Final Thoughts
Final Thoughts
Written by John Packard
May 8, 2017
My “final thoughts” is an area of the newsletter where I can provide some of my opinions on a wide range of topics, provide information or updates on our workshops and conference or provide late-breaking tidbits from around the world that come in late in the day and are unable to make it into a full article.
I was asked earlier today if I thought the Section 232 investigation will end up affecting the steel industry. I don’t have an answer to that question. Trade attorney Lewis Leibowitz has shared the results of the last time a Section 232 was used for the industry (Right after 9/11 there was an iron ore/semi-finished review). At that time, the industry was not deemed critical for national security. However, my gut tells me the Trump Administration is using a much broader definition of what constitutes national security including damage to manufacturing or other companies whose employment is considered critical to the health of the country.
I was also asked if the Department of Commerce finds reasons to block foreign steel how much material would be affected? That is definitely something I can only guess at. I guess the answer will be anything from zero to 100 percent…
I know the financial community scratches its collective head sometimes when the domestic steel mills don’t make money (or as much money) as was expected. How does this happen? One way may be the use of indexed based “bucket” deals. These are the same deals that killed the mills a few years back and an attempt was made to limit them. Evidently, they are back and can have a major impact on the market. Here is an example received from a service center earlier today:
“Interesting dynamic occurring right now with some large service centers using a backwardated futures market to offer grossly cheap HR to customer for the 3rd quarter and beyond. For example, service center has a bucket CRU deal with a mill at CRU-$50 [minus $50]. July roughly trading at 585ish so they offer August steel to customers using 585-50 = $535. No one in the spot market can compete with that kind of offer. I don’t know this to be fact, it’s an assumption based upon price feedback we are getting from customers who we trust where I know who the competitors are.”
We will discuss the Section 232 and other trade cases as part of our Steel 101: Introduction to Steel Making & Market Fundamentals workshop which will be held in Ontario, California on June 22-23, 2017. Come join myself and five other SMU instructors as we discuss how steel is made, qualities determined, rolled, sold and what impacts pricing. The workshop is perfect for new employees or those wanting to learn more about the industry. Information is on our website: www.SteelMarketUpdate.com/Events/Steel101 or you are welcome to contact me and I will do my best to address what is taught and why the workshop is a good one for your company. Part of this workshop will be a tour of the California Steel Industries (CSI) steel mill.
We will publish a new Premium newsletter tomorrow (Wednesday).
I will be in Chicago next Thursday for the Metals Industry Boy Scout Dinner. Come join me at the Hilton Chicago Hotel at 720 South Michigan Avenue. I expect the lounge will be packed starting around 4 PM in the afternoon…
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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Final thoughts
Cleveland-Cliffs is seeking $750 per short ton (st) for hot-rolled coil. That’s $20/st above where the steelmaker had been. It’s also $30/st above Nucor, which is at $720/st this week. We've seen prices increase incrementally this week. SMU's HR price, for example, stands at $690/st on average, up $5/st from last week. The questions now are whether a number well above $700/st will stick, whether other mills will follow Cliffs, and whether there is enough demand to support higher prices.
Final thoughts
We got a little flack for adjusting our sheet momentum indicators to neutral last week. To be clear, we didn’t adjust them to lower. Part of the reason we moved them to neutral was because there are some unusual cross-currents in the current market. On the news side, you could make a case that there should nowhere to go but up.
Final thoughts
I think all of us know that sometimes courtships go wrong. A misplaced word or deed and soon things can go sideways, and not in the prices sense. Such could be the case with Japanese steelmaker Nippon Steel’s play for U.S. Steel.
Final thoughts
We’re starting to see some impacts of the big trade case filed last week against imports of coated flat-rolled steel from 10 nations. Namely, we’ve heard that a range of traders have stopped offering material from Vietnam. An alleged dumping margin of nearly 160% will do that. Especially amid chatter of critical circumstances.
Final thoughts
The phrase “political football” has been tossed around a lot lately. (Pun probably intended.) For the humble journalists at SMU who thought the week following Steel Summit would prove a quiet one… the news cycle had other ideas