A minor fire at the ArcelorMittal Burns Harbor plate mill caused a shutdown in operations on Friday. The fire began in the control room for one of the 160-inch shear lines.

Firefighters responded to the incident from five area fire departments, said spokeswoman Mary Beth Holford. Paramedics evaluated two employees for smoke inhalation, but both were unharmed.

Congress and the Trump administration are likely to act on both tax reform and infrastructure spending before the end of 2018, predict the majority of forecasters polled by the National Association of Business Economics.

NABE conducted its September survey of 47 professional forecasters from Aug. 24 to Sept. 7 (during Hurricane Harvey and before Hurricane Irma). Seventy-three percent anticipate corporate and individual tax cuts by the end of next year. Sixty-one percent expect an infrastructure spending plan by late 2018.

U.S. Steel and Kobe Steel announced plans to expand the galvanizing line at their joint venture PRO-TEC Coating Co. in Leipsic, Ohio.

Construction will begin in the fourth quarter on a new continuous galvanizing line in response to demand for advanced high-strength steels. The $400 million CGL will have a yearly capacity of 500,000 tons and is expected to begin production in 2019. The line, utilizing a proprietary process, will coat AHSS steel that automakers need to meet safety and fuel efficiency standards.

U.S. content in NAFTA automobiles is shrinking and contributing to the trade deficit America has with Canada and Mexico, according to Secretary of Commerce Wilbur Ross.

In an editorial for the Washington Post, Ross cites a new study analyzing data from 1995 to 2011 that indicates U.S.-produced content in manufactured goods imported from Canada fell from 21 percent to 15 percent during the 16-year period. An even more dramatic decline was observed in goods imported from Mexico, from 26 percent in 1995 to 16 percent in 2011. Ross said there is no reason to think the situation has improved.

A contractor at Nucor Steel in Decatur, Ala., died at the mill on Saturday afternoon after falling into a vat containing waste product from finished rolled steel.

On Friday, Steel Market Update (SMU) adjusted our Price Momentum Indicator to Lower from Neutral. It is our opinion that flat rolled steel prices will move lower over the next 30 days for the following 10 reasons:

Steel Market Update (SMU) asked those responding to last week’s flat rolled steel market trends questionnaire where they see flat rolled steel prices headed? The results are shown in the graphic below. However, what is also of interest were the comments left behind by respondents.

First, the results: The majority (52 percent) believe there is no clear-cut direction for flat rolled steel prices right now. Thirty-four percent believe prices are heading lower, while the remaining 14 percent believe prices will move higher.

Growth in Chinese steel production continues to outpace the world, according to a Steel Market Update analysis of World Steel Association data.

Production in the month of August was 143,580,000 metric tons, down slightly from 143,729,000 metric tons in July. Capacity utilization was unchanged at 71.7 percent. The three-month moving averages (3MMA) that we prefer to use were 142,893,000 metric tons and 72.1 percent, respectively. Figure 1 shows monthly production and capacity utilization since January 2000.

Seaborne shipping is getting a much needed rise in rates. Freight rates are gaining strength following two years of historic lows, says MID-SHIP report. The Baltic Dry index, a benchmark for overall trade volume, rose to 1470 on Sept. 21 for its highest level in two years. MID-SHIP expects the BDI to approach 2000 in November, boosted by an increase in capesize rates, vessels carrying dry bulk materials.

Nucor Corp. executives urged the U.S. Trade Representative and Department of Commerce to vigorously oppose any efforts to weaken existing Buy America/n requirements, in their comments on President Trump’s April executive order. The steel company also urged the U.S. government to take additional action to stimulate demand for domestic steel in U.S. and foreign government procurement markets.

Steel buyers are evenly split on how their businesses will be affected by the cleanup from Hurricanes Harvey and Irma. About half (48 percent) of respondents to Steel Market Update’s latest steel market trends questionnaire expect the hurricanes and flooding in Texas and Florida to have a significant impact on their businesses and steel demand over the next three months. The other half (52 percent) expect a modest or delayed effect. Following are some of their more insightful comments.

Flat rolled steel prices have begun to uniformly move lower based on what we have been collecting for steel price averages from ours and other steel indexes. Both Platts and Steel Market Update (SMU) had benchmark hot rolled as moving lower by $10 per ton this past week. Cold rolled prices were $10 lower on our steel index, while Platts remained the same. SMU also saw galvanized and Galvalume prices as $10 and $5 per ton lower, respectively. SMU also saw a large drop in steel plate prices last week.

Steel imports are on the rise this year at ports on the Gulf and West Coast. Steel imports to the U.S. are expected to reach 39,812,592 net tons this year, an 18.6 percent increase from 2016.

The weekly U.S. rig count remained steady this week, according to Sept. 8 data from Baker Hughes, a GE Company. The number of active U.S. drill rigs declined 1 to 935 rigs; oil rigs declined 5 to 744 rigs, gas rigs rose 4 to 190 rigs, and miscellaneous rigs were unchanged at 1 rig. Compared to this time last year, the 935 count is up 424 rigs, with oil rigs up 326, gas rigs up 98, and miscellaneous rigs down 1.

A note that SMU adjusted our Price Momentum Indicator to Lower from Neutral on Friday. I have explained 10 of the reasons why (and there are more) in the first article in tonight's newsletter. If you would like to make comments, feel free to reach out to me at John@SteelMarketUpdate.com.

Both Current and Future Sentiment showed a slight decline as a single data point in the latest SMU Steel Buyers Sentiment Index, based on data gathered in mid-September. The index measures how buyers and sellers of flat rolled steel feel about their company's ability to be successful both in the current market environment, as well as three to six months into the future.

Overall, the indexes have remained at optimistic levels throughout 2017, though the small but frequent ups and downs may reflect steel buyers’ fluctuating uncertainty about market conditions. Hurricane Irma and the destruction it brought to the Southeast last week may also have been weighing on respondents’ minds.

Earlier this month, foreign steel imports for September were trending toward a 2.6-million-ton month based on import licenses through the first 12 days of the month. Over the past week, the pace for import license requests has picked up. This is most likely due to the impact of the two hurricanes: Harvey in Texas and Irma in Florida. Based on the latest import license data, September is now trending toward a 3.0-million-ton month. The trend is modestly lower than our 12-month and 3-month moving averages. Yet, it is a bit of a disappointment as the steel industry is expecting foreign steel imports to drop dramatically due to the threat of the Section 232 investigation on steel from earlier this year. That threat has now been pushed out to maybe as late as 1Q next year.

Flat rolled steel lead times have been relatively flat going back to early May 2017, according to the service centers and manufacturing companies who participated in the Steel Market Update (SMU) flat rolled market trends survey this week. Lead time, which is the amount of time it takes for the domestic steel mills to produce a new order from the time the order was placed, have been averaging close to four weeks for hot rolled, six weeks for cold rolled, six and a half weeks for galvanized, and Galvalume has been averaging six weeks.

Mills are even more open to price discussions than they were a couple weeks ago, report steel buyers and sellers who replied to Steel Market Update’s latest flat rolled market trends questionnaire.

More than 100 executives responded to this week’s questionnaire. Steel buyers’ perceptions of their suppliers’ attitudes offer a snapshot of how steel mills are currently handling price negotiations.

Spot iron ore pricing dropped 7.4 percent within the past 24 hours with 62% Fe iron ore fines hitting $63 per dry metric ton (dmt). Iron ore has dropped $15.80/dmt over the past month. On Aug. 22, 62% Fe fines were trading at $78.8/dmt, according to The Steel Index.

The following article on the hot rolled coil (HRC) futures markets was written by David Feldstein. As the Flack Global Metals Director of Risk Management, Dave is an active participant in the hot rolled futures market, and we believe he provides insightful commentary and trading ideas to our readers. Besides writing futures articles for Steel Market Update, Dave produces articles that our readers may find interesting under the heading "The Feldstein" on the Flack Global Metals website, www.FlackGlobalMetals.com. Note that Steel Market Update does not take any positions on HRC or scrap trading and any recommendations made by David Feldstein are his opinions and not those of SMU. We recommend that anyone interested in trading HRC or scrap futures enlist the help of a licensed broker or bank.

Thyssenkrupp and Tata Steel have signed a preliminary agreement to merge their European steel activities in a 50/50 joint venture. The new entity will be named Thyssenkrupp Tata Steel and will be based in the Netherlands.

The new company will have a workforce of about 48,000 at 34 locations. Major hubs of operations will be in Duisburg, Germany; IJMuiden, the Netherlands; and Port Talbot, Wales. Thyssenkrupp Tata Steel will come in at second place behind ArcelorMittal as the largest steel company in Europe. The partners hope to close the deal in late 2018.

The American Institute of Architects' Architecture Billings Index continued to show demand for design services with a seventh month of growth in August.The ABI gained 1.8 points last month for a solid score of 53.7. The new projects inquiry index rose to 62.5 from 59.5 and the new design contracts index slipped to 54.2 from 56.4

Are “Buy American” policies good for the U.S. economy and the U.S. steel industry?

President Trump issued an executive order in April instructing all federal agencies to conduct comprehensive assessments aimed at cracking down on weak enforcement of Buy American policies, and targeting the abusive use of waivers and exceptions that undermine Buy American laws. Fulfilling a campaign promise on infrastructure investment, he asserted, “We will have two simple rules when it comes to this massive rebuilding effort, buy American and hire American.” His executive order drew a number of responses from business and industry in a comment period that ended this week.

The latest data on automotive production offers potential ammo to U.S. trade officials as they work to renegotiate the North American Free Trade Agreement. Assembly of both cars and light trucks is shifting from the U.S. to Mexico, with Canada largely on the sidelines.

Total light vehicle production in the U.S. and Canada has declined by 4.4 percent in the past 12 months, while in Mexico it has increased by 10.3 percent. Figures from the latest three-month period of June-August show an even more dramatic shift, with the U.S. down by 13 percent, Canada down by 8.1 percent, and Mexico up by 7 percent.

Steel Dynamics expects third-quarter financial results to be similar to the second quarter. Higher shipments during the quarter were somewhat offset by metal spread compression.

Average quarterly pricing is expected to be consistent with the second quarter, but average scrap prices will be higher. SDI notes continued high import levels are impacting the ability of domestic steel prices to keep pace with raw material costs.

The U.S. Department of Commerce announced its affirmative preliminary determinations in the countervailing duty investigations of imports of cold-drawn mechanical tubing from China and India. Commerce determined exporters of cold-drawn mechanical tubing from China and India received countervailable subsidies of 33.31 to 35.69 percent, and 3.04 percent and 8.09 percent, respectively.

The U.S. International Trade Commission has decided not to revoke existing antidumping duties on imports of carbon and alloy seamless standard, line and pressure pipe from Japan and Romania. To do so, said the ITC, would "likely lead to continuation or recurrence of material injury within a reasonably foreseeable time."

Home sales in the South are expected to be dampened for the rest of the year as a result of the hurricanes in Houston and Florida, says the National Association of Realtors.

Existing home sales slumped in August to a seasonally adjusted annual rate of 5.35 million, a retreat of 1.7 percent from July and barely above last year's level.

Zinc is once again trading above $1.40 per pound ($1.42 as of 3:30 PM ET) and the smaller steel mills and converters are wondering why U.S. Steel, ArcelorMittal USA and Nucor haven't made the move to higher zinc coating extras on galvanized steel? We have seen four mills make changes on their “spot” new orders: NLMK USA, USS/POSCO, California Steel and AK Steel. Mills like Wheeling/Nishin (who tends to follow U.S. Steel), CSN (Terre Haute, IN) and Ternium are sitting back and waiting.

Although one of the mills told us that since coated transaction prices are not able to be increased in the current market, the net effect of the higher zinc cost is a squeeze on margin.

In the meantime, at least one of the indexes tied to contract pricing has made the decision to move .060” G90 coating extra from $78 per ton to $86 per ton. SMU has not yet made the move, and we will continue to keep our extras the same as long as USS, AM and Nucor hold out.

This doesn’t mean galvanized buyers should not be aware of changes or potential changes, and those of you involved in negotiating 2018 contracts for coated steels should be aware that extras may come up in the discussions with your mill suppliers (or service centers if they have to pass new extras through to their customers).

Flat rolled and plate steel prices, which have been fairly resilient over the past couple of months, slipped this week. The biggest move was in plate, which was down $30 per ton, while flat rolled products were lower by $5 to $20 per ton. We will wait to see if this move was nothing more than an adjustment to the spread or the start of a stronger move lower. Our SMU Price Momentum Indicator continues to be at Neutral, although we have been noting a negative feel to the market over the past couple of weeks.

Despite recent price increase announcements from major domestic mills and imports that are trending lower, wholesalers and distributors who sell galvanized steel products to the HVAC market don’t expect much change in lead times or pricing until there’s some resolution to the Section 232 and Vietnam circumvention trade actions pending in Washington.

In the monthly steel conference call hosted today by the Heating, Air-conditioning, and Refrigeration Distributors International, HARDI members reported generally strong demand for their products and balanced inventory levels. Lead times remain short, and mills remain willing to negotiate, they said.

The Metals Service Center Institute (MSCI) reported carbon flat rolled steel inventories as growing in August compared to the end-of-July 2017 data, but still below August 2016 levels. MSCI data shows the number of months of flat rolled supply at very low levels.

European steel producers are worried about tight supply conditions for carbon graphite electrodes used in electric arc furnace steelmaking, but it may not be as big a problem in the U.S. A global shortage of high quality needle coke has spiked prices and squeezed supply of electrodes in Europe in recent months, said Axel Eggert, director general of the European Steel Association (EUROFER).

"This global shortage has been caused by the idling of global production capacity over the past few years, followed by production stoppages recently enforced by the Chinese authorities as a result of additional environmental standards," said Eggert. Electrodes are produced in a limited number of regions that include China, India, Japan, Europe and the U.S.

U.S. raw steel production totaled 1,745,000 net tons in the week ending Sept. 16, up 0.7 percent from the prior week and an increase of 9.7 percent from the same period last year. The mill capability utilization rate for the Sept. 16 week was 74.9 percent, up significantly from 68.0 percent at the same time in 2016, reports the American Iron and Steel Institute in Washington.

Adjusted year-to-date production through Sept. 16 was 64,378,000 net tons, up 3.5 percent from the same period last year, at an average capability utilization rate of 74.6 percent.

New residential building permits surged 5.7 percent month-over-month in August to a seasonally adjusted annual rate of 1.3 million, according to the latest report from the Commerce Department. Single-family authorizations dipped 1.5 percent, but permits for housing of five units or more jumped 22.8 percent. Gains in August were concentrated in the Midwest and West, along with a 3.7 percent increase in the South. Permit authorizations fell 13.0 percent in the Northeast.

Steel shipments by Canadian service centers in August totaled 387,500 net tons, up 11.8 percent from the previous month, and up 6.2 percent from August 2016, reports the Metals Service Center Institute (MSCI). On a daily basis, total shipments were 17,600 tons per day in August (a 22-day month), up from 17,300 tons per day in July (a 20-day month), and up compared to a year ago when they were 16,600 tons per day (a 22-day month). Total steel inventories at the end of the month were 1,182,800 tons, up 0.8 percent from last month and up 2.9 percent from this time last year.

Weakening federal vehicle fuel economy standards would not relieve the auto industry of burdensome regulation, but rather would hurt job growth, as well as the environment, maintains the BlueGreen Alliance (BGA), a coalition of American labor unions and environmental organizations whose mission is to “work together to solve today’s environmental challenges in ways that create and maintain quality jobs and build a stronger, fairer economy.”

Speaking during a reception Sept. 13 following the 50^th anniversary open house at ArcelorMittal’s Global Research and Development Center in East Chicago, Ind., Zoe Lipman, director of BGA’s Vehicles and Advanced Transportation program, described how the current fuel efficiency standards have driven innovation among automakers and their suppliers, lowering harmful emissions while creating new jobs.

Hurricane Harvey outdid Irma in terms of supply chain disruption, according to John Kent, director of the Supply Chain Management Research Center at the University of Arkansas.

Irma skirted the east coast of Florida, focusing more on the West and causing minimal impact to major ports in Miami and Fort Lauderdale. Harvey took out not only the Port of Houston, but refineries and chemical plants along the Texas Gulf Coast.

The United Steelworkers union is calling for the United States to negotiate stronger NAFTA rules of origin. The union charges that the rules negotiated more than 25 years ago do not reflect current economic reality and sourcing patterns.

Increased imported content from China and other nations has been detrimental to U.S. production in North America, claims the USW.

There is a wide variance between what the MSCI reported for flat rolled inventories this week and what Steel Market Update reported on Sunday. As we look at our numbers, the mega service centers tended to carry less inventories (based on months of supply, not in total tons) than the medium and smaller distributors that are included in our index. We continue to add service centers and to refine our data and data collection. If you are interested in participating in our index, you can reach me at: John@SteelMarketUpdate.com

Steel Market Update is working on a new index to measure flat rolled steel inventories in service center warehouses at the end of each month. Our goal is to assist the flat rolled steel industry to better understand inventories and their potential impact on steel mill order books and lead times. SMU will also analyze data provided from distributors to track steel inventory trends.

We are working to accomplish this in a variety of ways:

Editor’s note: Mario Briccetti of Briccetti & Associates, a supply chain consulting firm, offers the following commentary:

I had the opportunity to interview the CEO of Big River Steel, David Stickler, at Steel Market Update’s Steel Summit Conference in August. Much of the conference was focused on trade issues, but Mr. Stickler’s remarks struck me as being just as important to the U.S. steel industry.  It could very well be that BRS will be a major disruptor in our industry. Here’s why:

ArcelorMittal is not expecting a big bump in business anytime soon due to the hurricane damage in Texas and the Southeast. “That will take a while to pass through,” said Wendell Carter, vice president and general manager of the steelmaker’s Indiana Harbor mill. Carter responded to questions during a media tour of the East Chicago, Ind., mill on Wednesday.

Flat rolled steel average prices are once again "mixed" as some items have dropped, some have remained the same and some rose last week compared to the previous week. We received numbers from Platts, SteelBenchmarker and our own steel index late last week and we found hot rolled down $5 on SMU, up $7 on SteelBenchmarker (SteelBenchmarker only produces prices twice per month) and unchanged at Platts.

Nucor expects earnings to be lower in third quarter compared to second quarter. Although Nucor sheet mills are operating at high utilization rates, pricing is not keeping pace with raw material costs due to pressure from imports. Plate demand has been tepid in end-use markets following a restocking of inventory in the supply chain earlier in the year, said Nucor executives in their earnings guidance. End markets are expected to remain stable.

"Dangerous, unintended consequences" could result from the Section 232 national security investigation of steel imports, said members of a panel hosted by the American Institute for International Steel, which represents foreign steel producers.

"Our objective today is twofold," said John Foster, AIIS chairman and president of Kurt Orban Partners, in his opening remarks, "First, to highlight the critical importance of the steel supply chain to our ports, the U.S. marine transportation system, and to the entire American economy; and second, to present compelling new evidence pointing to the potential economic disaster that may befall the steel supply chain, and other sectors of the American economy, like agriculture, if the administration imposes Section 232 trade restrictions on imported iron and steel products.

Long-term success requires strategic succession planning, said David Wolfort, president of Olympic Steel, who addressed members of the Association of Steel Distributors at their September regional meeting in Pittsburgh.

Olympic Steel was founded with $17,000 in 1954 by brothers Sol Siegal and Sam Sigel (yes, the spellings are correct) as a family enterprise focused on the warehousing and distribution of steel. The company at that time leased its building and equipment. During the years between 1954 and 1974, the company grew to $20 million. In 1974, Michael Siegal graduated and joined the company.

Thirty-four states and the District of Columbia added construction jobs in the year from August 2016 to August 2017, reports the Associated General Contractors of America, analyzing Labor Department data. Hiring likely would have been stronger if not for a shortage of workers.

Seventy percent of companies report having a hard time finding craft workers to hire. "Firms in most states are expanding their headcount to keep pace with growing demand for many types of construction projects," said Ken Simonson, chief economist for the AGC. "While it is too early to tell what impacts Hurricanes Harvey and Irma will have on the sector's workforce, there are not a lot of unemployed, experienced workers available to travel to Texas or Florida to help communities rebuild."

Last week, we mistakenly published new extras for Nucor that have not yet been announced. We have revised our galvanized coating extras comparison table (see below), which is also available on our website.

We will begin our mid-September flat rolled steel market trends analysis first thing on Monday morning. Invitations to participate will go out at 8 AM ET tomorrow morning. We currently send out approximately 650 invitations.

Note: We are correcting the galvanized comparison of coating extras as Nucor has not yet made a change to the schedule they are using. I also want to remind our readers that when reviewing our CPI, or on Tuesdays our galvanized .060" G90 pricing, we continue to use the existing U.S. Steel extras and not the new NLMK USA extras. I know that at least one index has gone to the higher extras. We will not make a move until U.S. Steel, Nucor and ArcelorMittal decide what they are going to do.

The following calculation is used by Steel Market Update to identify the theoretical spread between foreign hot rolled steel import prices (delivered to USA ports) and domestic (USA) hot rolled coil prices (FOB Domestic mills). We want our readers to be aware that this is only a "theoretical" calculation as freight costs, trader margin and other costs can fluctuate, ultimately influencing the true market spread.

Our primary numbers for this analysis are from Platts as we compare European HRC export pricing (FOB Ruhr), Turkey HRC export pricing (FOB Turkey) and Chinese HRC export pricing (FOB Chinese port). Be aware that Chinese hot rolled pricing is not available to the U.S. market, so the Chinese spread is nothing more than an exercise in "what if." SteelBenchmarker is the secondary data provider of foreign hot rolled coil prices and is noted further down in this article.

ArcelorMittal is on a mission to make sure that steel remains the material of choice for a modern world. The steelmaker invited state and local dignitaries, staff and members of the media to an open house on Wednesday to commemorate the 50^th anniversary of the ArcelorMittal Global Research and Development Center in East Chicago, Ind.

The following article on the hot rolled coil (HRC) futures markets was written by David Feldstein. As the Flack Global Metals Director of Risk Management, Dave is an active participant in the hot rolled futures market, and we believe he provides insightful commentary and trading ideas to our readers. Besides writing futures articles for Steel Market Update, Dave produces articles that our readers may find interesting under the heading "The Feldstein" on the Flack Global Metals website, www.FlackGlobalMetals.com. Note that Steel Market Update does not take any positions on HRC or scrap trading and any recommendations made by David Feldstein are his opinions and not those of SMU. We recommend that anyone interested in trading HRC or scrap futures enlist the help of a licensed broker or bank.

Back-to-back hurricanes disrupted trucking in the South, and the effects are expected to linger as the region competes for truck capacity to rebuild damaged homes and infrastructure.

The American Transportation Research Institute uses GPS to track movement of over 700,000 trucks in the U.S. Hurricane Harvey hit international and east/west commerce hard as Houston is a key hub for transportation, said Dan Murray, vice president at ATRI. West of Houston and Corpus Christi is Laredo, Texas, a major border crossing for goods going to and from Mexico.

JSW Steel, a steel plate mill in Baytown, Texas, reports a remarkable story of perseverance, ingenuity and courage as it faced the devastation of Hurricane Harvey.

As the hurricane was bearing down on the coast, CEO John Hritz made the difficult decision to shut down operations at the mill. JSW's 700 acres are situated in the bayou area of Baytown, an area that can't withstand the type of downpour that Harvey was expected to bring. Employees were sent home to prepare personally for what was coming. "No one really anticipated the magnitude," said Hritz. "In hindsight, we did the right thing."

Southeast Texas, including Houston, is considered one of the most affordable large housing markets in the nation, said Svenja Gudel, chief economist at Zillow. That may change in the wake of Hurricane Harvey.

"Housing has historically been affordable in the area because it's relatively easy to build homes there. Unfortunately, a lot of those homes were built in areas vulnerable to flooding, both on the coasts and from rising rivers and bayous farther inland."

The U.S. Department of Commerce updated foreign steel license data on Tuesday. Based on data through the first 12 days of September, foreign steel imports are trending toward a 2.6 million net ton month. If the numbers hold, the 2.6 million tons would be one million tons lower than the three-month moving average, which is currently at 3.6 million tons.

Zinc prices have been rising and we are starting to see updated galvanized price extras from the mills. Steel Market Update has received updated galvanized coating extras from Nucor, USS Posco (UPI), NLMK, California Steel Industries (CSI), and AK Steel. We updated the comparison tables on our website and have included a copy of the G90 comparison table below.

Updated UPI and CSI extras are nearly the same, with any differences due to slightly different thickness ranges listed in their price books. Compared to price extras posted earlier this year, the new AK Steel G90 extras rose an average of 16.5 percent, while new Nucor G90 extras increased an average of 14.7 percent. You can see the changes for each specific mill on our website by looking in the Resources section of the menu under Steel Mills > Galvanized.

As of late Thursday when this article was written, we have not found updated galvanized extras for U.S. Steel, ArcelorMittal, Wheeling Nisshin, CSN, Steel Dynamics or Big River Steel.

A note to service centers: SMU is working on a new prime flat rolled distributor inventory index and trends analysis. If your company is interested in participating or if you have any questions, please send me a note: John@SteelMarketUpdate.com

Steel Market Update canvassed flat rolled and plate steel buyers throughout the day today in order to determine if steel prices have changed since our review last week. We found prices softening on most flat rolled products and heard from steel buyers that the mills were willing to discuss pricing on “real” orders.

The Steel Market Update (SMU) Price Momentum Indicator has been “stuck” in Neutral for a number of weeks as steel buyers and steel mills wrestle with the direction of flat rolled steel prices going forward. Steel buyers are beginning to say the next move in flat rolled steel prices may well be lower, rather than higher.

Throughout the day (Tuesday, Sept. 12, 2017), Steel Market Update (SMU) has been discussing steel prices, AK Steel’s price announcement and whether or not there is any way the mills will be able to collect another $30 (or anything) based on what is happening in the market right now.

“This increase puzzled all of us. I guess if you have no spot tons to sell you can raise prices whenever you would like. Not sure what they were thinking,” said one flat rolled steel service center executive describing his feelings about AK Steel's price announcement.

Domestic raw steel production totaled 1,733,000 net tons in the week ending Sept. 9, an 8.9 percent increase from the same period last year, but a decrease of 0.8 percent from the prior week. The mill capability utilization rate was 74.3 percent, down slightly from 74.9 percent the prior week, but up from 68.0 percent the prior year, reports the American Iron and Steel Institute in Washington.

Over the weekend, we received a message from trade attorney Lewis Leibowitz regarding the status of the Vietnam circumvention suit. This is the one where the domestic steel mills filed a circumvention suit alleging China is circumventing the duties on cold rolled and CORE (corrosion resistant) steels by sending substrate to Vietnam and having it converted there before shipment to the U.S. as Vietnamese material.

Lewis told us, “Commerce announced today that it will issue a preliminary determination in the Vietnam circumvention proceedings (cold-rolled and corrosion resistant steel) on Oct. 16.  The decision will be publicly available on the next business day (Oct. 17).  The Commerce Department previously announced that the final determinations will be issued on Feb. 15, 2018.”

The Metals Service Center Institute is urging the Trump administration to take “swift, decisive action on the Section 232 steel investigation to bring certainty to the marketplace.”

In a letter to President Trump last Thursday, MSCI President and CEO Robert Weidner, III, and Chairman R. Holman Head, stated that “problems posed by foreign government-sponsored capacity expansion demand a comprehensive response from the U.S. government.”

The U.S. economy should finish 2017 strong, but the leading indicators point to a downturn in the second half of 2018 followed by a mild global recession in 2019, predicts economist Alan Beaulieu, principal of ITR Economics, who addressed a sellout crowd Aug. 30 at Steel Market Update’s Steel Summit Conference in Atlanta.

“You will like the next several quarters. The economy will keep expanding. It’s 2018 when things will begin to change, especially in the latter half of the year. It’s not going to be a bad year, it’s just not going to be as good as 2017,” he said.

What happens to all those autos ruined by the double whammy of hurricanes in the South? Cox Automotive estimates 300,000 to 500,000 cars were damaged by Hurricane Harvey. Auto-market researcher Black Book puts the total in Texas closer to one million. And millions more could be added to the toll after Hurricane Irma is tallied.

"We reviewed damage numbers in both (Hurricane) Katrina and (Superstorm) Sandy, which were the most comparable storms. We looked at the reporting of wide-spread flooding, which more resembled Katrina than Sandy. We took into account the high vehicle density and the dependency on vehicles in Houston," said Jonathan Smoke, chief economist for Cox Automotive, in a media conference call.

The U.S. Commerce Department today announced an affirmative preliminary determination in the countervailing duty investigation on exports of metal tool chests and cabinets from China. Commerce calculated preliminary subsidy rates ranging from 17.32 percent to 32.07 percent.

Representatives from the U.S. auto and steel industries are working on a joint proposal to address changes in the rules of origin for steel used in vehicle production. The Trump administration and domestic steelmakers would like to close "loopholes" that allow foreign steel producers to take advantage of NAFTA rules. Currently, automobile content must be of at least 62.5 percent North American origin to qualify for tariff exemptions.

G-20 members are on track to hold their first official meeting of the Global Steel Forum on Excess Steel Capacity this fall. The forum was formed last year during the 2016 meetings to find "collective solutions" to remedy steel overcapacity and discourage protectionism. The group met informally at the Summit in Hamburg in July 2017.

Below is the latest data released by the the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) regarding residential and commercial heating and cooling equipment shipments through July 2017. You may read the press release on their website here.

A picture is worth a thousand words, as they say. In that case, here are a number of photos from our 2017 SMU Steel Summit Conference, which will help those who were unable to attend get a feel for what happened, how many people attended (661 registrations from 309 companies) and the networking that went on during the event. We hope you will join us next year for our 8th SMU Steel Summit Conference, which will be held in Atlanta at the Georgia International Convention Center over three days during the week of Aug. 27, 2018. Mark your calendars now and remember to include it in your budget for 2018.

Our SMU team has been pretty lucky as those of us who live in Florida did not suffer significant damage to our homes. The Florida residents ended up escaping and being essentially unaffected by Hurricane Irma. However, Brett lives in Georgia and he lost power yesterday as a large tree took out the power line and blocked his street, as well. He has been stranded for more than a day as they wait for the power company to come cut the tree and replace the downed lines. Diana and are working toward being back up and running in our offices on Thursday as we move back from the Florida panhandle to Hobe Sound. We have been advised that our office building has no power or internet service, but our home office does. Thank you for your patience, and we will try to get caught up with any outstanding issues on Thursday and Friday of this week.

Japan-based Metal One Corp. has agreed to acquire Cargill’s U.S. metals business. The two companies expect to close the sale later this year.

The agreement includes Cargill’s U.S. metals supply chain business, which includes commercial activities based in Minneapolis and Houston, as well as eight processing facilities in seven U.S. cities: Windsor, Colo.; Panama City, Fla.; Granite City, Ill. (two facilities); East Chicago, Ind.; Tulsa, Okla.; Loudon, Tenn.; and Houston. Metal One will establish a wholly-owned subsidiary in the U.S. to manage the new business.

There was little movement in the steel indexes followed by Steel Market Update (SMU) last week. Both Platts and SMU have hot rolled average as being $630 per ton ($31.50/cwt). Cold rolled average was $805 (+$5) out of Platts and $810 (-$5) on our own CRC index.

Steel buyers and sellers report that most mills are still open to price discussions, even after recent price increase announcements, based on responses from Steel Market Update’s latest flat rolled market trends questionnaire. Over the course of the past week, SMU canvassed active participants in the manufacturing and service center segments of the flat rolled steel markets to capture any changes in market trends. The more than 100 responses to this week’s questionnaire offer a snapshot of how steel mills are handling price negotiations.

Flat rolled lead times, the amount of time it takes for the steel mills to produce an order if placed today, have shortened ever so slightly in the past month, according to data collected by Steel Market Update (SMU) from manufacturers and steel service centers earlier this week. Viewed over a longer time frame, lead times have remained essentially flat for the past few months.

Steel mill lead times are one of the keys used when determining whether flat rolled steel prices should/will gain strength or weaken over time. AK Steel announced a new $30 per ton price increase last week, but so far the other mills have not followed. The flat lead times we are measuring may be one of the reasons why other mills are being cautious before making their announcements.

Mill lead times could certainly change in the coming few months, but will more likely lengthen as the market responds to increased steel demand in the wake of two hurricanes and possible trade action in Washington. Steel Market Update will report on the first signs that storm recovery is affecting lead times.

Hurricane related delays continue to frustrate shipping on the Gulf Coast and now on the Eastern Seaboard from Florida to the Carolinas. Port closures, rail delays, truck shortages, and flooded roadways and rail systems are affecting all modes of freight transportation.

Reliance Steel & Aluminum Co., Los Angeles, reports that its operations in the Houston area suffered no material damage to facilities, equipment or inventories because of Hurricane Harvey. Many facilities were closed and unable to ship for most of last week due to the catastrophic flooding, but are now reopened and operational.

Editor’s note: Following is a response from Zekelman Industries CEO Barry Zekelman to remarks by Daniel Pearson of the Cato Institute published in Steel Market Update’s Sept. 5 newsletter. Zekelman comments on his position on imports and the current state of steel-related trade into the U.S.

During our exchange at the recent SMU Steel Summit Conference, Dan responded that he was surprised I advocated for “much of the same” when it comes to dealing with dumped steel and steel products. Nothing could be further from the truth! My suggestions were to change the system to better capture countries, products and schemes that are used to circumvent duties, and speed up the process, initiate these measures on the imposition of threat, broaden the product scope and definition of injury. Quotas should be imposed at the immediate sign of threat to injure (which China and many countries do) based on price erosion, job losses, volume reductions and plant closures. Duties are very difficult to enforce due to the lack of resources to collect them, mislabeling products to avoid duties, changing documentation to avoid disclosing the actual producing country, and just not paying the duties. All these cheating schemes harm the entire country that receives the unfairly sold product.

Millennials are the steel industry's future and are anxious to solve problems and get results. Attendees who remained for the final presentation at the SMU Steel Summit heard an eye-opening discussion on just what the millennial generation is seeking and how the steel industry can recruit and retain talent from this important demographic.

Three young professionals from Pacesetter, Cargill, and Hubbell, Inc., offered their insights on millennial behavior, goals, and recruitment.

Apparent steel supply for the month of July totaled 9,570,118 net tons, according to the latest data from the U.S. Department of Commerce and the American Iron and Steel Institute. Apparent steel supply is calculated by adding domestic steel shipments and finished U.S. steel imports, then subtracting total U.S. steel exports.

U.S. steel exports in July totaled 806,512 net tons (731,656 metric tons), down 11.5 percent over June, but up 9.3 percent from July 2016. Total exports have declined over the last two months after reaching a 2.5-year high in May (1,006,087 tons). The total July export figure is below the three-month moving average (average of May 2017, June 2017 and July 2017), and below the 12-month moving average (average of August 2016 through July 2017). Here is a breakdown of flat rolled and plate steel exports:

The weekly U.S. rig count remained steady this week, according to Sept. 8 data from Baker Hughes, a GE Company. The number of active oil rigs declined by 3 to 756 rigs, while the active gas rig count rose 4 to 187 rigs. The miscellaneous rig count was unchanged at 1 rig. Compared to this time last year, the 944 count is up 436 rigs, with oil rigs up 342, gas rigs up 95, and miscellaneous rigs down 1.

The Dodge Momentum Index, a measure of nonresidential construction projects in planning, dropped 2.4 percent to register 129.1 in August. Commercial planning led the decline, falling 8.7 percent, while institutional planning partially offset it with a gain of 7.3 percent. In general, commercial planning has seen a steep rise this year as large office building projects entered the planning cycle, said Dodge Analytics.

The saga continues as we endeavor to escape the wrath of Hurricane Irma. After leaving Hobe Sound, we settled in Gainesville on the campus of the University of Florida. As the hurricane track began to move a little further west, we decided to do the same and headed into the western panhandle of Florida. That is where we are now and where we expect to remain as the storm heads up the west side of Florida. Our hope is the move west will ultimately be good news for our home and office in Hobe Sound on the east coast. We are keeping our fingers crossed. On Monday, we are expecting sustained winds here in the panhandle of 45 miles per hour (just updated to less than 45 miles per hour as the storm weakens while pummeling Naples).

Late yesterday (Sept. 6), AK Steel announced a new $30 per ton flat rolled price increase. AK Steel last announced a flat rolled price increase three weeks ago when on Aug. 16 the steel mill raised prices by $30 per ton.

Both current and future sentiment showed a slight improvement in the latest SMU Steel Buyers Sentiment Index, based on data gathered in early September. The index measures how buyers and sellers of flat rolled steel feel about their company's ability to be successful both in the current market environment, as well as three to six months into the future. Overall, the indexes have remained at optimistic levels throughout 2017.

The history of the SMU Steel Buyers Sentiment Index is when we start to see a jump in the numbers it generally is due to higher steel prices or, a market that is perceived as heading higher from here. We will need to watch the data closely in the coming weeks to see if steel prices and demand improve from here. We do know that the information coming from China and elsewhere is quite positive and that too could be influencing the optimism being expressed in our Sentiment Index.

Ferrous scrap prices were expected to rise by $20 to $30 per gross ton once the September negotiations began. By Thursday afternoon (today), we were learning that steel mills are suddenly able to buy at sideways numbers. We understand North Star BlueScope was able to buy September at the same prices as August. Other sources are advising that the upside potential is now $10-$15 rather than $20-$30.

Steel Market Update (SMU) is in contact with a number of ferrous scrap sources and we are being advised that the market is still in flux, and those anticipating higher prices than those collected in August may be disappointed.

The following article on the hot rolled coil (HRC) futures markets was written by David Feldstein. As the Flack Global Metals Director of Risk Management, Dave is an active participant in the hot rolled futures market, and we believe he provides insightful commentary and trading ideas to our readers. Besides writing futures articles for Steel Market Update, Dave produces articles that our readers may find interesting under the heading "The Feldstein" on the Flack Global Metals website, www.FlackGlobalMetals.com.

Three out of four steel buyers responding to Steel Market Update’s latest market trends questionnaire believe the hurricane and flooding in Houston will have a significant impact on the steel industry, at least for the short term. Following are some insightful comments:

The U.S. Department of Commerce (DOC) released final census data on July foreign steel imports. The DOC advised total steel imports of 3,482,524 net tons. When semi-finished steels are removed (slabs/billets/blooms), finished steel imports totaled 2,896,389 net tons.

At the same time, the DOC advised the latest license data for the month of August. As of Sept. 6, it appears August foreign steel imports will match those of July at about 3.5 million tons. Finished is expected to be close to July levels, as well, around 2.7-2.8 million net tons.

U.S. automakers sold 1.48 million vehicles in August, a 1.9 percent drop from a year ago. A portion of that decline was the loss of an estimated 20,000 sales from the Houston area during the last week of August.

Houston is the ninth-largest vehicle market in the U.S., and sales are expected to rebound as consumers replace autos damaged in Hurricane Harvey. Kelly Blue Book estimates as many as 300,000 to 400,000 vehicles will need to be replaced. Some dealerships in the Houston area escaped damage, while others report total loss of inventory.

Domestic raw steel production totaled 1,747,000 net tons in the week ending Sept. 2, up 0.4 percent from the prior week and an 8.6 percent increase from the same period in 2016. The mill capability utilization rate was 74.9 percent for the week, up from 68.8 percent in the same week last year, reports the American Iron and Steel Institute in Washington.

Adjusted year-to-date production through Sept. 2 was 60,900,000 net tons, up 3.2 percent from the same period last year. The capability utilization rate of 74.6 percent was up from 72.1 percent through the first eight months of 2016.

Global manufacturing rose to a 75-month high in August. The J.P. Morgan Global Manufacturing PMI climbed to 53.1 from 52.7 in July. Most components of the PMI increased in August and at a faster rate. Future output was the only measure to remain the same as July, at a strong 63.5.

Solar manufacturers are hoping for a positive determination in a Section 201 trade case that claims U.S. manufacturers are harmed by global overcapacity and the import of cheap solar modules from China. They are now getting support from the steel industry in the form of a letter to the U.S. International Trade Commission from the Steel Manufacturers Association. Washington-based SMA represents EAF steel producers.

Thyssenkrupp finalized the sale of Brazilian steel mill CSA Cia Siderúrgica do Atlántico to Ternium this week. The sale takes effect retroactively from Sept. 30, 2016. The $1.3 billion deal was hammered out in February.

Completion of the transaction ends a long process for Thyssenkrupp to divest all of its Steel America assets. In 2014, Thyssenkrupp sold what is now AM/NS Calvert Steel in Alabama to ArcelorMittal and Nippon Steel. The company was unable at the time to find a buyer for the struggling CSA, which it jointly owned with Vale. Thyssenkrupp secured full ownership of CSA from Vale in late 2016.

Kloeckner Metals Corp. announced the appointment of a new chief executive officer and chief operating officer on Thursday. Beginning Jan. 1, John Ganem will serve as CEO and Bart Clifford as COO.

I want to recognize the Steel Market Update writers who have been doing stellar work through a grueling work schedule. Last week, it was our conference where we had all hands on deck in order to make sure the conference ran smoothly. This week and this coming weekend (and probably all of next week), the schedule will be tough due to Hurricane Irma as it is impacting our offices. So, I want to thank Tim Triplett, Sandy Williams, Brett Linton and Peter Wright for all of their hard work.

Steel Market Update headquarters is in Hobe Sound, Fla., and we are part of the mandatory evacuation area as Hurricane Irma moves towards the east coast of Florida. We have buttoned up our house and our office and we have left south Florida and are currently located in Gainesville, Fla., on the campus of the University of Florida. After driving 264 miles over seven hours, we have decided to hunker down here. There are essentially only two ways out of Florida if you are coming up from the south, I-95 on the east coast and the tollway to I-75 through the central and west coast. We are about 60 miles north of Orlando and a little west of the center of the state.