Final Thoughts

We picked up comments like this one from the general manager of a middle USA service center who reported spot hot rolled as being $600 per ton ($30.00/cwt base), and cold rolled and galvanized at $780 per ton ($39.00/cwt base). He told us, “Market is still in flux and moving higher, so we need to see if/where it pauses/stabilizes before being able to forecast future direction.”

My conversations have identified companies – end users and service centers – who made opportunistic purchases in October prior to the mills announcing prices (or right at the beginning of the announcements). I am being told by these companies they will not need to purchase more spot steel until late February or March. I don’t have a good feel for what percentage of the companies with whom I speak made speculative transactions, but it is not an insignificant number.

A Texas based company spoke about foreign steel and what they think will happen in the coming months: “I think the market will continue to rise through the end of Q1, then start to decline as initial spring demand stalls. Import offers are starting to get in line for buyers to start seriously considering a potential restart of an import buying strategy.” 

From my perspective: Restarting a foreign import buying strategy, if implemented, will create issues for the domestic mills down the pike. As buyers transition tons away from domestic sources, they are not necessarily telling their current suppliers of their intention to spread their business. This creates holes the domestic mills will not be expecting. Something to watch over the next few months.

The buyer at a large service center group told SMU, “We have not bought any spot in 2020. Our inventory is strong, and we can buy spot from other service center cheaper than the new mill pricing.”

From my perspective: Another issue for the domestic steel mills. If the mills push prices high too fast, many service centers can buy from their competitors (or distributors who specialize in selling to service centers) cheaper than mill replacement cost. Over time, holes will develop. Question is what comes first – holes in inventories of the distributors servicing the service centers or mill lead times that begin to falter and the mills begin discounting?

This same service center buyer gave us his perspective on how high steel prices can go: “I think $600 is the first test. Will the market support $600 short term, and more importantly, will the market support $640 or higher? I don’t feel the market is strong enough to support anything over $600, short or long term. If scrap goes sideways or down in February, I believe pricing will quickly stall.”

I heard the scrap comment today from a few steel buyers. Something we will need to watch closely as we head into February (which is only a couple of weeks away).

Another steel buyer gave us these thoughts: “I cannot see the mills getting more than what is already announced without a traumatic event. It will be a tall task to collect all of what is announced. However, in the near term, lead times are strong and contract buying is robust. Until contract pricing catches up with spot pricing, we would expect the mill order books to remain pretty populated.”

From my perspective: There does seem to be some skepticism while at the same time support for the higher prices right now. SMU is keeping our Price Momentum Indicator on flat rolled pointing toward higher prices.

Plate buyers seem to be split on whether the market is getting stronger or if prices will falter as soon as scrap falters. We will watch lead times, negotiations and market pricing very closely in the coming weeks for signs of a change.

Now for the second topic of discussion for the day – the 2020 SMU Steel Summit Conference. My team has been very active in soliciting and confirming agenda slots and speakers to go with those spots. Today we confirmed CNN’s Michael Smerconish as a special keynote speaker on Wednesday, Aug. 26. He will be covering the Republican National Convention (which is happening at the same time as our conference) and will be traveling to Atlanta straight from the convention, and then he will return right after his talk to our group. I enjoy Smerconish as he tends to be level-headed and not prone to take a right or left position. With the election looming a few months after our conference, politics will play in any forecast being made for 2021 and beyond.

I have also been working very hard on the expansion to the Wednesday afternoon program. On Wednesday afternoon, after Smerconish speaks, we will provide a program we feel is critical for manufacturing, distribution, steel mills and related companies. How do you attract, train and maintain young people in your company? Some of the answers may surprise you. I am finalizing the keynote speaker who will begin this segment, and I will have more on this program in the weeks to come. Plan on staying until 4 p.m. on Wednesday afternoon – book your return flight after 5 p.m. – you won’t regret it.

I asked the individuals with whom I spoke today who they would like to see speak at this year’s conference. A few of them mentioned names where I have invitations pending–U.S. Steel CEO David Burritt and Nucor’s new CEO Leon J. Topalian. If you are in contact with either U.S. Steel or Nucor, please mention to them that you would like to see their CEO at this year’s conference!

If you have a speaker or a specific segment you think needs to be covered at the 2020 conference, please feel free to send me a note: John@SteelMarketUpdate.com

We will be the best attended steel conference of our kind in North America. We anticipate close to 1,200 executives at this year’s event. Remember, SMU and CRU members get discounts, as do companies sending more than one person to the conference.

Registration for the 2020 SMU Steel Summit is open. Click on the link just given or go to www.SteelMarketUpdate.com/events/steel-summit for more details, and to review of list of the companies who attended last year.

A quick note – Paige Mayhair is back in her office after attending last week’s Steel 101 workshop in California. If you would like to renew your newsletter subscription, upgrade your account (add more people to your existing membership, or upgrade to Premium) or if you would like to become a new subscriber – you can reach Paige at 724-720-1012 or by email at Paige@SteelMarketUpdate.com. As I have been saying over the past week – membership prices will be rising as of Feb. 1, 2020. As in the past we will allow renewals at existing pricing if paid prior to Feb. 1 (no matter when your membership is set to expire).

As always, your business is truly appreciated by all of us here at Steel Market Update.

John Packard, President & CEO