Steel Buyers: Looking for a Top, Looking for Steel...

Demand is still quite strong. In fact, many of the respondents to this week’s market check are reporting demand as expanding. One manufacturing company told us, “[We are] able to pass on all higher costs, demand for all our customer base is very strong. Last week was our largest week in the history of the company. We have broken many records this year so far.” Another reported, “We still have an incredibly strong order backlog, we produced more units in Q1 ’21 than any quarter since ’08 and didn’t catch up at all. We’re still adding capacity and trying to increase production further, but supply chain issues continue to be the main challenge to our ability to fill orders.”

A West Coast service center echoed the statements coming from the manufacturers: “We haven’t seen any demand reduction yet, at all. In fact, we’re actually seeing an uptick coming out of the winter months. There is definitely some pent-up demand coming along with general positivity as we spin out of COVID. And shame on those who believed all of the bearish headlines from the pundits and analysts. This thing has had much longer legs than many of the so called ‘experts’ have predicted.”

As was just quoted in the paragraph above, steel mills continue to control order entry and have limited to no spot tons available. So, supply is tight. We are seeing inventories as remaining low since tight supply and late deliveries does not allow for inventories to be rebuilt.

We did hear today of one mill coming out with new HRC spot prices at $1,400 per ton. However, we are not aware of anyone buying at that number. I spoke with one service center who told me they would not buy at $70.00/cwt “unless sold first.” I am quite sure that is not an isolated requirement.

A note to our service center data providers, we will produce our “Flash” report for you tomorrow.

I heard from the head of commercial of one steel mill today that they closed out coated for June production at $75.00/cwt-$78.00/cwt and they were going to wait “a little while” before opening July.

The mill also said, “Light gauges really popping [galvanized] because it seems end users are having good shipments, imports are running late with all kinds of freight issues…and now future offers are not as pretty because Asian HR is $900/metric tonne and Euro substrates are reaching records there, too.”   

One large service center reported, “Mill prices have moved into a narrow $66-67/cwt range (many are providing these prices while also admitting to not having actual spot to offer). Even though there’s little if any spot available, it feels like we might be setting up for a top, but I think it’s just as likely we go to $70/cwt or higher. We won’t know until the mills have more widespread spot availability–perhaps July–if prices will simply march higher or stabilize. The difficulty in all of this is the lag time now in place between the next spot opening and order placement. The mills can/will wait for a number of weeks before addressing July, so they’ll have ample opportunity to see what transpires between now and then (raw material price changes, import data, etc.).”   

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Steelmageddon Doomed?

With the ruling of the Senate parliamentarian this week, it appears the Democrats will be able to pass an infrastructure bill without the help of Republicans. Exactly what will be in the bill when it is finally passed is an unknown. However, the expectation is it will include a lot of steel-intensive projects over the next five-plus years.

So, we went to some of our data providers and asked them the following question: When do you think President Biden’s infrastructure bill, if passed, will have an impact on steel demand and steel prices?

A service center executive responded, “As we all know, we are an industry that feeds off of the headlines and overall sentiment and emotion of the market. If/when it gets passed–and I personally think it is more of a ‘when’ at this juncture–I do think we’ll see some steadying strength in the marketplace right away. I know for service centers that deal with construction OEMs, it’ll be a big psychological boon. The actual POs might not start flowing until next year, but the overall positivity that would come out of the passage would be enough to keep pricing in a historically high range for a long time. It would offset the much ballyhooed “Steelmageddon” as well, which would be great for all of us heading into 2022.”

Another service center made an interesting observation/comment to the same question: “2022, but more importantly it may impact investment decisions soon thereafter, by the mills and other participants in the segment.”

Something to think about–the need to prepare to get ready to supply what is in the infrastructure bill. This would include rail, beams, rebar, plate, electrical steels and flat rolled.

Steelmageddon may end up meaning something totally different than originally intended. I will reach out to Timna Tanners at Bank of America to see if her view of the market has changed over the past few months.

The timing of the 2021 SMU Steel Summit Conference on Aug. 23, 24 and 25 live in Atlanta, is going to be spot on as we look around at the economy, infrastructure, new mills coming online, foreign steel and much more. We will have key executives who will be in the thick of things from Cleveland-Cliffs, Steel Dynamics, Nucor along with Alan Beaulieu of ITR Economics and economists/analysts associated with CRU, industry experts and trade experts such as the Steel Manufacturers Association, Bank of America, Lewis Leibowitz and many more. This will be an event you will not want to miss. You can learn more about our agenda, speakers, costs to attend and how to register by clicking here.

On April 21, we will conduct our first Galvanized Steel Hedging Workshop. This workshop is for those of you who are buying cold rolled and galvanized products (not just galvanized) and you want to know what you can do to manage your price risk. We will discuss the new HDG product being offered by the CME and much more. This is a half-day workshop, and the price is $500 per person prior to any SMU/CRU and multiple registrant discounts being added. You can learn more and how to register 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