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
Some of you have told me that the current market feels about as crazy as early 2021 when demand snapped back after the initial outbreak of the Covid-19 pandemic. Others have said it might be more like late February/early March 2022, when Russia launched a full-scale invasion of Ukraine – and, in the process, caused […]
Final Thoughts
To say we’ve entered a “Brave New World” since Jan. 20 might be an exaggeration, but we’ve definitely entered a different one.
Final Thoughts
I think it’s fair to say that the last few weeks – and last week especially – have been among the most intense for any of us covering steel (or aluminum).
Final Thoughts
A look at how SMU survey respondents are reacting to President Trump's recent actions on tariffs.
Final Thoughts
A lot of the changes basically entail rolling back what I’ll call, for fun, Section 232 Lite. S232 Lite resulted from watering down what I’ll call OG S232 – the one first imposed in March 2018 - with exemptions and exclusions over the years. Now, OG Section 232, is back with its across-the-board 25% tariffs against everyone.