SMU Market Trends: Price Hike Coming in January?

• “I am leaning slightly toward, yes, the mills will announce an increase. The AIIS lawsuit could take months to conclude and the new U.S.-Mexico-Canada treaty is yet not ratified. It’s unlikely the Trump administration will eliminate Section 232 tariffs on steel and aluminum imports from Canada and Mexico anytime soon. We have been informed by the mills that demand is still steady.”

• “I suspect the mills will try to stop the slide.  I think it depends a lot on economic conditions on the ground.  If things do not appear to be stable, it may be hard to implement a round of increases.”

• “Prices are very soft. A price increase would seem probable within the next few weeks to try to stop the slide. But I don’t see much upside to prices at this point. This down market cycle is the backlash from government involvement in steel prices.”

• “It’s hard to read the market at this point…aside from the fact that all market signals are currently pointed down. We all know this is based on the situation with Section 301 tariffs on China. If there is a deal, the markets will all begin rapidly recovering; if not, this will get uglier. My gut says there will be a deal in spite of hawks like Lighthizer and Navarro buzzing in Trump’s ear. As for the mills possibly announcing an increase, on one hand you’d think that something has to be done to stem the downside pressure. On the other hand, we all know it’s hard to catch a falling knife, and a failed increase attempt is most definitely worse than a successful one.”

• “We still see January HR open for many mills. Like Nucor did in December, the mills may try for an increase in January, but unless they have a solid order book behind it, it will have little chance of succeeding. If a price increase is announced and it is not accepted, it will drive the market down further. We see scrap down further in January, so we believe the mills can allow pricing to fall another $20 per ton without margin erosion.”

• “In my opinion, it all depends on how many orders the mills receive. If they get lots of orders, we see a little movement to the upside for a few weeks. I expect the mills to come with an increase, but I do not believe it will stick. There are too many factors pushing the price lower. It may go up for a few weeks, but I believe it will continue to be under pressure.”

• “There’s too much capacity coming online. The first half of 2019 will be flat. Mills will try for an increase, but no one’s buying it. We’re range bound at $650-$750 for the next six months.”

• “Before the holidays, my answer was a definite “yes.” Now, it appears that conditions don’t really warrant the mills trying for an increase. January scrap prices look like they’ll be cratering with potentially a further fall in February—almost unheard of. They’d be better off seeing if they get some firming in their order books before trying. Given that the last attempt fizzled, if the same thing occurs again this soon after, they could lose credibility. We’re all subject to the same supply/demand dynamics, and they will ultimately determine where pricing goes, regardless of what the mills attempt to do.”