Next Steel Mill Price Increase Right Around the Corner?

SMU is going to take a moment and remind everyone of an article written back on April 27, 2017, entitled: “Is the Trump Administration the Next Black Swan Event?” In the article, we warned of the potential disruption that could be caused to the industry should the Trump administration take the same kinds of actions it did against Canadian wood exports to the U.S. (a 24 percent tariff).

We received a lot of push-back from a few companies via social media – especially on our LinkedIn page. The following was published in the May 14, 2017, issue of SMU in an article entitled: “Will the Mills ‘Push the Envelope’ If Provided the Opportunity?”:

“Steel Market Update (SMU) has an active presence on social media. We find LinkedIn in particular an area where we can get our LinkedIn readers involved in a subject prompting questions and responses.

In the preamble prior to the posting of an article produced by Steel Market Update entitled ,’ SMU publisher John Packard said, “The Trump Administration through the U.S. Department of Commerce is making bold moves that could impact the amount of foreign steel coming into the country. This could restrict supply forcing prices even higher and perhaps pushing manufacturing out of the United States….”

This prompted a flurry of responses (the authors of the responses can be found in the LinkedIn group called Steel Market Update):

“I usually love your steel insights and positive perspective. This one surprises me a little as it makes a big assumption that the U.S. steel companies are suicidal and not rational. Of course, that would require unreasonable greed on their part, but certainly there are one or two that would practice some common sense. Is it that much more expensive to add back idled capacity? Based on your previous great track record of deep and credible insight into the US steel market, do you really believe after years of difficulty dealing with unfair trade practices that they would so easily jump off the cliff again?” Manufacturing company

“Some U.S. steel companies are owned by foreign steel producers. They have different business practices, have been ‘reactionary’ over the past few years and it does cause ripples in the market. However, the long-standing U.S. owned steel companies with common business sense have been level-headed, don’t and won’t act unreasonable or greedy, as you pointed out.” Data and Market Analyst

We have not yet seen the report from the U.S. Department of Commerce with the recommendations from Secretary Wilbur Ross. From SMU’s perspective, it will be interesting to count the number of price increase announcements that will be made prior to (1) the recommendation from Secretary Ross and (2) President Trump’s announcement of any remedies provided to the domestic steel industry to block imports.

We understand that the domestic mills need to stem losses and regain the pricing reached earlier this year when benchmark hot rolled coil hit $655 per ton (March 21, 2017, SMU Index). The question in buyers’ minds is going to be at what point does the mills’ case for “a healthy steel industry” become price gouging of their customers, just because they can.

SMU Note: This article was completed and published prior to the ArcelorMittal USA announcement which was made late this afternoon.