Final Thoughts

Steel Market Update is not projecting lower prices at the end of the price cycle, which is constantly being adjusted. In other words, we are reviewing Momentum daily, but we are only looking out 30 to 60 days into the future.

SMU does not forecast future steel prices. We leave that up to CRU (out parent company) and other consulting companies.

The SMU Price Momentum Indicator is currently pointing toward higher flat rolled and plate steel prices over the next 30 to 60 days.

Next, as we look at the current market, the lack of supply exacerbated by limited foreign tons and domestic production lower than it could be due to strike at NLMK, Covid issues and blast furnaces being down, we do not have a clear picture as to how high steel prices may go, and at what point they begin to retreat.

I have suggested that it could be sometime during second-quarter 2021. When I say second quarter, I am not talking about orders in April, May or June being taken at lower prices than today, but rather orders taken during one of those months for future production (as that is what the spot price is based on). So, an order taken in June could well represent a July/August production on hot rolled and September on coated products.

What will move this market?

It is my opinion there are a number of variables to consider. There is the new capacity coming online (Big River Steel, JSW restart, USS restart of blast furnace(s) and possible extra capacity coming out of Cleveland-Cliffs). We also have to consider the introduction of more foreign steel into this market at “X” point in time (exactly when is an unknown right now and it is not immediately imminent).

Other items to consider are demand destruction and government intervention. It is my opinion that $1,000+ per ton hot rolled is not sustainable over an extended period of time. Steel manufacturing industries will either begin to seek other areas of the world in which to produce their products (as they have done in the past), or they will be forced to price their products at levels where consumers will refuse to pay.

I think the Biden administration will be asked by manufacturing companies to remove the Section 232 tariffs. Remember, many countries also have anti-dumping (AD) and countervailing duties (CVD) in place. A month or two back, I didn’t think the Biden administration would deal with the 232’s right away. In light of where steel prices are today, and where they could well be at the beginning of February, this leads me to believe their removal (or phased out reduction) could now happen sooner rather than later.

For right now, the expectation is for high steel prices to continue.

I think the timing of the Tampa Steel Conference on Feb. 2 is just about perfect to deal with the subject of steel prices, foreign steel imports and the new Biden administration. This one-day virtual event is also one of the most competitively priced conferences you will see online or in person. You can find more details here.

I also want to mention that we will be hosting one of our Steel 101: Introduction to Steel Making and Market Fundamentals workshops on Feb. 9-10. More details on that workshop can be found here.

Lastly, we will host a FREE SMU Community Chat Webinar this Wednesday (Jan. 13) at 11 a.m. ET with the speakers being myself and Michael Cowden who just joined SMU after spending years at Fastmarkets/AMM where he was responsible for launching their daily hot rolled steel index and reporting on the flat rolled (and other) markets. You can register for this free event by clicking here.

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

John Packard, President & CEO, John@SteelMarketUpdate.com