Final Thoughts

I have been searching for cracks in the armor; in other words, are any buyers seeing:

• Unexpected offers from steel mills that were not there one or two weeks back.
• Lead times shrinking or material arriving much sooner than what has been normal over the past month or two.
• Prices being offered at numbers well below (more than $50 per ton) their last order with the same supplier.
• Foreign steel offers/orders being placed that did not exist a few weeks ago.

Essentially, I found minor “chips” but no cracks in the armor. Most spot tons are being sold close to or above the levels we have referenced in our indexes on Tuesday of this week. We heard cold rolled and galvanized base numbers being offered from $68.00/cwt to $70.00/cwt in the Midwest, and the lowest coated base prices being in around $64.00/cwt to $66.00/cwt in the South.

Many service centers are amazed that their end users are paying the price. After all, a $60.00/cwt base hot rolled number needs to be resold for $65.00/cwt just to make an 8 percent profit. That same price level (mid-$60s) is also what I am hearing from a number of service centers who are selling spot hot rolled sheet into the spot market even though their on-floor cost is much lower than that. The service centers must take into consideration their replacement costs, because they all know at “X” point in time prices will fall and that replacement stock at $1,100 to $1,200 per ton will have to be sold at cost, or a loss. This has many service centers shaking in their boots. All is rosy now, but flowers wilt and die over time….

Lead times are extended, but we are seeing some moderation in some of the products. As I spoke to one steel buyer, he pointed to regional differences and differences in products. For example, hot rolled base galvanized is tight, but not quite as tight as cold rolled base galvanized in the Midwest.

The extremes with lead times are with those mills that are having production problems, or have maintenance outages planned in February/March. Here are a couple examples of the extremes when it comes to lead times:

SMU understands that Stelco (Canada) continues to have production issues. One of the service centers in the Great Lakes region told us Stelco is chronically late on orders and still owes orders booked in October, November and December of last year. We are being told the mill is reducing orders taken for February and March as they attempt to get caught up. We asked Stelco to comment and they advised us they would not be saying anything regarding production issues until they have reported their earnings.

Algoma (Canada) is reportedly booked through May on flat rolled and currently booking new orders for June (16+ week lead time), and on plate they are booking July (20+ week lead time). Ouch….

Anecdotally we have heard of possible offers out there for March hot rolled (you have to pay $$$$ for it). One southern service center said, “Why would I buy March tons when I have orders already placed through April?”

Crack in Input Pricing?

We only heard from one service center that they were able to buy tons over the past week at lower prices than they did prior to that. I don’t have all the details, but I do trust the source. So, this information is being put in the folder marked “Possible Cracks in Pricing” as I wait to hear similar comments from more buyers.

We are also watching foreign steel offers and orders. Foreign hot rolled is being offered below $50.00/cwt (lowest I heard was $47 for May delivery). Will foreign be a good deal when it hits the U.S. port? If you are located close to the port, the answer is probably yes. Those who have high inland freight costs, maybe not.

The other question I was asking today is, do the buyers expect the next round of foreign to be at lower numbers? Most believe the answer to be “yes.”

A southern service center told us they have foreign cold rolled on order for May arrival at $62.00/cwt (port). They called their trader and told them to take the material and sell it to someone else if they can. The trader was unable to re-sell the material. Did the trader really try? Unknown.

We are continuing to try to get a handle on how much foreign is incoming. That will be important as any added supply will help temper the domestic shortage we have been seeing over the past couple of months.

Scrap Signaling a Crack?

We learned today that domestic steel mills are buying shredded and cut grades of ferrous scrap at lower numbers in February than what was charged in January. Shredded scrap numbers are down $60 per gross ton and cut grades are down $50 per gross ton. Prime grades are coming in at the same prices paid in January.

I am sure steel buyers will be watching scrap prices closely and using lower buying numbers as leverage against the EAF mills.

SMU Events

We conducted the 32nd Tampa Steel Conference on Tuesday to rave reviews. We saw 91 percent of the 454 people registered attend the one-day event, and the average time spent on the platform was more than 7 hours. Both are exceptional for a virtual conference. The platform remains open for those who are registered (for that matter you probably can still register if you want to view the presentations) and the speaker presentations are available as are the exhibition booths, access to attendees, etc. If you have any issues, please reach out to: conferences@crugroup.com By the way, there was an error in the dates for the 2022 Tampa Steel Conference. The 33rd annual event will be held on Feb. 14-16, 2022, in Tampa Bay, Fla. (live).

Our next Steel 101:Introduction to Steel Making & Market Fundamentals virtual workshop will be held next Tuesday and Wednesday (Feb. 9-10). If you would like more details or would like to register, please click here.

Our first Steel Hedging 201: Advanced Strategies & Execution workshop will be held on Feb. 23-24 (half day each). You can learn more about the agenda, instructors and costs to attend by clicking here.

The SMU Steel Summit Conference is scheduled to be a live, in-person event in Atlanta on Aug. 23-25, 2021. We already have commitments from Lourenco Goncalves, Chairman, President & CEO of Cleveland Cliffs; Mark Millett, President & CEO of Steel Dynamics; Alan Beaulieu, Managing Director, ITR Economics; and Michael Smerconish of CNN. We are extending other invitations right now, and we anticipate the strongest line-up for an SMU conference ever. We know there is pentup demand for an in-person event, and we are hopeful that the U.S. will have vaccinated all of our potential attendees by early summer (I am scheduled to get my first shot tomorrow). Registration is open for this event, and you can access it by clicking here.

I also want to point out the Fabricators and Manufacturers Association Annual Meeting will be held virtually on March 3-4, 2021. You can find more information about their agenda, speakers and how to register by clicking on the following link.

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

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