Final Thoughts

There is, in the meantime, some debate about what the ramp-up will look like. Will BR2 see a smooth ramp-up, as happened pre-pandemic with the original Big River mill? Or will it be in fits and starts, as has been the case at SDI Sinton, which ramped post-pandemic?

Whatever happens, with new capacity coming online and demand iffy, I know some of you think that recent mill price increases are worth about as much as White Sox playoff tickets. But I’ve also heard from some of you who think there is method behind the price hike madness.

For starters, I’ve heard that some large orders have been placed by companies in the line pipe sector – let’s say 200,000 tons to 250,000 tons split between at least two domestic mills capable of making API grades.

One source told me it might be election-related. Energy companies that had projects in limbo think that work might finally get greenlighted under a Trump administration. Maybe. Other sources have told me that it has more to do with geopolitics.

Basically, tensions in the Middle East continue to rise. Russia is not coming off the sanctions list anytime soon. (North Korean troops will soon be fighting for Russia against Ukraine, according to the US Defense Department. Maybe talking about the “enemy from within” is not the best use of time. But I digress.) And so the long-term risk/reward calculus has shifted toward domestic energy projects – regardless of who wins the White House next week.

I’ve also heard from some of you that certain large hot rolled buyers have come off the sidelines and placed big orders at low numbers. That should, in theory, stretch out lead times and give mills a stronger hand to stick to higher prices.

That might help explain why U.S. Steel went up $30/st. Why Nucor went up $20/st. And why Cleveland-Cliffs reminded us on Oct. 30 that its HR price was $750/st, unchanged from Sept. 17.

I suspect there might have been some unpublished movements between those two dates. It wouldn’t be the first time we’ve seen a mill quietly around the lowest price and publicly around the highest price at roughly the same time. But, again, I digress.

I’m not saying that prices are going to soar upward. Not everyone can make API grades. And some EAF mills have lead times in late November and early December not only for hot-rolled coil but also for coated products.

And, again, while some mills are publicly in the $720-750/st range for HR, we’ve heard that deals have been made in the low $600s/st and even in the $500s/st. That’s not only from certain US mills but from Canadian producers as well.

On the galvanized side, we’ve heard similar things. Namely, certain mills in the US and Canada are below $800/st for galvanized base prices. Maybe that indicates weak automotive demand? In any case, it also indicates that the spread between HR and coated base prices has declined from a “new” normal of $300/st to $200/st – which had been roughly the norm post-pandemic.

Where things go from here for galvanized might hinge in no small part on what happens with the coated trade case. Trade attorney Lewis Leibowitz had some good thoughts on the matter in his Community Chat on Wednesday. If you couldn’t watch it live, you can catch a recording here.

Broadly speaking, a lot also hinges on where scrap prices settle in November. Earlier in October, sentiment had been bullish. It has since become less so. The consensus now appears to be for a sideways November scrap market.

What does this mean for steel prices? Perhaps more unprecedented stability. You could make a valid case for continued erosion or for some modest gains. It’s hard to see – at least from where I sit – the logic for any big swings one way or the other, unless something unexpected happens (an unplanned outage, a surprise idling, etc.).

I am also reminded by some of you that you have more pressing problems than prices. Namely, finding good workers. One service center source said the problem is less creating jobs than finding people to fill those jobs – and to stay in them. Any one have any good ideas to share there?

In the meantime, thanks to all of you from all of us at SMU for your continued business. If you’re reading this in the evening – Happy Halloween. And if you’re reading this Thursday morning, we hope you and your family had a good time together!