Final Thoughts

The inflection point that wasn’t

Here is another point that underscores how things are off when it come to demand, this one from the coated side of the market. Remember the preliminary anti-dumping duties announced on imports coated flat-rolled steel on April 4? They were supposed to, well, galvanize galvanized prices.

That’s not what we’ve seen to date. Instead, galvanized base prices have continued to slip since peaking in March. And that’s despite import volumes of both galvanized and ‘other’ coated products falling in April. (The “other” category includes Galvalume.)

Meanwhile, domestic capacity continues to ramp up. And countries that were assessed zero or only modest duties continue to offer material into the US.

One related development: Sure, lead times for the products we track continue to slip. But we’ve heard there is more material sitting in front of Galvalume paint lines, where I’m told lead times are up. (SMU doesn’t at present track paint line lead times, so I’m just going to have to trust our contacts there.)

Light-gauge galv: Are US mills in it to win it?

Sticking with coated products, I’ve noticed that some of the debates that typically come back when the galv market is weak are with us again. Have I noticed the wide gap between hot-rolled base galv and cold-rolled base galv? Yep. That’s back, for sure.

Another one: Maybe your domestic supplier is suddenly interested in making light-gauge galv. They’re even saying they’re committed to doing so for the long-term. For real?

You know how it usually goes. When the market improves, mills want to run heavy gauge. It’s less time on the mill, it’s easier to make, and it’s more profitable. They’ll let imports serve the light-gauge market when times are good.

But some of you tell me that your domestic suppliers are saying this time really is different. Usually I’m skeptical of “this time is different” talk. Maybe this time really is, especially with all the new galvanizing capacity. Maybe, just maybe, we’ll see a more permanent shift toward the US being more self-sufficient in steel.

Tariff talk

Several of you have mentioned that the US-UK trade deal (or at least the framework of a deal) could serve as a template for other deals. And, if that’s the case, perhaps quotas could come back into the market again.

I’ve even heard talk about a potential easing of tariffs on Canada. If you were looking for a shock to the downside, that might be one. Rewind to 2019, and the removal of 25% Section 232 tariffs from Canada helped to send US prices back down to earth again.

Sure, there has been more of a relaxing of tariffs lately. But will that remain the case? Or was the UK-US deal a one off?

Could the US ratchet up “Liberation Day” tariffs again when the current pause expires in July? Or maybe the can will be kicked down the road again? Given the jawboning with Canada, maybe the thing to watch is not a relaxation of Section 232 on Canadian steel but Russian aluminum coming back into the market?

These questions are tricky to answer. Maybe impossible, unless you happen to have a desk in the West Wing, and even then…

In other words, I can see why people remain mostly on the sidelines and why they’re not looking to make big forward buys.

Recency bias

But as SMU’s latest service center inventory data shows, stocks have been trending downward since late last year. And we’re roughly even with where we were in April 2024. (We’ll release May SCI data around June 15.)

As David Schollaert noted in his Final Thoughts on Sunday, almost no one is restocking. And as I’ve said before, the steel market (and humanity in general) is prone to recency bias. We tend to assume that the good times will never and. And when times are bad, we struggle to find a silver lining.

How does that relate to inventories? Not only are people not restocking, we’ve actually seen an uptick in the number of companies who say they are destocking.

Sure, demand isn’t as good the market had hoped it would be earlier this year. But assuming it doesn’t fall of a cliff, buyers will have to restock at some point. And that might give domestic mills enough leverage to raise prices again.

OK, it’s rare to see prices rise in June or July. So maybe mills stop the bleeding. And then there might be some actual gains in August as lead times stretch past Labor Day. That’s one scenario I can see happening.

Another is that tariffs lead to inflation, supply chain snarls, and/or more “policy volatility” – which can translate into price volatility. That might keep people on the sidelines for a little while longer.

Which do you think is more likely?

SMU Community Chat

Barry Zekelman, executive chairman and CEO of Zekelman Industries, will be the featured guest on our next Community Chat on Wednesday, May 28, at 11 am ET. You can register here.

We’ll talk about the positives and negatives of tariffs and what else the steel industry might like to see from the Trump administration.

We’ll also talk about the latest new capacity announcements and what it means for the market. Potential new projects tallying into billions have already been announced. And that’s just in steel. How much high could that investment figure go if we include other industries?

We’ll take your questions too. So make sure to bring some good ones to the Q&A!

And in the meantime, thanks to all of you for your continued support of SMU. We truly appreciate it.