Final Thoughts

That’s not all bad. We’re starting 2025 with SMU’s hot-rolled coil price at $675 per short ton (st). That’s $370/st lower than $1045/st at the outset of 2023, according to our interactive pricing tool. I think we can safely say that a decline of that magnitude won’t happen in 2025.

Will scrap see better times in the New Year? It’s not clear. But SMU contributor Steve Miller tries to read the tea leaves here.

USS-Nippon odyssey continues

We’re also still waiting for smoke signals from the White House when it comes to Nippon Steel’s nearly $15-billion deal for U.S. Steel. (Recall the deal was first announced in late 2023.) Ethan Bernard has the latest here.

Last month, I thought a decision might happen shortly after the Committee on Foreign Investment in the United States (CFIUS) delivered a report to the White House. Maybe even a decision on Christmas Eve! But CFUIS deadlocked. And now the proverbial can has been kicked to Jan. 7. Will said can finally become a square and stop rolling then?

I can see why Cleveland-Cliffs has long opposed the deal. The Cleveland-based steelmaker came very close to being successful in its attempt to acquire its Pittsburgh-based rival in 2023. There would be a lot of “synergies” if Cliffs were to have a wall of integrated mills along the Great Lakes. And competing with Nippon Steel, which has deeper pockets than U.S. Steel, could be tough.

I have a little trouble understanding the opposition from USW leadership. You don’t spend $15 billion on a company to immediately shut facilities. And if the rumor mill is to be believed, an unsuccessful deal could result in a USS furnace being idled.

I also have a little trouble understanding the political opposition – from both the outgoing Biden administration and the incoming Trump administration. Nippon Steel would bring the kind of foreign direct investment the US wants. It would bring capital into the US along with technical know-how – including in hydrogen-based steelmaking.

I get it that “national security” can be an efficient way to ram through policies that would otherwise get tied up in bureaucracy. But does anyone really believe that Japan – a longtime US ally that hosts a massive US military presence – is really a threat to national security?

Sure, the optics of “U.S. Steel” being controlled by a foreign company might not be great for a US president, regardless of party. But then what kind of precedent does that set for future foreign investment in the domestic steel industry? I don’t pretend to know which way the decision will go – or even whether there will be one. I’ll toss a coin in my next Final Thoughts and let you know the results.

Less than 25% odds of 25% tariffs on Canada/Mexico?

Speaking of coin tosses, will Trump impose 25% tariffs on Canada and Mexico? A US president is not a king when it comes to most issues. Case in point: The budget talks over the holidays, where rifts among congressional Republicans were on full display. But on trade issues, the president really does have kinglike powers. If Trump wants tariffs, he’ll get tariffs, and quickly too. That’s especially if he invokes national security, as we learned during Trump’s first administration.

Some of you tell me there is probably more upside risk than downside risk to flat-rolled steel prices because of this. Sure, demand isn’t great. Service center inventories are high. And US mills, including Nucor, SDI, and U.S. Steel, reported weak guidance last month. But could we see a sudden upswing if buyers shift orders from Canadian and Mexican mills to US mills because of the threat of tariffs?

Just like there is a trade association for just about anything nowadays, there is also a betting market for just about everything. Polymarket, which I kept tabs on during the election, has a market for the potential of the US hitting Canada and/or Mexico with tariffs. Here’s what caught my eye: It cost 45 cents to buy a “yes” on tariffs on Christmas Eve, up from 31 cents when Trump first threatened the measures just before Thanksgiving.

Where do things stand now? A “yes” cost only 17 cents on Thursday afternoon. A “no” cost 85 cents. Does that mean the prospect of tariffs has dropped precipitously over the last week or so? Or is it just noise – and a good chance to buy “yes” should the market get closer to 50-50 again ahead of Inauguration Day on Jan. 20?

Overall steel imports up, coated imports down

One thing we know for sure: The AD/CVD case against imports of coated flat-rolled steel remains on track. Maybe that could provide a catalyst for domestic steel prices to rise as we get closer to preliminary determinations?

Overall steel imports are likely to be up in December versus November. (Data for last month isn’t quite complete.) The US was licensed to import 2.18 million metric tons (mt) of steel, according to Commerce Department data last updated on Dec. 30. That’s up nearly 11% from 1.97 million mt in November.

But it’s a different story when you drill down to coated products. The US was licensed to import 242,900 mt of coated flat-rolled steel through Dec. 30. That’s down nearly 23% from 314,952 mt in November.

And let’s not forget about Old Man Winter

The US is in for a cold snap as “Artic air surges south” from Canada, according to the US National Weather Service. That’s typically not an issue in the Midwest, which is used to such weather. What’s worth watching is whether the freezing temperatures move further south.

Remember “Snowmageddon” in early 2021? That’s when freezing weather led to widespread power outages (and mill outages) along the Gulf Coast and northern Mexico. The market isn’t nearly as tight now as it was then. But it’s one to keep your eye on, along with Trump’s social media posts.

Tampa Steel Conference

We expect much milder conditions when we gather for the Tampa Steel Conference on Feb. 2-4. More than 300 people have already registered. You can see the companies attending here and register here.

Our room blocks have sold out at the conference venue, the JW Marriot Tampa Water Street. But don’t fear; cheaper rooms are available within walking distance of the main event! Among them are the Embassy Suites By Hilton Tampa – Downtown Convention Center. It’s approximately $220-300/night during the conference dates. And I’m sure you can find other deals using your favorite travel app.

So don’t delay and register today! In the meantime, a very Happy New Year to all of you from all of us at SMU. We truly appreciate your continued support.