Final Thoughts
Final Thoughts
Written by John Packard
May 15, 2019
I have moved from our Steel 101 workshop in Iowa to Minnesota where I met with a large flat rolled service center this afternoon.
The service centers are consistently reporting to SMU that the domestic steel mills are just plain producing too much steel. With scrap down and the marginal cost to produce a hot band at the minimills somewhere around $500 per ton, there just is no incentive for the mills to stop making steel.
The expectation is for Mexico and Canada to have the Section 232 tariffs removed. However, there will be protection mechanisms in place that protect the normal and natural movement of material between the three countries. Steel buyers may think that prices will drop, and they may, but more due to sentiment being affected than a flood of imports coming from either country.
I communicated with a Mexican mill today and asked about the mill increasing shipments to the U.S. and was told, “No chance. There will be a surge protection mechanism that has a tie-in to historical volumes. As you know, Mexico exports a small percentage of its production…just like the U.S. exports a small percentage of theirs. Whatever the agreement is, the countries have made it clear that there is a certain natural volume that crosses the border in both directions, and there is no place for Peter Pan like projects to artificially increase shipments between the countries.”
I have had discussions with service centers this week about the direction of flat rolled and plate steel prices. With scrap moving lower (and summer coming when scrap prices traditionally move lower due to higher collections) and nothing on the horizon to spark demand, or limit supply, then prices are expected to continue to move lower. Will the hot rolled average break though the $600 per ton barrier? Well, the only way I can answer that is to say there are already a number of data points below $600 and the expectation is for that number to only grow over the next few weeks.
The companies with whom I have been speaking are all coming to the 2019 SMU Steel Summit Conference in Atlanta, which they all agree is the premier networking event for the steel industry. You can learn more about the conference by going to: www.SteelMarketUpdate.com/Events/Steel-Summit
For those interested in nominating someone for the 2019 SMU NexGen Leadership Award, which is being sponsored by the Steel Manufacturers Association, you can click on this link.
If you are interested in becoming a new subscriber to Steel Market Update, or would like to renew or upgrade your existing service, please contact Paige Mayhair at 724-720-1012 or by email at Paige@SteelMarketUpdate.com
As always, your business is truly appreciated by all of us at Steel Market Update.
John Packard, President & CEO
John Packard
Read more from John PackardLatest in Final Thoughts
Final Thoughts
And just like that, we’re wrapping up the last SMU newsletter of 2024. We’re closing out our 19th year and looking with wide-eyed anticipation to what 2025 will bring.
Final Thoughts
SMU looks back at stories from Decembers past, one, five, 10, and 100 years ago.
Final Thoughts
It's that time of year again. You know, that time when people wonder if those things are drones in New Jersey or if the aliens are ready to come onto the stage just in time for Inauguration Day. What will that do for steel price volatility? In any case, the SMU team finds itself in Pittsburgh this week.
Final Thoughts
The Community Chat last Wednesday with ITR economist Taylor St. Germain is worth listening to if you couldn’t tune in live. You can find the replay and Taylor’s slide deck here. You can also find SMU reporter Stephanie Ritenbaugh’s writeup of the webinar here. Taylor is Alan Beaulieu’s protégé at ITR. Many of you know Alan from his talks at SMU Steel Summit. I found Taylor’s analysis just as insightful as Alan’s.
Final Thoughts
Cracks have formed in what has been presented as the Biden administration’s united front against Nippon Steel’s play for U.S. Steel. A report from the Financial Times said parts of the administration are at odds on the deal.