Final Thoughts

Final thoughts

Written by Michael Cowden

Thursday felt eerily quiet after a frenzy of steel and financial market news on Wednesday.

The US Federal Reserve on Wednesday signaled that it would cut interest rates in 2024, a sharp reversal after several years of big rate increases aimed at stemming inflation.

Also on Wednesday, CNBC reported that U.S. Steel’s board was meeting to consider multiple offers valuing the iconic Pittsburgh-based steelmaker at more than $40 per share. In other words, roughly double the $20.80 apiece that shares of ‘X’ closed at on June 1.

I could speculate on what the outcome might be and when we might hear an update. But it would be just that. Wolfe Research analyst Timna Tanners notes that the outcome is “unknowable” at this point.

That’s a fair assessment until we see the white smoke from the U.S. Steel building. (Get it? White smoke from the Vatican is how you know when a new pope has been elected!) I don’t make that analogy carelessly. The potential passing, or at least transformation, of arguably the most iconic American steelmaker will be a momentous occasion for this industry.

November service center inventories

Here are a few trends that aren’t speculation that I want to draw your attention to in today’s newsletter or in upcoming editions of SMU.

It’s become almost a mantra across the domestic industry that inventories are low and so domestic consumers must buy – even at current high prices. But how many spot tons are being transacted at those levels?

I ask because I’m looking at the November service center inventory data that was sent out to our data providers today and that premium subscribers will see tomorrow. (If you are interested in upgrading to premium, contact us at

Here’s a teaser: Service center inventories increased in November for the first time since July. And the amount of material on order, whether from domestic mills or from imports, remains high.


Also, the spread between US sheet prices and those in the rest of the world is really, really wide. Take a look at the charts in David Schollaert’s article on the matter.

The US price tends to bounce on prices in the rest of the world almost like a ball. We typically dip below the rest of the world, soar above it, and then come back down again. I’m not saying that US prices have peaked. But we sure look to be in one of those periods when US prices are a bubble.

That makes life a little tricky for domestic steel consumers. They might prefer to purchase from local mills for a whole host of reasons. But they must also remain competitive in pricing to their customers.

We don’t have enough data on imports to jump to any conclusions about imports pouring in. But a few data points might be worth noting in the the latest steel import license data compiled by the Commerce Department through Dec. 11.

  • South Korea was licensed to bring in more flat-rolled steel through Dec. 11 (81,422 metric tons) than it shipped to the US in all of November (69,855 metric tons).
  • It’s a similar story with Brazil, which was licensed to import 29,955 tons of flat-rolled steel to date in December compared to 12,541 tons in total last month.
  • Germany, with 30,810 tons licensed to date is not far from the 32,577 tons of flat-rolled steel it shipped to US ports in all of November.

The consensus remains that we won’t see any big uptick in imports until the latter half of Q1 and perhaps not until Q2. But it’s worth keeping an eye on the license data all the same.

Here is a counterintuitive observation in the meantime: US prices falling below prices abroad is typically a good indicator that domestic prices are about to shoot higher. So why do people wait to buy imports until US prices are really high compared to those abroad? Why not buy imports when US prices are really low?

Next week

We’ll be releasing the results of our special “What’s in store for 2024?” survey next week as well as those from our usual steel market survey. I’m looking forward to sharing the results with all of you.

Please keep an eye out for those survey invites. If you don’t receive those invites but would like to participate in our surveys, please contact us at

Also, don’t forget to register for the Tampa Steel Conference. The SMU team has been in discussions with many of the panelists already. It’s safe to say that there will be some good debates and some great networking opportunities – as Bank of America SVP Ira Kreft pointed out in our Community Chat on Wednesday. (Thanks for the shoutout, Ira!)

Michael Cowden

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Final thoughts

I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.

Final thoughts

We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?