s because, on a very basic level, the floor for flat-rolled steel prices, which is typically provided by imports, is now significantly higher than it was a week ago.
Final Thoughts
We're about to hit 50% Section 232 steel tariffs. What could happen?