Final Thoughts
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Final Thoughts
Written by Tim Triplett
January 6, 2020
John Packard is traveling….
As always, the holiday break put the brakes on buying, making it a challenge to gauge steel prices in the first week of 2020. But it appears the upward price momentum has continued into the New Year.
Steel Market Update’s survey of the market over the past two days shows flat rolled steel prices up another $10-20 a ton. Multiple buyers tell SMU we can expect another $40 price increase announcement, probably led by Nucor, as soon as tomorrow (Wednesday).
Judging by comments from various steel buyers, views are mixed on the prospects for higher prices in the first quarter:
• “I believe the elements for a rising price market are falling into place. Nearly all of the factors affecting prices are bullish; lower recent imports, longer lead times, stable inventories and higher input costs all support higher prices. Then we have the unplanned outages at both USS and AM, which will put further constraints on supply. With the announcement by USS to shut down steelmaking at Great Lakes by April 1, this creates forward supply pressure, as well. Where will those lost tons go? Unless there’s a surprise to the downside for demand, I think we’re on the cusp of a market with the potential to keep rising for the near-term.”
• “Scrap should be up at least $30 a ton. Coupled with some production issues at AM, that should result in further price increases this month.”
• “I believe the expected increase in scrap, once it settles this week, will help firm up the $600 per ton minimum for hot rolled ($300 for scrap/$600 for HRC). I expect another increase to be announced soon once everyone’s lead times move into March.”
• “It does appear more clearly now that this market has some legs, based on planned/unplanned outages and capacity being taken out of the market. Prior to the holidays, I felt we would see price deterioration by late January. Now it looks like it will be very late Q1 before we see any cracks in the pricing. I think this market will test $625 before falling back to the $575 range in Q2. With an election year, geopolitical events, trade wars and tariffs, there’s always room for a surprise or two.”
Not all the service center and OEM executives responding to SMU were as bullish on pricing:
• “Lead times range from early March to just three weeks from now. It’s a real mixed bag depending on the region. We feel certain we will see another increase announced in the next 10 days or so, purely based on scrap going up. But the next increase announcement could hurt more than it helps. We are pushing up against that $600 HR number, and I think we will see growing resistance.”
• “The mills are trying to give a drifting market direction, but I’m skeptical it can last. It feels like we are in the giddy part of the mini-cycle and orders will slow from here.”
• “I don’t think they will be able to move prices higher. I think they have already run out of runway. I can’t see that being a logical move if and until someone takes out more capacity. Ultimately, the answer to that question will determine whether they can keep prices at the current level.”
John Packard is conducting the latest sold-out Steel 101 workshop today in conjunction with California Steel Industries in Ontario, Calif. The next opportunity to take advantage of SMU’s popular Steel 101 program will be in Merrillville, Ind., on March 31 and April 1, including two days of instruction and a tour of the NLMK Portage steel mill. For more information about registration, send an email to: Events@SteelMarketUpdate.com
Registration is also open for the 2020 SMU Steel Summit Conference to be held at the Georgia International Convention Center in Atlanta on Aug. 24-26.
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Tim Triplett
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Final thoughts
Sheet prices didn’t roar back after Labor Day. But steel market news sure came out of the gate strong (or maybe chaotically is the better way to put it). First, the nearly $15-billion proposed sale of U.S. Steel to Nippon Steel exploded into the news. And when I say exploded, I mean that all sides seem to be escalating things now.
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Final thoughts
Welcome back from Labor Day, from Steel Summit, and from whatever fun you might have had over the long weekend. Personally, I enjoyed camping with friends and family near Starved Rock. No one starved, there were no major injuries, and we enjoyed the many splendors of Mystical Fire. (Speaking of which, does that have industrial uses? But I digress.)
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Final thoughts
I want to say a huge ‘thank you’ from all of us at SMU to all of you (more than 1,500!) who attended Steel Summit this year. We appreciate you taking time out of busy schedules to join us – whether that was up on stage, submitting thoughtful questions, or catching up over a drink and bite to eat. Also, a bit shoutout to everyone at SMU and at CRU who made this event possible. It’s no understatement to say that we have a fantastic team.
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Final thoughts
Day one and two of SMU's Steel Summit 2024 are officially in the books. We covered a lot of ground, and the agenda sure did deliver.
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Final thoughts
The big show is just about here. SMU Steel Summit will be getting underway on Monday. Where does the networking begin? I’d say at the airport. So don’t forget your business cards. And it can't hurt to wear a company golf shirt.