Final Thoughts

There are two schools of thought in the market right now, captured well by these contrasting quotes from two SMU sources: “The recent price announcement has lots of traction; inventories got too low and buyers got flat footed. It will stick. There is no negotiation on HR and galvanized right now, with $30/cwt firm for HR and $40/cwt firm for galv.” Then there’s the comment from another steel exec: “Interesting moves by the mills, reminiscent of the old days. Pile on increases, move out lead times…then ride that horse till it dies. We don’t see this exuberance lasting beyond November, even with all the so-called outages. Q4 is typically lower demand for all, COVID in winter is still an unknown, the election will be a spectacle undecided for weeks, etc. Contract negotiations for 2021 may still be undetermined by December. Smart buyers will station themselves on the sidelines and wait for an opportunity.”

Added another industry veteran: “As usual the mills are going for the jugular and it looks like it could remain tight for at least 45-60 days. At some point the integrateds will overcome production issues and auto schedules will back off. Then WATCH OUT!”

Analyst Timna Tanners of Bank of America has raised her second half steel forecast to reflect the better than expected demand, but her outlook is tempered. “U.S. hot rolled coil prices are heading for $600 per ton near term, with Monday’s price hike supported by higher scrap costs for minimills and strong auto demand tying up their integrated mill peers. We expect near-term strength can last into November, as recent greater protection from imports and strong Chinese demand keep global alternatives expensive.” She pointed to mill outages that have tightened supplies, including  planned downtime at Stelco’s Hamilton mill, reduced volumes at NLMK’s Farrell, Pa., mill due to a strike, and unplanned outages at U.S. Steel’s Mon Valley and ArcelorMittal’s Burns Harbor. “However, we expect disrupted mills to resume output and seasonal weakness in Q4 to dampen prices ahead.”

Watching the news footage of the tragic fires on the West Coast and all the burned out vehicles littering the smoky landscape, I wondered if the scrap market might see a big enough bump in supply to affect prices. The experts at CRU tell me the fires most likely will not impact scrap collection in any meaningful way as the West Coast is not a big factor in the U.S. scrap market. Many thought the devastating hurricanes in the South a few years ago would flood the market with scrap, but that proved not to be the case.

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

Tim Triplett, Executive Editor