Final Thoughts

Final thoughts

Written by Ethan Bernard


What’s something going on in the market that no one is talking about? That’s a question on our survey, and it was also posed to many who graced the stage at our Tampa Steel Conference 2024. Actually, another way to phrase that is “not talking about publicly.” Trying to connect the dots of steel market chatter to find a central issue, I thought one survey respondent really summed up the current moment: “Right now, it is all politics.”

That’s what one would expect in a presidential election year. Still, it hits a bit different in 2024. In February 2020, the words “lockdown,” “social distancing,” and “super-spreader” had not yet become engrained into our everyday vocabulary. Investors who were long Plexiglass had not yet cashed in on amazing fortunes. And, for the white-collar worker, “remote” probably referred to the thing to change the channel rather than a Zoom/Teams meeting that never ends.

So it’s hard to doubt there could be another Black Swan out in the distance. Or some mini swans, or even a whole gaggle of them. (Yes, it’s a “gaggle.” I looked it up.) To put it differently—judging by current events—the captain would have already advised us to return to our seats and buckle our seatbelts by this point in the flight.

Here are a few things ripped from the headlines that may be making the rounds at a local watercooler or Zoom call near you. Rather than gossip, though, these could become action items, at least in the very near future. Whatever period of history we are in, we seem to be getting dragged into the next phase.

Trump

Possible 60% (or more) tariffs on Chinese imports? Sinking the U.S. Steel-Nippon deal upon entering office if re-elected? Trading barbs with UAW president Shawn Fain? Yes, the former president has had an eventful couple of weeks. And that’s outside of the courtroom.

Citi equity analyst Alex Hacking pointed out at Tampa Steel that, beyond bluster, Trump actually does many of the things he talks about. (See Section 232 tariffs).

We learned that Tweets (now posts on X) can lead to policy. Whether it’s X or Truth Social, now seems like a good time to start monitoring social media more closely. Trump is already using the steel industry in his messaging, and we can probably expect more of that over the coming months.

Putin

Russia’s invasion of Ukraine put steel prices on a roller coaster, affected raw materials, and upended—it seems—the post-World War II order. On Thursday, Feb., 8, Tucker Carlson aired a two-hour interview (filmed on Tuesday) with Russian President Vladimir Putin.

The wide-ranging interview, available on X, had Putin talking about his version of Russian history, his spin on the conflict in Ukraine, and being open to negotiations. Whatever one thinks of the interview, what struck me personally was that it took place at all. Could Russia be re-integrated into the world system, or is that system itself on the verge of a major change?

PM2.5

Now it’s time to get particulate. The EPA announced stricter air quality standards on fine particulate matter (PM2.5) on Wednesday. The 2.5 refers to the size of the particles, 2.5 micrometers or smaller.

Steel trade groups AISI and SMA pointed out that the new regulations could impact the steel industry. Philip Bell, president of SMA, pointed out that up to 40% of the US is in “non-attainment areas.” We will in future editions of the newsletter be doing a deep dive to see what the implications for the US steel industry will be like on the ground.

From geopolitical events in Ukraine and the Middle East to legislation here at home (and globally, like the Global Arrangement on Sustainable Steel and Aluminum), politics is taking center stage these days. The question is how will you, your company, and the steel industry as a whole react to volatility not just in steel but potentially in domestic politics and world affairs as well?

Ethan Bernard

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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?