Economy

Buyers See 'Further Extensions, Further Uncertainty' Come June 1

May 29, 2018

The steel market is waiting anxiously to see what happens June 1 when the tariff exclusions are set to expire for Canada, Mexico and the European Union. Some expect the exclusions to be extended as trade negotiations continue. Most expect steel prices to remain steady or move higher, based on an informal canvass of Steel Market Update sources this week.

“After all the extensions and confusion thus far, I have no clue what the outcome may be. My guess is that we will see further extensions and further uncertainty,” said an executive from a large service center organization.

“It feels like Trump will extend the deadline to maintain the leverage. Prices are staying steady,” said another source.

“I think the administration will extend the exclusions for at least another month, if not longer, if they are making progress on the quotas or exclusions and the NAFTA rework,” said one recycler and distributor.

“I believe each country will work out its own deal with the United States. Steel pricing should remain the same, with everything already baked into the price. The summer months will test the price of coil and plate,” said a Midwestern steel plate distributor. He added: “Plate demand is steady, but off from the highs of March (50-year record) and April.”

“I believe the lack of a deal for all temporarily exempted countries will help support the market near-term. I see prices steady short term, and then I could foresee the mills being able to inch pricing a bit higher after they are fully booked for the July-August summer timeframe,” added another service center exec from the Midwest.

Another sheet and plate distributor in the Midwest sees no attractive foreign offers to keep domestic prices in check. “The plate mills are supposed to announce an increase to stop any slide that MIGHT be happening in the distribution side of the market. Demand is relatively good and lead times are out into August, thus an increase may be warranted.”

Offering an opposing view, a West Coast distributor commented: “I’ve been in the camp for many weeks that the tariff will be enforced against Europe. Trump is playing hard ball, they are playing hard ball, and I think Trump believes (and he’s right) that trade action against Europe would play well with his base. NAFTA countries are a coin flip to me.”

Most who replied to SMU’s query agreed that foreign steel prices are not currently “attractive” enough to consider import offers at this time.

“Foreign offers are not overly attractive. For some products, import is of course cheaper than domestic, even with the duties. But the savings is often not enough to take the risk and bear the lead time. We’d only buy with a firm customer PO to back it up. The ‘big move’ in steel prices has already occurred,” said one service center in the Midwest.

“Tariffs and the threat of quotas make foreign offers very uncertain,” said another, adding that the price is low enough on some products that he is tempted to try placing a few small orders.

Foreign offers are mostly on cold roll and galvanized. “Based on today’s domestic pricing they are attractive, but I’m not so sure they will look that attractive come Q4,” observed another buyer.