Final Thoughts

Final thoughts

Written by Michael Cowden

It’s been a slow start to the week as far as news goes, something you’d expect ahead of a shortened Independence Day week.

That said, it’s not as if transactions have completely ground to a halt. (Prices continue to drift lower.) And while news might be slow, rumors of low-priced deals, price hikes, and trade cases seem to have filled that void.


Let’s start with prices. There continues to be a rumor that mills might announce a price hike shortly after July 4. Perhaps the week of July 8? The past doesn’t predict the future. That said, we did see something like that in 2019. (Details are in our price announcement calendar.) So it wouldn’t be without precedent.

We have also heard rumors of low-priced deals placed by large buyers at about $600 per short ton (st) – perhaps even the high $500s/st? As best as we can tell, those kind of figures include contract discounts and/or volume discounts not available to most spot buyers.

And it’s not clear to us whether any really, really big purchases have been made at those levels. But some of you have told us that you’ve bought, or plan to buy, enough to tide you over until late August.

Summit deals?

That’s of course when Steel Summit takes place. It’s the unofficial start of contract negotiation season. It has also been, in past years, around when some very large, highly discounted deals have taken place.

I’m on the fence about whether we’ll see rock-bottom deals happening in August of this year, if for no other reason than the market seems to have slowed down a little earlier than usual.

Certain mills struggle with prices around $600/st. So I wouldn’t be surprised if we see lower run rates later this month and into August. That might incrementally tighten up supply.

Also, we’ve heard from some of you that at least one US mill might be exporting to Mexico to help fill the gap left by lost production at ArcelorMittal Mexico. (Recall the company is grappling with ongoing labor issues there.)

So could we see lead times start to stretch out later this month? I’ll be keeping an eye out for that.

Trade jitters

When it comes to trade case rumors, I’m not sure where to start. Mexico has been in the news lately. And the other country I hear brought up often is Vietnam.

I had been assuming that no new trade action against Vietnam would be taken until the US Commerce Department decides whether Vietnam is a “non-market economy” (NME). That decision is due by July 26, according to government records.

As best as I can tell, that remains the consensus. But some of you tell me that a filing could come sooner than that.

Questions of timing aside, I can see why the drumbeat for trade action against Vietnam is getting louder.

Vietnam shipped approximately 114,000 metric tons (mt) to the US in May, according to preliminary Commerce Department figures. (License data for June was not complete when I filed this article.) That’s up from ~66k mt in January and up from ~9k mt in June of last year. Almost all of those imports were cold-rolled or coated product.

Gains like that, and at the low prices we’ve seen offered, will get the attention of domestic mills. And the rumor of a trade case seems to have already resulted in some of those offers being held back.

What surprised me more when I called around about Vietnam was how many other countries and regions were mentioned as potential targets – whether in South America, the Middle East, or Asia.

Tinplate redux?

As one industry source put it, Vietnam would probably be a “slam dunk.” The question is whether other countries would be included in any future trade actions. And if they are, would this be like the tinplate trade case?

In that case, eight countries were targeted. Headlines with allegations of high dumping margins ensued. But Commerce last year found low or no duties against all nations but China, which was tagged with a dumping margin of 122%. And even that became a mute point when the International Trade Commission terminated the case in February.

Would any new trade action see a similar result? Or would it be more like trade petitions in 2015-17 that targeted, and were successful against, multiple nations?

It’s worth noting that Vietnam is facing its own pressures when it comes to imports. One participant in the international steel trade said the Southeast Asian nation might take trade action of its own against China – whose exports have been putting pressure on steel markets across the region and in South Asia as well.

In short, with mills struggling at home and abroad (as was the case in 2015 too), I wouldn’t be surprised if we see some trade-case pyrotechnics this month, next, or later in 2H.

Happy Fourth!

I hope some of you will find time to enjoy some real-life fireworks with friends and family.

SMU’s office will be closed in observance of Independence Day on July 4. We’ll be back at it on July 5.

In the meantime, we thank all of you for your continued support. We really do appreciate it.

Michael Cowden

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