Final Thoughts

Final thoughts

Written by Ethan Bernard

This earnings season will hit a little different. U.S. Steel has announced that it won’t be hosting an earnings call. While this silence is normal during an acquisition process, it does alter a staple of the earnings landscape. Last week, Scott Davidson, VP at Nippon Steel Trading Americas, wrote a letter to the editor on why the Nippon buy was good for U.S. Steel and domestic manufacturing. It seems this deal highlights the complexities of the current moment.

In a globalized world, how exactly do you define domestic? Of course anyone familiar with the number 232 will know such definitions exist. Still, the idea that you work at a factory in a town, the owner lives in said town, and you may run into him or her on the main town square on a Sunday stroll is not as common as it once was. Things often get more complex. Outside of factories, scrapyards, or mills, a lot of people no longer even work in an office.

Regarding this deal for U.S. Steel, we’ve heard a lot about “ally-shoring,” emphasizing that Japan is an ally of the US vs. a couple of other countries you can probably imagine. “Ally-shoring,” “friend-shoring,” “near-shoring”… . In a recent meeting our managing editor, Michael Cowden, quipped, “There’s a whole lot of shoring going on.”

Shore, you’d think it would be something near a large body of water. But today it seems more like whatever boundary you want to draw around supply chains. US. USMCA. A US-EU global arrangement. There are a lot of shores, near and far. Of course, there are reasons behind each one, many of them good. I guess there really isn’t a limit as to how many you can have.

Underpinning all of it seems to be an assumption that the ideal of “globalization” needs to be amended. You collapse down to boundaries that are more secure. You survey the landscape and try to limit fragility. You accept that things can change in an instant, and try to hedge against that. More than just a series of trade alliances, the post-WWII system seems a bit wobbly at the moment. And the geopolitical situation doesn’t seem terribly stable, either. How will it evolve over the next 10 years? One thing seems certain, though. We are not going back to March 2020 (or February 2022) anytime soon, if ever.

The metals industry still has local, independent players enriching the landscape as well. Many of you are our subscribers. Navigating this time there are lot of data points to keep track of, and we’re trying our best to make sense of them to provide you with useful analysis.

Tampa Steel Conference: Jan. 28-30

In case you were interested in seeing an actual body of water, there are still a few days left to register for the Tampa Steel Conference. It might not be Main Street USA, but it’s still a great place to run into anyone who’s anyone in the North American steel industry. More than 500 people have registered, a new record, so come down to Florida and beat the cold.

You can learn more and register here.

Ethan Bernard

Read more from Ethan Bernard

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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.

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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?