Final Thoughts
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Final Thoughts
Written by John Packard
October 31, 2013
It seems to be a foregone conclusion that there will be a flat rolled price increase announcement within the next few working days. Spot prices have remained firm with benchmark hot rolled averaging $665 per ton ($650-$680 range) based on our SMU index. Scrap is forecast to be up by $20 to $40 per gross ton and maybe $50 per gross ton by the end of the year. If that is correct the mini-mills will have pressure on their margins. Our expectation would be for Nucor or Severstal to lead off the next round of increases. Our expectation is $30-$50 per ton…
My opinion is prices will rise from here through at least the rest of the year. As of 6 PM this evening I am adjusting out SMU Price Momentum Indicator to Higher. I will have more details on the reasons why in Sunday night’s edition of our Executive Newsletter and in our Premium Special issue to be published for our Premium Level members tomorrow.
September preliminary census data was reported by the U.S. Department of Commerce around 5 PM ET today. The big number is total imports for September were 2,760,821 net tons which is lower than August when the U.S. received 2,878,367 net tons. Slabs were much lower than the license data had projected with 633,951 net tons vs. license data of 771,300 net tons. We will have a full report in Sunday night’s edition of our Executive issue of Steel Market Update.
Our next steel market survey will begin on Monday morning, November 4th.
I haven’t been reading the other industry newsletters’ coverage of the ThyssenKrupp Steel Americas rumor mill. However, I am aware of the comments being made regarding ArcelorMittal, Nippon and potentially U.S. Steel joining forces to pursue the Calvert, Alabama facility. Here are some of my thoughts and opinions on the subject.
It has been known for more than a year that the two primary interested parties were CSN out of Brazil and ArcelorMittal with their headquarters in England. Other companies who had expressed interest were Nucor and U.S. Steel for the Calvert operation and Ternium for the CSA slab mill in Brazil.
Ternium dropped out of the bidding almost immediately feeling the price being requested was not reasonable.
CSN became the lead bidder because they were interested in both assets – CSA, the slab mill in Brazil and the Calvert, AL rolling mill here in the United States. No other company expressed interest in the Brazil facility as AM and USS are both long slabs.
Our opinion is Nucor is only interested from a commercial standpoint and has been upgrading the Decatur and Berkeley operations in order to become a larger supplier to automotive and doesn’t really need the Calvert operations.
CSN has wanted to become a larger player in the North American market and has made several attempts to purchase mill assets in the United States only to be spurned by the unions. The one asset they did manage to purchase was the former Heartland Steel in Terre Haute, Indiana. The Heartland Steel facility was a non-union plant and is now called CSN.
This may be CSN’s last chance to purchase a quality non-union steel asset in the United States or Canada.
If ArcelorMittal becomes the lead buyer there most likely will be questions by the U.S. Department of Justice. Since the mill is only a rolling mill and is not yet considered to be a major automotive supplier they may or may not be required to divest themselves of other U.S. assets.
When speaking with buyers and mill people the expectation is if AM is the buyer there will be fewer competitors and a potential elimination of one of the more competitively priced mills in the United States.
If CSN becomes the new owner they then become a “wild card” as no one is quite sure how they will go to market.
Our sources do not believe that the CEO of CSN has thrown in the towel and admitted defeat after spending almost 9 months in constant negotiations with ThyssenKrupp.
Second, a sale to ArcelorMittal without a resolution to the CSA plant doesn’t help ThyssenKrupp AG as much as a sale to CSN with some form of slab agreement which potentially provides some value to the Brazilian assets over the next five years.
The candle has been lit and is now sitting beneath a few executives seats in Germany, Brazil and England…
The next couple of months may prove to be quite interesting indeed.
As always your comments and your business are both truly appreciated.
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John Packard
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Sheet prices didn’t roar back after Labor Day. But steel market news sure came out of the gate strong (or maybe chaotically is the better way to put it). First, the nearly $15-billion proposed sale of U.S. Steel to Nippon Steel exploded into the news. And when I say exploded, I mean that all sides seem to be escalating things now.
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Welcome back from Labor Day, from Steel Summit, and from whatever fun you might have had over the long weekend. Personally, I enjoyed camping with friends and family near Starved Rock. No one starved, there were no major injuries, and we enjoyed the many splendors of Mystical Fire. (Speaking of which, does that have industrial uses? But I digress.)
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I want to say a huge ‘thank you’ from all of us at SMU to all of you (more than 1,500!) who attended Steel Summit this year. We appreciate you taking time out of busy schedules to join us – whether that was up on stage, submitting thoughtful questions, or catching up over a drink and bite to eat. Also, a bit shoutout to everyone at SMU and at CRU who made this event possible. It’s no understatement to say that we have a fantastic team.
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Day one and two of SMU's Steel Summit 2024 are officially in the books. We covered a lot of ground, and the agenda sure did deliver.
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The big show is just about here. SMU Steel Summit will be getting underway on Monday. Where does the networking begin? I’d say at the airport. So don’t forget your business cards. And it can't hurt to wear a company golf shirt.