Final Thoughts

I have made that statement often over the course of my steel career. When I first started in the steel business with Rolled Steel Corporation in Skokie, Ill., in 1977 I used to joke, “the only people who get into the steel industry are either family or friends of family. My college roommate’s father owned the company….”

Over the years I came to realize I enjoyed the industry. There was opportunity to be successful for those who worked hard. It was open to men, women, minorities, etc. There were good companies and good people, but there were some who wore black hats and were a bit “shady.”

The steel industry has always been a “people” business. One where relationships matter.

Then I came to understand the people I was interacting with tended to see the glass as half full and not half empty. I had many a conversation where the person on the other side complained mightily about how their business was suffering, prices were down and moving lower, the competition was “cheating” or doing something terrible in order to hurt their business. When I asked where they thought business would be in six months, the answer was almost universally one indicating it would be better, or much better.

Right now, I am getting calls asking if steel prices are “at the bottom?” The real question being, is it time to leap in and buy?

I heard from a couple of sources of hot rolled being sold (large tons) at $400 per ton. I heard galvanized, especially when taking into consideration negotiation on coating extras, as being sold at base prices below $30.00/cwt.

I have been in the business for 43 years. The rule of thumb on galvanized is you can get hurt too bad when base prices are at, or below, $30.00/cwt. At the same time, stay away from galvanized when the base prices are at $50.00/cwt.

This pandemic, however, is something none of us have experienced during our steel careers. How low it can go is unknown. The optimist in us wants to believe scrap prices will firm in May (due to lack of scrap being collected/produced). If what Mark Millett of SDI said is true (operating at 80 percent of capacity) for Nucor and other non-automotive steel mills, then we could have a tight situation developing for scrap.

I spoke to a dealer in the Northeast this afternoon and asked his opinion about where he sees prices for May? He was of the opinion there could be some upward movement on primes (busheling and bundles) of $20 to $30 per gross ton. He did not see other scrap grades as being lower either. The mills may try to buy sideways, but they may not get sideways numbers in May.

Which brings me back to steel prices. Can they go lower from here? Yes, especially when you look at the numbers as an “average.” However, the low end of the ranges is probably getting to the point of resistance. Where we should expect movement is at the top end of the range.

Or is this just the optimist in me thinking things can’t get much worse?

Your opinions are welcome. Please send them to me at John@SteelMarketUpdate.com

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John Packard, President & CEO