Final Thoughts

From my experience, one of the biggest mistakes service centers and wholesalers make in markets like these is to sell off of the cost of goods on the floor at a time when replacement costs are $50, $100, $200 per ton higher.

So, how tight is the market right now?

A large service center in the center of the country answered that question this way, “We have not yet fallen victim to it (being unable to fulfill a customer order/release), but lateness for sure is happening. I believe these are the tightest conditions I’ve seen since the ’04 market, and I think this market will end up being worse than that one before it’s over.”

A manufacturing company told us, “Are we seeing any shortages in inventories from your perspective? Yes unfortunately. With the mills running more than three weeks behind in the South, there are major shortages in inventory, causing major delays in shipping to my customers. Many of our customers are very busy, however, having a hard time finding anyone to get them more material than forecasted.”

An Upper Midwest service center confirmed the $840 per ton hot rolled and $1,000 per ton cold rolled and coated spot base prices out of Nucor for February production. “I have NEVER seen a market like this. It does not matter what you are willing to pay a mill, there is simply no spot available until Feb/March. Many service centers are simply desperate,” he said.

Another large Midwestern service center group is concerned things will get much worse before they get better, “I believe we are just seeing the beginning of the actual shortages that will get significantly worse over the next few months. At a macro level, we are way short of steel supply for the demand we have and will have for the next few months. Up to this point everyone has been filling holes out of inventory or the service centers buying from each other. That is coming to a halt, if it hasn’t already.   Our sales to the trade are a small fraction of what they were a month ago as we need to keep every available ton we have for our contract business. With absolute lack of imports in November and December, this situation is going to get a lot worse. We have had our light-gauge coated customers on allocation for over a month and things aren’t getting any better and won’t until imports arrive in April. The Dofasco situation has the Canadian customers in an absolute panic, as it should. Hold on, this is going to get a lot worse before it gets better.”

I asked the head of commercial at one of the steel mills this afternoon if a shortage is coming (or already here)? “Seems like it’s already here,” he said. “In our entire hemisphere, inventories are low relative to demand. Prolonged inventory reductions combined with difficulty getting production up caused constraints in keeping up with ever-increasing demand. Hey, when you get Steelmageddon drilled into your head for two years, it’s hard to be bullish and inventoried up. I remember when three months of steel in the pipeline was OK. Most of the service centers I know thought two was too many. And end users? How many keep even two weeks around nowadays?”

So, many specialized items are in short supply. The pipeline to rebuild inventory is going to take awhile to fill, and demand seems to be at good levels (and people are bullish now that a vaccine is on the horizon).

So, how long will prices move higher? Is $900 per ton hot rolled out of the question? We are working to answer those questions and much more.

We are bringing back the free SMU Community Chat Webinar series beginning next week (Dec. 2 at 11 a.m. ET) when our speaker will be Josh Spoores, Principal Analyst at CRU (responsible for North American steel pricing and forecasts). The markets are quite volatile and Josh’s insights should be quite helpful. You can register by clicking here or going to: www.SteelMarketUpdate.com/blog/smu-community-chat-webinars

Our Dec. 8-9 Steel 101: Introduction to Steel Making & Market Fundamentals Workshop will be well attended as more than 30 individuals from manufacturing, service centers, steel mills and companies associated with the steel industry have signed up. We have room for a few more in this our second virtual steel training conference. You can learn more about the course, cost and how to register by clicking here. If you have any questions, you can submit them to Events@SteelMarketUpdate.com

Registration has begun for the 32nd annual Tampa Steel Conference which will be held virtually on Feb. 2 of next year. Steel Market Update is working with Port Tampa Bay to present a quality one-day conference with speakers covering key issues on the economy, trade, new Biden administration, logistics and more. One of the featured speakers will be Leon Topalian, President & CEO of Nucor. We have many other speakers already confirmed: Timna Tanners of Bank of America, Dr. Walter Kemmsies of the Kemmsies Group, Josh Spoores of CRU, Phil Bell of the Steel Manufacturers Association, Lewis Leibowitz of the Law Office of Lewis E. Leibowitz, Paul Anderson of the Port Tampa Bay and myself. We will be adding a few more speakers over the coming week or two. The maximum ticket price is $150 per person with a 50 percent discount for past attendees (must book by Dec. 31) and other discounts for SMU and CRU member companies. You can learn more and register by clicking here.

If you are new to Steel Market Update and would like to know more about becoming a subscriber, please reach out to Paige Mayhair at 724-720-1012 or by email: Paige@SteelMarketUpdate.com Paige also handles renewals, adding more people and upgrades for existing members.

Thursday is Thanksgiving here in the United States, so we will not be publishing a newsletter on Thursday nor will we publish on Sunday. We will return to our normal publishing schedule next Tuesday, Dec. 1.

We want to wish you and your family a very happy and healthy Thanksgiving.

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

John Packard, President & CEO