Final Thoughts

Pig iron prices can only rise as exports from Russia and Ukraine are derailed by the fighting and sanctions aimed at deterring the Russian aggression. Service center flat rolled inventories, at roughly 2.7 months of supply, are approaching normal levels, though distributors continue to work down some excess stocks. The buyers’ strike may be nearing an end as many are poised to come off the sidelines at the first sign of prices plateauing. Indeed, the added uncertainty from geo-political tensions may prompt some to order insurance tons just in case the conflict in Eastern Europe causes unforeseen supply disruptions. All this totes up to a change in the market’s mindset. It’s no longer just about declining prices.

In fact, service center and manufacturing executives polled by SMU are beginning to report an easing in the rate of price declines. Hot-rolled steel prices have dropped by an average of about $75 per ton per week since the beginning of the year. That’s a total decline of $515 per ton, from $1,535 per ton in the first week of January to $1,020 per ton in SMU’s check of the market last week. “The price has not fallen nearly as much lately as it has in the previous weeks,” observed one exec. “The steep week-over-week decrease is starting to transition into a glide slope,” said another. “The actual declines aren’t stopping, but the rate of the fall seems to be decreasing. Maybe we see a bottoming in early April? Fingers crossed!” added a third respondent.

Supply-Chain Problems Persist…

SMU’s questionnaire also asked this week: Are supply-chain issues getting better or worse? Judging by these comments, the prevailing view is a bearish one:

“Slowly, very slowly, they are getting better.”

“February started with bad weather, and then the trucker protest in Canada put automotive behind, so they are working to catch up.”

“Mill supply chains are fine, customer supply chains are hit and miss, particularly if they have Asian sourcing.”

“Port supply chains are terrible. Congestion is as bad as ever, and now vessels are deciding not to call on West Coast ports due to too much wait time and delays. It might improve by the fourth quarter at the soonest.”

“Supply-chain issues apply to random items at random times. Normal is a long way off.”

“Supply chains are still settling. Trucking is still an issue.”

“It’s worse – toll slitters are very busy, and it’s hard to find trucks.”

“Things are still backed up, but hopefully will get better in six months.”

“They are staying the same – awful.”

…Labor Issues Too

In another survey question, SMU asked: Are you having trouble finding enough labor? The response was evenly split among those who still have trouble filling positions and those who see a slight improvement in the labor market.

“Labor is short across the board.”

“Finding labor is a big problem.”

“It’s still very tough to find good people, but a wee bit better than a few months ago.”

“Unskilled labor is opening up, but skilled labor is still very tight.”

“Hiring is not improving. It seems the work ethic is missing since the pandemic.”

“It’s very difficult to find dependable employees, especially truck drivers.”

“Fewer problems finding labor, but wages are up.”

“Finding labor is not the issue. Getting them to actually work every day is the issue. People want jobs, but don’t want to work.”

“We are having trouble hiring, similar to six months ago.”

“Labor is the biggest issue for the industry going forward.”

Democracy’s Worth $4 a Gallon

The Ukrainians aren’t the only victims of the senseless Russian invasion. The conflict halfway around the world could exact a toll closer to home. I’m talking about the economic sanctions’ potential effect on global inflation, rising energy prices and perhaps even cyberattacks on U.S. institutions. Former U.S. diplomat and policy expert Elizabeth Shackelford called for a united front against Russian aggression in a Chicago Tribune op-ed this week. “That unity may well depend on the willingness of citizens of the West to suffer some economic costs of the broad sanctions too. If inflation or gas prices go up and your 401k goes down as a result, give some thought to what democracy is worth to you,” she wrote. Rather than complain next time I find myself pumping $4-per-gallon gas into my tank, I’m going to say a little prayer for the people in Ukraine.

Upcoming SMU Events

SMU is now accepting registrations for a virtual Introduction to Steel Hedging Workshop scheduled for April 26-27 and SMU’s 2022 Steel Summit in Atlanta on Aug. 22-24. Hope to see you there, virtually and in person.

As always, we appreciate your business.

Tim Triplett, SMU Executive Editor, Tim@SteelMarketUpdate.com