Trade Cases
Steel Buyers Not Yet Concerned about Trade Suits
Written by John Packard
August 16, 2015
It’s not every day that you get three flat rolled steel trade cases filed back to back to back. With the domestic steel mills clearly focused on removing as much hot rolled, cold rolled and coated steels from the market, we asked steel buyers for their opinions on what will happen from here?
Prices of flat rolled have been flat for a couple of months as benchmark hot rolled has bounced from $460 to $465 per ton with the SMU range currently at $440 to $480 per ton and our Price Momentum Indicator pointing at Neutral.
The short term affects of the trade cases are not moving the pricing needle as steel buyers report short mill lead times and plenty of available inventories on all products. We asked an executive with a manufacturing company that utilizes ultra light gauge galvanized in their production if they had any concerns related to the trade suits and the potential elimination of their Indian and Chinese sources of supply. “We have plenty of material,” we were told, “The world market must be slow as Vietnam, South Africa, Turkey and even Pakistan are offering steel.” He went on to tell us that prices have not risen on the news of the corrosion resistant dumping suit. “There is an onslaught of inventory. No need to buy any material. There is no shortage of material and I am not sure that you will see a spike in pricing.”
On Friday we spoke with a trader who is well known for their ultra light gauge flat rolled relationships overseas. He told SMU that the light gauge galvanized buyers in the United States were being a little short-sighted and that there is not enough mills in the world that produce light gauge galvanized that have the tonnage available to cover the U.S. market. In this trader’s eyes, it is only a matter of time before there will be both price and inventory issues.
Steel buyers who are more in the mainstream buying and selling medium and heavier thickness materials report that they are unconcerned about the dumping suits having any immediate impact on flat rolled steel pricing. “Some new countries are trying to fill the void created by dumping. Pricing indications ad been high for a number of weeks but lately GI [galvanized] and CRC [cold rolled coil] have been trading similar to last Chinese offers of two months ago, some items even cheaper.”
SMU confirmed that low priced cold rolled offers are out there. We spoke with one of our good sources who confirmed they had just purchased cold rolled from Vietnam at less than $500 per ton delivered to USA port.
Lead times continue to be reasonable with a Southwestern service center reporting, “Some domestic mills have talked about lengthening lead times but our orders seem to ship on time or early.”
We thought the comments made by one of our Southern service center sources about the flat rolled markets becoming “regional” and “protected” were worth repeating to our readers:
“The steel world is becoming a collection of regional, protected markets. Steel is not as freely traded anymore. Where it is freely traded, the price is weak ($13 HRC export price from China?!?!). With recent trade cases it seems like pricing is, and may stay relatively flat here instead of drop like the rest of the world. We are optimistic that a more stable market (rather than falling the way it has been since last summer) will allow for our margins to expand slightly.
Additionally, seems like domestic mills will also win if flat rolled pricing simply stays where it is. No need for price increases as cost reductions are widening their margins as well.”
John Packard
Read more from John PackardLatest in Trade Cases
Fitch warns more tariffs will pressure global commodity markets
“New commodity-specific tariffs, mainly on steel and aluminum products, could widen price differentials and divert trade flows,” the credit agency forewarned.
Commerce increases import duties on Korean galv, plate
The Commerce Department is raising the import duties on imports of corrosion-resistant sheet and cut-to-length plate from Korea.
Leibowitz on trade: Why is protectionism so popular?
The world has had a few shocks recently. The CEO of a major health insurance company was gunned down in Manhattan. The 50-year Assad dynasty in Syria was pushed out less than two weeks after rebels started an offensive. And President-elect Trump is promising tariffs on everything a month before he takes office. But one shock has been taking place for a lot longer than the last few weeks. The 70-year consensus on trade hasn’t just been challenged. It’s been repudiated.
Ternium chief say Mexico tariffs ‘irrational’
Vedoya said the proposed tariffs are "an irrational measure that would harm both their own industry and ours."
Price on Trade: Trump tariffs are no negotiating tool – and could come at lightning speed
We focused on trade actions the second Trump administration might take in a prior column. Since then, we have learned more about the individuals who will be leading these efforts. Recent nominations reinforce the president-elect’s statements that tariffs will feature prominently in the second administration and that trade actions will be unveiled at lightning speed.