Final Thoughts

March 10, 2022

In his remarks during Wednesday’s Community Chat, Johnny Sjöström, the top executive at SSAB Special Steels, suggested that the fighting in Ukraine will make nations more gun-shy about becoming too dependent on their foreign trading partners. Nations in Europe and many other parts of the world are scrambling to maintain production without the exports of steel and steelmaking raw materials from Russia and Ukraine. Prices for iron ore, scrap, slabs, pig iron and other commodities are spiking dramatically. No doubt, when the smoke clears, countries will take a step back from this latest unimaginable calamity (first a pandemic, then a senseless war, what’s next?) and reassess their vulnerabilities.

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Sjöström predicts steel trade between regions will decrease in the future. Most notably steel trade with China and the CIS countries. “U.S. duties on China were justified because their exports were heavily subsidized. Someone had to put an end to that because they were killing the market economy around the world. If you take China and the CIS out of the export picture, there will be more demand than capacity in the rest of the world and that will have a big [positive] impact on prices and availability,” he said.

He pointed to the billions being invested by steelmakers in the United States to add lower-emitting EAF capacity. That will reduce the industry’s carbon emissions, but also make the U.S. economy less dependent on foreign steel imports in the future. A model being emulated in other parts of the world.

It’s understandable that a nation would want to keep its economic destiny in its own hands. But history has shown that isolationism can actually open the door to evils ranging from inefficiencies, lower competition and higher costs to strident nationalism and even militarism. Ultimately the world would be better off with more global trade, more interdependence, not less.

Survey: Seeing Impact from War?

In Steel Market Update’s survey March 7-8, we asked: Are supply chain issues getting better or worse? And are you seeing any impact from the war in Ukraine? Virtually all the service center and manufacturing executives who responded said their supply-chain issues are just as bad or worse and are likely to be further complicated by fallout from the war in Ukraine. Here’s what a few had to say:

“The war is definitely going to have impact.”

“The lack of Ukrainian and Russian pig iron is driving up domestic prime scrap pricing.”

“Supply-chain disruptions continue to be bad and appear to be getting worse thanks to the situation in Eastern Europe. Pretty wild stuff.”

“Worse, we had a foreign order canceled that was coming from [a Russian mill].”

“Port issues are not any better especially at the West Coast ports. Inland transportation is difficult. And expect price increases due to the Russian invasion causing cost increases for energy.”

“Decent demand, scrap, oil, Ukraine all pushing plate prices up.”

“The future near term is getting messy. How high can prices get, with futures crossing $1,600. Could the mills actually be raw material short in a couple months?”

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