Final Thoughts

Higher for Longer

If you think prices will continue to rise, you might point to longer lead times and stable order entry.

Are mills seeing spot buyers placing huge orders (10,000 tons or more) like they were in September? Maybe not. But are standard spot transactions (500-1,000 tons) still coming in at a healthy clip? Yes. And are buyers paying more than $700 per ton ($35 per cwt) for those tons? Also yes.

You might also note that mills have shown their ability to ratchet back supply should demand tail off, whether because of the UAW strike or some other factor.

Some recent reductions weren’t intentional. Unplanned outages, for example. But EAFs were designed to be more flexible. So if you’re an EAF mill, why continue to produce 100% if demand is not 100%?

Also, service center inventories were lower. Why should mills produce more if consumers still need steel and might not have enough inventory to mount a buyers’ strike? Why not instead manage the HRC-scrap spread as effectively as possible?

Higher, But Not for Long

Those of you who think that prices are set to cycle back down might point out that most fall maintenance outages are wrapping up. You might reason that those outages had outweighed the impact of the UAW strike – which allowed prices to rise even as auto assembly plants shut.

You might also note that the UAW strike continues, and that that’s more of a problem now because it’s expanded well beyond the three assembly plants that were targeted initially on Sept. 15.

Some of you think that the strike will see a resolution, or at least a tentative agreement, before Thanksgiving. Others suggest that typical patterns (a deal before the holidays, for example) should not be taken for granted this time. After all, if the UAW took the unprecedented step of striking all “Big Three” automakers at once, why would the union fold just because the weather has turned cold in the Midwest?

You might also suggest that higher spot prices are less the result of solid demand than of consumers ordering to the maximum end of their min-max contracts. That allows mills to charge more for the spot tons they have available. But how many takers are there for $750-per-ton HRC for delivery at year end?

Galv Price at $950 Stickier Than HR at $750?

I don’t want to paint with too broad a brush across sheet products.

Some of you who think $750/ton HRC, the target base price announced by Cleveland-Cliffs last month, isn’t very likely to stick. But you also think $950/ton galvanized base might.

Why is that? It could be a story of lead times. Mills could find it difficult to sell out December for hot-rolled. But they already have or are close to doing so on coated products, and so they can be more disciplined on holding out for $950/ton.

Does that match what you’re seeing in the market? Let me know!

And thanks to all of you from all of us at SMU for your continued support.