Final Thoughts
Final Thoughts
Written by John Packard
March 6, 2015
Someone asked me recently what value is there in a publication like ours? Perhaps the best real life example I have to reference is about the two decisions made here in Dawson County, Georgia to build first, a new jail and then second, a new courthouse. The county ignored my warnings when they built the jail as they went to bid just when steel prices were heading higher. The jail was well over budget when completed. The County Manager, Kevin Tanner (now a state representative), came to me when the courthouse was on the drawing boards and we agreed they would wait to take it to bid until the timing was in their favor. The courthouse was many millions under budget because they were reading what Steel Market Update was writing about regarding steel pricing trends and they were ready when prices moved in their favor.
I know there are other communities and states out there who read Steel Market Update. My opinion is now is the time to go get those bids for schools, courthouses, jails, etc. It is always harder to swim upstream and the current is in your favor at this time…
Iron ore spot prices in China have begun to move lower. As of Friday, The Steel Index had 62% Fe fines at $58.2 per dry metric ton (dmt) CFR Tianjin Port, China. I communicated with one of my key trading contacts in Asia who actively sells iron ore to the Chinese steel mills and he told me, “When you have small mills of 2-3 Millon MTS per year closing down and Integrated mills as Benxi, Angang etc.. shutting down 30-40% of their BF’s, the Ore price can only go one way, DOWN… This was advised to you some time ago that Ore levels would drop to the 50’s level on 62% in 1st/2nd Quarter 2015.”
There has been a lot of talk lately as to where scrap prices “should” be in comparison to iron ore. A number of analysts have referenced 3 times iron ore should be the ratio for obsolete grades of scrap (like shredded). At $63/dmt = $189 and at $58 X 3 = $174. I have also heard that the number should be 4 times iron ore. That would put scrap at $252 at $63 and $232 at $58 (which is where we are at this moment). If the number is “3” then scrap may well have more to drop before stabilizing.
Now is the time to watch and see where the latest foreign offers are going to be for hot rolled, cold rolled and coated steels. Late last week we were advised of a foreign offer on hot rolled that when freight was added ended up being $500 per ton delivered. For domestic to compete with that offer the mills would need to sell around $440 per ton. Is this just an isolated offer to one rather large buyer or the beginning of the next leg lower?
If you have information (new offers or new purchases of foreign HR, CR, GI, AZ or plate) please let me know. You can reach me at: John@SteelMarketUpdate.com or by phone: 800-432-3475.
A reminder that we are taking registrations for our next Steel 101: Introduction to Steel Making & Market Fundamentals workshop. The workshop will be held in Merryville, Indiana which is just outside of Chicago and a short drive from NLMK Indiana which is the mini-mill we will take our group to tour. The dates for the workshop are: May 19 & 20, 2015. Details are on the website. SMU member companies receive a $100 per person discount. We also have a second discount for those companies who send more than 1 person to the workshop. If you have any questions do not hesitate to contact me: 800-432-3475.
As always your business is truly appreciated by all of us here at Steel Market Update.
John Packard, Publisher
John Packard
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