Economy

Bits 'N Pieces

May 21, 2016

Steel Market Update was speaking with a trader on the West Coast about the USS/POSCO $150 per ton ($7.50/cwt) price increase announcement made late last week. The expectation is for California Steel Industries (CSI) to open their order books early this week.

The trader shared a story about the steel market that existed in 2004 in order to put the USS/POSCO $150 per ton number into perspective, “I remember in 2004 going back east to meet a customer and explain I was raising my price by $16.00/cwt. Customer countered that price increase should be no more than $14.00. We both had to laugh out loud on that request. Fun times. Price did go up the $16.00 [$320 per ton].”

We received the following information from a large service center, “John, the market is feeling toppy to me in the face of the China reversal, and the summer season. I don’t think it’s been announcements that pushed the prices to where we are, but fundamentals. More announcements may come – likely until the price stops moving up. Going higher from today’s levels faces much stronger headwinds. Lower scrap will fatten mini mill margins and ensure they are getting every pound possible out the door. I would love to see some demand improvement – seeing a stronger July instead of the seasonal reduction would be very helpful for service centers. Otherwise the price of July receipts will be hard on the market.”

The same service center told us that we need to watch currencies (our Premium members know that we do and that we report on the changes in currencies once per month). The U.S. dollar has been trending higher over the past few weeks which is not good news for steel prices… We will provide a new report on steel trading nations currencies in the coming days for our Premium level members.

We were asked the other day by a manufacturing company to comment on cheap Chinese slabs being imported into the United States. The Chinese mills are NOT exporting slabs to the United States. In fact, according to the latest data coming out of China the country essentially does not export any slabs anywhere around the world. There are only four countries exporting more than 10,000 net tons of slabs per month to the United States. They are: Brazil, Russia, Mexico and Japan. The Brazilian slabs go to California Steel and AM/NS Calvert, Russia main customer is NLMK USA, Mexico is AM/NS Calvert and California Steel and Japan is California Steel.

Our understanding is AK Steel, which in the past was an importer of foreign slabs as they have more rolling capacity than melt, is currently not importing foreign slabs based on an agreement with their union. As long as the blast furnace is down at Ashland the mill will not import slabs.