Final Thoughts

Final Thoughts

Written by John Packard


I am working on an article regarding foreign steel offers, which have almost dried up completely due to the threats/unknowns associated with the Section 232 investigation. There have been a number of months where foreign steel imports have exceeded 3.5 million tons. We are hearing that these months will soon be behind us – although my gut tells me it might be October before we see any radical change in the numbers. The U.S. Department of Commerce will release new import license data on Tuesday evening. We will be on top of the numbers as we work to better understand both the short- and long-term consequences associated with change and with uncertainty.

I was reading an article about India and its steel industry earlier today. It was amazing in light of what is going on around the world regarding steel overcapacity. The article was about how India was looking to become the second largest steel producing nation within the next few years and by 2020-2025 they expect to have 300 million metric tons (330 million net tons) of capacity. (The Business Today article attributes the forecast to Dr. Venugapalan of Tata Steel). Is the world doomed to learn the errors of the Chinese over and over again? The article I was reading also said that the country has enough iron ore supplies to support that 300 million metric tons for 35 years.

I also read a piece in The Hill written by Daniel Pearson about how foolish the Chinese must feel transferring their wealth with every ton of steel they export to the rest of the world.

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Latest in Final Thoughts

Final thoughts

SMU’s sheet prices firmed up modestly this week, even as CME hot rolled futures declined. What gives? My channel checks suggest that demand remains stable and that buyers have returned to the market following new HR base prices announced by mills earlier this month. I’m looking forward to seeing whether lead times, which have stabilized, will start extending. SMU will have more to share on that front when we release updated lead time figures on Thursday. As for HR futures, what a reversal! As David Feldstein wrote last Thursday, bulls expected mill price increase announcements. And we briefly saw the May contract climb as high as ~$1,000 per short ton (st).

Final thoughts

There’s that concept from Adam Smith we all learn about in our Econ 101 classes: The Invisible Hand. A simple Google search will provide a refresh, but if memory serves I would classify it as something akin to “the market is magic” or “the market’s gonna market.” Today, obviously, we live in a mixed environment. There are a lot of hands out there, and they’re not too difficult to see. In this election year of 2024, one of the most visible hands out there probably belongs to the federal government.

Final thoughts

SMU’s price for hot-rolled (HR) inched lower this week. I wouldn’t be surprised, however, if we start to see prices and lead times move higher in the weeks ahead. The modest declines in HR this week are probably the result of lingering deals cut at “old” prices, as sometimes happens after mill price increases. But those deals will probably be out of the market soon if they aren’t already. So why do I float the idea of higher prices? Some big buys have been placed. It reminds me a little of what we saw last fall, when people restocked in anticipation of higher prices once the UAW strike was resolved.