Final Thoughts
Final Thoughts
Written by John Packard
September 23, 2020
There is a lot of catching up that I have had to do over the past few days. In the process I have spoken to steel buyers and sellers, mills, service centers, and traders.
Steel buyers should anticipate another flat rolled price increase between now and early October. Scrap is rumored to be going up again in October and the mills will use the increase (or projected increase) along with the tightening of supply to move prices higher.
Steel buyers continue to be cautious as one Midwest service center executive put it to me, “While we see continued near-term momentum, there is the risk of course that the market corrects, as these maintenance outages are completed. There is more capacity coming online next year too. It is also possible buyers look to imports now – for 2Q needs; and if so, these buyers will need less domestic steel in coming months. Obviously, another wave of COVID is a major risk as well.”
Regarding COVID and a possible second wave: I spoke to our London offices yesterday who advised England has imposed a second lockdown and all workers who are able to work from home have been ordered to do so, restrictions on gatherings, restrictions at pubs, a halt to spectators at sporting events, a $250 fine for not wearing a mask in public (even first time offenders), those failing to “self-isolate” face fines of $12,500. The changes do not go back to full lockdown status as was seen in March (schools/universities remain open) but the new rules are expected to remain in place for the next six months. England had more than 41,000 new COVID cases earlier this week and are projected to reach 50,000 new cases per day by October.
From Big River Steel spokesperson, I learned the galvanized line will resume production this weekend. The company told me, “Big River Steel is currently finishing the refractory dry out and will then recharge the pot with zinc in a day or two. Galvanized shipments are expected to resume over the weekend.” The lack of production off the GI line at BRS has been one of the major problems within the market. We heard from one service center, “The Big River Steel Galvanized line being out has rocked my world. Galvanized is near impossible to get until December and at a high price. The other mills jumped at the chance to push prices up. I was surprised to see in the newsletter [SMU] this morning that your average price is below $40. I can’t get anyone to quote below $40. I’ve been told there will be no year-end deals this year – so I’m looking at more contract business. However, with prices where they are now, I’m not sure about locking in. What to do?”
SMU is taking our Steel 101: Introduction to Steel Making & Market Fundamentals Workshop virtual. We are working with the dates of October 20-21 for the first virtual Steel 101 event. You will be seeing more information on this workshop and registration links in the coming days. If you have questions please send them to: Jill@SteelMarketUpdate.com
It’s good to be back, and to know that the steel market still needs old guys like me to help make sense to what sometimes can seem like total chaos.
If you are new to SMU and are not yet a subscriber, please consider joining. I spoke with a service center buyer yesterday who told me that the information in SMU is more important today than it has ever been. You can learn more about becoming a member (as we like to call our subscribers) by contacting Paige Mayhair at Paige@SteelMarketUpdate.com
My name is John Packard and I like to hear from our readers, and from those associated with the steel industry. You can reach me at John@SteelMarketUpdate.com
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John Packard, President & CEO
John Packard
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Final thoughts
Cleveland-Cliffs is seeking $750 per short ton (st) for hot-rolled coil. That’s $20/st above where the steelmaker had been. It’s also $30/st above Nucor, which is at $720/st this week. We've seen prices increase incrementally this week. SMU's HR price, for example, stands at $690/st on average, up $5/st from last week. The questions now are whether a number well above $700/st will stick, whether other mills will follow Cliffs, and whether there is enough demand to support higher prices.
Final thoughts
We got a little flack for adjusting our sheet momentum indicators to neutral last week. To be clear, we didn’t adjust them to lower. Part of the reason we moved them to neutral was because there are some unusual cross-currents in the current market. On the news side, you could make a case that there should nowhere to go but up.
Final thoughts
I think all of us know that sometimes courtships go wrong. A misplaced word or deed and soon things can go sideways, and not in the prices sense. Such could be the case with Japanese steelmaker Nippon Steel’s play for U.S. Steel.
Final thoughts
We’re starting to see some impacts of the big trade case filed last week against imports of coated flat-rolled steel from 10 nations. Namely, we’ve heard that a range of traders have stopped offering material from Vietnam. An alleged dumping margin of nearly 160% will do that. Especially amid chatter of critical circumstances.
Final thoughts
The phrase “political football” has been tossed around a lot lately. (Pun probably intended.) For the humble journalists at SMU who thought the week following Steel Summit would prove a quiet one… the news cycle had other ideas