Economy

Bits 'N Pieces

May 11, 2016

Supply is the over-riding issue affecting steel buyers today. Supply is constrained for a number of reasons, some expected and some by chance.

We wrote an article earlier this week about two situations affecting steel buyers in the United States. The accident at CSN in Brazil took out their lone blast furnace costing them about 200-250,000 metric tons of pig iron production. The net result of the CSN accident is affecting tens of thousands of tons of export orders (mostly corrosion resistant steels) to customers in the United States. Then over the weekend North Star BlueScope suffered an explosion and breakout of one of their electric arc furnaces. The company is expecting a loss of approximately 38,500 net tons (35,000 metric tons) of hot rolled production that cannot be made up due to the mill being at capacity at the time of the accident.

We are learning that foreign steel that was anticipated may either be late or may not come at all. We had dinner with a company that had some Sidor (Venezuela) steel on order and the steel has been delayed due to the government cutting energy to the mill.

During the Boy Scout Dinner which was held this evening (Thursday) the talk was all about the rapid rise in flat rolled steel prices and how long will it last.

The temperature of the audience here in Chicago is that the strong price environment will last longer than many think. We heard from a number of people that it will last at least another 6 months (late 4th Quarter).

Another comment we heard was what was going to be the catalyst to move the needle in the opposite direction? Supply is constrained and will be further constrained over the summer as there are a number of maintenance projects that will take out production. An example is the new Galvalume pot being put into SDI Columbus will create a two to three week hole in their coating line. There are examples of maintenance across the industry.

Trading companies reported light gauge galvanized as being in very short supply with South Africa, Pakistan and UAE as being the only mills who were quoting (and we heard Pakistan and the UAE are less interested at this moment). The India mills want to ship to the U.S. but they won’t do anything until the Final Determinations are announced.

We heard the expectation is that the Final Determinations will be higher than the Preliminary Determination. Exactly how high is not known. Once the Final Determinations are made then the country (like India) will decide if they can ship to the U.S.

A comment was made by a trading company that if India gets 10 percent or less duty they will absorb it and go back to shipping steel to the United States.

The Boy Scout Dinner had another good crowd of steel people from around the country. We spoke with dozens of people who spoke highly (or heard others speak highly of our Steel Summit Conference) and a great many have verbally committed to attend this year.