Final Thoughts

Now that SMU has added more people to our company, we are spending more time slicing and dicing the data we are collecting to be as accurate as possible. This can be a challenge in markets like what we are seeing today where there are mills whose order books are closed or who have limited to no spot tonnage available to sell.

We are trying to provide more details about how we see the numbers flowing to assist our readers in better understanding the range and averages we are producing.

I spoke with an executive at a steel mill today whom I have known for many years. We discussed the dynamics of the market, when they thought market prices would peak and pull back, status of order books, and the psychology of today’s steel buyer.

I was told, “No one saw this market coming.” As you look at what happened in September, October, November, and December of last year, steel buyers were not rushing to replenish inventories. In many cases service centers were ignoring the pent-up demand of their customers, or they were reacting to normal year-end inventory adjustments (i.e. pull inventories lower by year end for tax reasons and build back in January/February of the New Year).

He also said steel buyers have not reacted to the changing dynamics of consolidation. What Cleveland-Cliffs did when they purchased AK Steel and AMUSA operations (except Calvert and Dofasco), and what U.S. Steel did in buying Big River Steel, is a huge shift in how the industry is looking at customers, order books and profits.

The mill exec described his order book as “solid” through the third quarter and very possibly through the end of the year.

This mill has exposure to the energy markets and their book is solid without taking into consideration that there are “green shoots” showing up in the oil patch. I was told there is movement in storage tank construction (oil/gas). And the storage and moving of hydrogen is a growing market.

One more comment from the mill exec: Expect a new wave of consolidation within the service center industry.

SMU Events

The success of the SMU Steel Summit Conference is being recognized around the world. As we focus on providing the most relevant program to our attendees, we are getting serious consideration from areas where in the past we have been unable to break through. We have extended an open invitation to President Biden’s administration and today we learned we are seriously being considered as an event for a government department secretary to speak. No promises, but it is nice our event has a shot at grabbing someone we all want to hear. Stay tuned.

I cannot emphasize this enough, if you have not gotten vaccinated and plan on attending our conference, we ask that you do so. Getting a shot will help protect you and everyone at the conference, and we want to host a successful networking event unlike any other the industry has ever seen.

We are also looking at the possibility of providing an online version of the conference for those who are unable to travel due to company policies or lack of vaccinations. I will discuss this possibility in the weeks to come. Right now, my focus is on producing a live event with all of the key industry executives, analysts, economists and consultants as presenters.

You can learn more about our agenda, speakers, attending companies (such as recent registrants Alro Steel*, BTD Manufacturing, Conklin Metal Industries, Inc.*, Klein Steel*, NSPS Metals, Nucor*, Olympic Steel* and Viking Materials, Inc.*), costs to attend, discounts for SMU/CRU members and companies bringing multiple attendees, and how to register by clicking here (* means more than one person is attending from that company).

Our three hedging steel price risk workshops have shown themselves to be quite popular and instructive to those wanting to learn more about managing the risks associated with rapidly rising and falling steel prices (volatility). I wanted to spend a few moments to talk about what we have learned now that we have produced all three of the new hedging workshops: Steel Hedging 101: Introduction to Managing Price Risk, Steel Hedging 201: Advanced Strategies & Execution, and we just finished our first Galvanized Steel Hedging Workshop.

First, we are going to adjust the names of the three steel hedging workshops. The 101, 201 and Galvanized designations can be confused with our Steel 101: Introduction to Steel Making & Market Fundamentals Workshop, which we have been running for about 10 years now.  We have not yet renamed the workshops, but that will be coming soon.

Second, we are going to do a better job of defining who should attend each workshop and what baseload of knowledge on hedging concepts is needed for each. Obviously, our introduction to steel hedging (101) workshop is for those who are new, unfamiliar or uncomfortable with the concept of managing price risk and working with financial instruments.

The more advanced (201) steel hedging workshop is for those who have attended our introduction to hedging (101) workshop, or who already have a basic knowledge of the concepts, understand the “slang” (for example, what backwardation means), or perhaps have already begun the process of trading but would like more information regarding strategy and order execution.

Our third hedging workshop (Galvanized) was totally mislabeled as the workshop is for people who know the basics already (such as our intro to hedging workshop) but buy/sell products other than hot rolled steel or flat rolled products whose price movements do not mirror HRC. It is for those companies who recognize they have basis risk that does not match well to an HRC contract (for example: what do I do about freight, currency valuations, geographical variations from the Midwest HRC contract, etc.?).

You can find more information about our workshops, including our Steel 101: Introduction to Steel Making & Market Fundamentals Workshop, by clicking here or going to: https://events.crugroup.com/steel101/home

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

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