Final Thoughts

Commerce continues. It’s not as easy to spot with traffic sparse and stores and restaurants shuttered, but many readers tell Steel Market Update they remain busy, servicing clients as best they can while taking steps to ensure the health and safety of their employees.

We are fortunate to be part of an industry that is vital to the economy. As the Trump administration made clear with Section 232, the nation’s security depends on a healthy steel industry. While the rules vary from jurisdiction to jurisdiction, primary metal manufacturing is usually considered “essential” and is thus exempt from the restrictions being placed on other industries. Many of the steel-consuming businesses are not considered essential, however, which will undoubtedly affect demand in the weeks to come. Construction and automotive are the two biggest markets for steel. Construction projects continue in some areas but not others, and automakers have suspended production, which makes it particularly difficult to gauge the steel consumption ahead.

News on the spread of the coronavirus changes by the hour, which makes SMU survey data from a few days ago almost ancient history, but it’s the best information we have at the moment and it indicates that steel buyers remain hopeful about demand and pricing. What does the data from the March 16-17 survey show? Most executives responding to SMU’s questionnaire said they expected steel prices to remain stable over the next 30 days. Eighty-three percent said they anticipated prices remaining about the same, while just 15 percent predicted prices would decline. Lead times for spot orders of flat rolled showed some initial signs of shortening, but remained at healthy levels comparable to this time last year.

Steel prices in April and beyond will depend in large part on how well manufacturing survives all the measures taken to stem the spread of COVID-19. Manufacturers responding to SMU’s poll were surprisingly positive, given all the negative headlines. Two out of three said they expected demand to remain the same or decline only marginally in the coming weeks. Another 23 percent predicted demand would actually improve. Only 13 percent predicted a substantial decline in their business.

Many companies are dealing with the crisis from a position of strength, with cash on hand and little debt. Until the virus hit the fan, the first quarter was a strong one. Typically, looking back at quarterly results is predictive of what’s to come. Unfortunately, this time, what’s coming in the second quarter has little to do with the first-quarter’s results.

Some observers are predicting a shakeout among weaker competitors who won’t survive the coming recession (depression?) regardless of how much stimulus money the government throws at the problem. As one executive at a steel distributor in the Northeast told SMU: “This is not going to blow over in two weeks. I think we are in this for the long haul. But whenever we get to wherever we are going, whoever is left standing will be in a really good position. There will be some consolidation, less competition, and everyone is going to need a lot of stuff as the market quickly recovers. But getting there will be a trial.”

In other news, we are still accepting registrations for the 2020 SMU Steel Summit, set for Aug. 24-26 in Atlanta. God willing, the worst of the virus crisis will be behind us by then and the economy will be on the mend. We’re hopeful the timing will be right for the industry to gather and compare notes on the lessons learned and strategies for the rebound ahead. You can register by clicking here or by going to www.SteelMarketUpdate.com/Events/Steel-Summit.

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

Tim Triplett, Executive Editor