Final Thoughts

Maybe that should come as no surprise given all the uncertainty – around tariffs, around politics, and around the economy in general. It feels a little like last year when everyone sat on their hands awaiting the election results – and then nothing happened until Trump threatened to put teeth back into Section 232 (and then did).

The will he/won’t he with Section 232 tariffs has been a constant backdrop to the market ever since. The latest twist: Trump and Canadian Prime Minister Mark Carney had nice things to say about each other when Carney visited the White House last week. Does that mean we could see Section 232 lifted from Canada, or at least reduced to 25%?

I know that’s a wild card a lot of people are watching. Because the removal of Section 232 from Canadian steel in 2019 led to an immediate drop in domestic steel prices. Algoma said publicly that a 50% tariff had effectively blocked it from the US market. I’m guessing other Canadian steelmakers came to a similar conclusion (unless maybe it’s contract tons to automotive). But would a 25% tariff allow Canadian steel back into the US?

Maybe. I think it’s equally possible that the Trump administration will keep the 50% as a negotiating tool when USMCA comes up for renegotiation next year. And it’s probably equally possible that Trump won’t reduce or drop the tariff until the US and Canada have a more balanced trade in steel. And that would probably require Canada to take more draconian action against steel imports than it has to date.

That’s something we at least have a rough template for. Some of the other things causing uncertainty are a little harder to handicap. Just one example: Trump on Friday threatened to hit imports from China with an additional 100% in tariffs starting on Nov. 1. That threat came after China threatened to cut exports of rare earths, which are critical for – among other things – industrial magnets.

Markets plunged in response. It felt a lot like the day after ‘Liberation Day’ when we saw something similar – a big selloff based on big injection of policy and supply chain uncertainty into the market. Talk of HRC hitting $1,000 per short ton (st) collapsed along with the Dow Jones and the S&P500. Broader markets have recovered since then.

And maybe this latest kerfuffle with China is all Trumpian theater aimed at moving the goal posts and gaining leverage in negotiations with Beijing. Maybe markets will shake it off again. We’ll see.

Then there is the matter of the ongoing government shutdown. ICE is still working. Planes are still flying. But on the steel side, we know that import data isn’t being collected. What about federally funded construction work? I don’t know the answer to that. But I’d be curious to hear from any of you who do know.

As far as more typical concerns go, recent developments in raw materials prices probably didn’t provide anyone with a compelling reason to go out and buy. Scrap prices fell, not as much as expected. But they were down yet again. Pig iron prices fell too.

But there is another way to look at that. Scrap is often weak in October before firming in the winter months. Could we be at a bottom? The tight spread between busheling and shredded scrap might indicate that. It’s unusual for bush and shred to be near parity for long.

From a lot of you, we continue to hear that too much uncertainty and too little demand mean you’re buying only as you need. And you’re rarely testing the spot market water because you can meet your needs with contract tons.

Let’s say, for the sake of round numbers, that hot-rolled (HR) coil prices are $800/st on average. And let’s say that the average contract discount is 6%. That means you’d probably want a spot price of around $750/st to get your attention. That might explain why mills have been able to firm the low end of the market but not increase the high end very much.

Despite all that uncertainty, there is another narrative that I’ve been hearing recently from mills as well as some larger HR buyers. Yes, import volumes are down because of the 50% Section 232 tariff. Yes, inventories are lower than they were this time last year. And, yes, mills have limited volume because of outages and (according to some of you) better demand than you’d think. But none of that is new.

Here is what is: Some big buyers tell me that (a) they think this is a good time to buy and (b) they’re not able to get the kind of volume deals they typically get. Not even when they inquire for tens of thousands of tons. If you’re in that camp, it’s just a question of what and when the catalyst for higher prices hits.

I’m not going to take sides here. But I do think the idea that nothing even happens is a little risky. What if something finally happens? What’s your plan?