Final Thoughts

Final Thoughts
Written by Michael Cowden
October 22, 2024
SMU’s hot-rolled (HR) coil price slipped this week to $685 per short ton (st) on average. We also adjusted our sheet momentum indicators to lower for the first time since July.
HR prices dip
When it comes to HR prices, some mills (notably certain producers in the Great Lakes region) are in the mid/high $600s/st. Others, particularly southern EAFs, are trying to hold the line at or above $700/st. That’s why our average price has been landing roughly in the middle.
There also appears to be a similar split when it comes to lead times. Mills in the South have longer lead times, which partly explains the higher pricing in the region.
It’s nothing new in this current market cycle. But it’s a change for those of us who’ve been around the market for a while. It used to be that EAF mills almost always had lower prices and shorter lead times – typically by design. If this remains the case, what’s driving the weakness in the North?
Momentum shifts lower
Some of you might be surprised that we adjusted our sheet momentum indicators to lower from neutral. Why change them now?
For starters, our HR price has declined for three weeks in a row now. Those declines might be modest. But the ones we’re seeing on galvanized have been steeper. Also, service center inventories – while down from August – remained high in September. (We’ll post October inventories in mid-November.)
Meanwhile, most steel buyers continue to tell us that mills are willing to negotiate lower. More than 80% of service center respondents say they are releasing less steel than a year ago. And more than half of respondents said they missed forecast last month, according to our survey results. (See slide 36.)
Maybe you’re surprised SMU didn’t bring its HR price down by more than $5/st. I could see the logic there too. We’re heading into what is often a slower time of year. Yes, mills might be slow to come out of maintenance outages. And, yes, new capacity could be slow to ramp up. But both will eventually happen.
The big picture
Frankly, we can speculate all day whether HR will go up, down, or sideways next week or next month. What’s also worth noting is the unprecedented stability we’ve seen in prices over the last couple of months compared to the last few years.
It feels almost weird to type that after writing “unprecedented volatility” so often since 2020. Or maybe as far back as 2017-18. Remember the swings on rumors about and then implementation of Section 232?
My colleague David Schollaert noted that Nucor’s CSP has been $710-730/st since Steel Summit kicked off (Aug. 26). SMU’s HR price over the same time has fluctuated in a narrow bandwidth of $685-$705/st.
Tariffs: beautiful or chaotic?
It will be interesting to see how long this period of stability lasts. Those of us who have been around for a while remember the initial chaos around Section 232.
What would happen to steel prices if tariffs (which former President Trump called the “most beautiful word”) were applied suddenly to a wide range of imported downstream goods – including those made by US allies?
We’ve got two weeks to election day in the US and three months until inauguration. You could make the case that that’s a 2025 question. But polls have been shifting lately toward Trump, so it’s one that’s been on my mind.
One theory is that tariffs will bring back manufacturing jobs to the US. Maybe. We saw billions invested in new domestic steelmaking capacity in the years after Section 232 was put in place. But is it safe to assume that something similar will happen when it comes to downstream goods – especially things like light vehicles and consumer products? How can you increase tariffs on such things without also stoking inflation?
Also, if the tariffs are deployed suddenly, what would happen to supply chains? Restarting idled domestic plants would take time. Building new factories would presumably even longer. What happens in the meantime?
I’m not trying to score partisan points here. Generally speaking, government initiatives don’t always produce the intended result. Programs aimed at promoting EV adoption, for example, haven’t really panned out to date. EVs remain (mostly) status symbols. And they’re still not practical for the long distances US drivers drive.
What about you: How do you think a new tariff regime might play out, or is it just too early to say without knowing specifics? Let us know at info@steelmarketupdate.com!
SMU Community Chat on Oct. 30 at 11 a.m. ET
Barry Zekelman, executive chairman and CEO of Zekelman Industries, touched on some of these topics last week during an SMU Community Chat webinar. Our next Community Chat will be Wednesday, Oct. 30, at 11 a.m. ET with Lewis Leibowitz, a frequent contributor to SMU.
Leibowitz and Zekelman have at times sparred in these pages. So my guess is that Leibowitz might have a slightly different view. (But not on everything. Both agree that burgeoning Chinese exports are a problem.) In the meantime, you can learn more and register here.
And, most importantly, thanks to all of you for your continued support of SMU. All of us here truly appreciate it.

Michael Cowden
Read more from Michael CowdenLatest in Final Thoughts

Final Thoughts
Will a US-UK meeting next week prove a harbinger of tariff deals to come, or will it be just another case of having the rug pulled from under us?

Final Thoughts
When will we see prime scrap become scarce as the worldwide transition to EAF melting increases, especially for HRC production? It's a question I've been asked a lot.

Final Thoughts: The hidden cost of analysis paralysis in the age of uncertainty
With US economic indicators all over the map, it’s no wonder the steel market has experienced a whole lot of analysis paralysis this year.

Final Thoughts
A recurring theme in conversations with some of you and in the comments submitted in our surveys is concerns about demand and uncertainty around tariffs. Where does SMU’s latest opinion polling on President Trump’s tariffs stand? Let’s take a look at the numbers.

Final Thoughts
I’ve been getting some calls lately from some of you who want to kick around ideas on where prices might bottom and when.