Final Thoughts

If this pace of gains continues – SMU’s benchmark hot-rolled coil price is $1,820 per ton, up $50 per ton compared to last week – we’ll be at $2,000 per ton on Aug. 10.

Why do I mention that date? Because we hit a 2020 low of $440 per ton on Aug. 11 of last year. We’re not talking about a doubling or tripling of HRC prices since then – we’re talking about them nearly quintupling.

I’m running out of new ways to say “prices are up again this week.” And new reasons for why they keep defying predictions. Yet I see nothing beside a Fed rate hike – highly unlikely, that – that would send prices the other way anytime soon.

And so a year-long price upswing – something without any recent precedent in steel – is upon us.

How is this possible? Set aside models for a moment, and predictions based on what iron ore prices are doing in Asia. Yes, those are important variables. But just as important are new variables that we’re learning about on an almost daily basis.

What’s happening now? We learned last week that SDI won’t be firing up the hot end at its new mill in Sinton, Texas, until the fourth quarter. Which means that, despite firm demand, there is no additional capacity riding to the rescue until the end of the year.

And then there are the outages – so many outages. We’ve got some mills with unplanned outages, others taking longer than expected to come back from planned outages – and a raft of additional planned outages in the fall.

Why waste time writing about a short, planned outage at one mill in October. Well, hot-rolled coil lead times average 10.74 weeks – just a few days shy of October. And a bunch of small, individual planned outages add up to something significant – especially in a market this tight.

The situation is no better north of the border, with some market participants noting that lead times at certain Canadian mills are out to October or November.

What happens if energy demand returns in force or if automotive production comes back strong? It’s possible we could see shortages in September and October, according to some market participants. And mills are talking about high prices lasting into the first quarter of next year. Sounds crazy, right? But crazy has been right more often than not over the last 12 months.

Will import volumes remain high in July? Probably. But keep in mind that high import volumes can be indicative of strong demand. And we’ve heard from some sources that they’re turning to the import market – in some cases with the OK and even encouragement of their domestic mill sales representatives – to ensure they have enough steel to meet their commitments.

Alas, imports are no panacea. Material ordered now might not arrive until November or December. Which means it’s risky to bring it into the Great Lakes. And port congestion – and the uncertainty that comes with it – remains rampant on the West Coast and Gulf Coast.

And if you thought Section 232 might be defanged, think again. The U.S. Court of Appeals reversed a lower court ruling and decided that former President Donald Trump had the legal authority to raise tariffs on Turkey to 50% – something the former president announced to the world via tweet on Aug. 10, 2018.

Below are a few comments that we think sum up current market sentiment:

Mill source: “We have some major planned outages going for Q4 that are going to influence our spot business. … They (senior management) told us to tell spot customers that, after this month, don’t plan on us for the rest of the year.”

End -user source: “Most of our buys are from domestic mills. … With the port congestion and the delays, we’re not willing to take those risks” (associated with imports).

Service center source: “The amount of money most people are making is obscene. It’s made everyone healthy again.”

And now for a word on Steel Summit.

Ternium Mexico President César A. Jiménez Flores will be joining us for a fireside chat. We’ll talk about Ternium’s new hot strip mill, how the project is progressing and what it means for the steel market in both Mexico and the U.S.

Also, here are registrations over the past few days for Steel Summit: An asterisk means more than one executive is attending from that company: Accurate Machine and Tool; BMW Manufacturing Co., LLC; Central States Manufacturing, Inc.*; Donnelly Metals Inc.; GE Appliances*; JSW Steel USA Inc.*; Komatsu; Metal Sales Manufacturing; Metontec Limited; Minmetals Inc.; Newgate Global Markets; Prime Metal Buildings and Components; Quick Tie Products, Inc.; Stavig Group (North Coast, Myers, General Steel Drum); The Greenbrier Companies; Thyssenkrupp Steel Services & Distribution*; Triple-S Steel Holdings, Inc*; TubularUSA; and UBS Securities LLC*.

We are now anticipating 900-1,000 attendees from across the steel supply chain.

To learn more about the conference agenda, attending companies, NexGen Leadership Award (nominations close this Friday), speakers, costs to attend, and how to register, please click here.

Also, don’t forget to tune in to our upcoming virtual events – Steel 101 (July 20-21) and Steel Hedging 201 (Aug. 3-4).

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

Michael Cowden, Senior Editor,  Michael@SteelMarketUpdate.com