Final Thoughts

Scrap sideways and sheet meh (for now)

Scrap settled “soft sideways” yet again in November. Once again, the initial chatter was that scrap would (finally) go up. And once again, that bullish sentiment faded the closer we got to settlement. Will scrap finally rise in December? Or is that too much to expect, given weak demand abroad and uneven demand at home?

On the finished steel side, I know some folks have bought a lot of coil in recent weeks, in some cases at prices not far from July’s low. Perhaps they didn’t buy quite as much as they bought over the summer. But that’s largely because demand is so-so, and lead times aren’t very long.

To be clear, service centers’ sheet inventories are lower than they were in July/August. And activity has ticked up post-election. But inventories probably remain on the high side versus prior years, especially heading into what is typically the slowest time of year.

SMU hasn’t released October data just yet. We’ll get those figures to our premium members on Friday. They’ll also be able to access it here. (If you’re an executive member, our Service Center Inventory report is a great reason to upgrade to a premium subscription. Contact SMU’s senior account executive, Luis Corona, at luis.corona@crugroup.com if you’d like to upgrade.)

I know some of you aren’t all that concerned about inventories, even if yours are a little on the high side. You feel like you’ve loaded up twice at competitive prices. And even if prices drop a little more in the short term, the upside risk is probably more than the downside risk (especially if you bought HR at around $600 per short ton) heading into 2025 – which is when the coated trade case and tariffs could become bigger factors.

Signs of life in plate?

One thing to keep an eye on is plate. Prices and lead times have been drifting lower for about a year now. But plate inventories, unlike sheet, have fallen and have been at or below 2021-23 levels.

True, demand is soft on the plate side. But if there is somehow a little boost to demand, it might not take much to tip that market into deficit – stretching out lead times and sending prices upward. Granted, that deficit might not last long if Nucor decides to really run its Brandenburg, Ky., mill, which sources tell us to date has only been operating at a fraction of its rated capacity.

Trump 2.0 primer

Want to know what President-elect Donald Trump’s second term might mean for steel? Check out the coverage below from SMU and our parent company, CRU. It’s a great starting place to get an idea of what Trump 2.0 could look like.

– Wiley trade attorney Alan Price a good summary of what Trump’s agenda will be when it comes to tariffs, decarbonization, USMCA, and the IRA here.

– CRU’s economic team has a solid overview of how Trump’s policies could impact the broader economy. Taxes and deregulation could spur growth. But a hard line on immigration and widespread tariffs could re-ignite inflation. Higher deficits are also a risk if tariff revenues and spending cuts aren’t enough to offset lower tax revenue. The details are here.

– As Wolfe Research’s Timna Tanners noted in Wednesday’s Community Chat, none of those things on their own are bad. But it’s not obvious how you can have them all at the same time without getting some perhaps unintended results. A snapshot of that conversation is here.

– CRU’s climate policy team notes Trump 2.0 probably means withdrawal from the Paris Agreement (again). But the repeal of the IRA isn’t a sure thing, especially given the billions it has invested in swing states and “red” states. That analysis is here.

– One thing that is almost guaranteed is that the EV tax credit is kaput, according to Reuters. And Trump’s new best friend, Elon Musk, is reportedly OK with that – since it will probably hurt traditional automakers more than Tesla.

– On a personal note, I recalled in a recent Final Thoughts how tumultuous Trump 1.0 trade policy was. Section 232 tariffs of 25% on steel, unveiled in March 2018, caught even those in the room where it happened by surprise. And we learned on a random Friday morning in August of that year that Trump could indeed double Turkey’s tariffs from 25% to 50% via tweet. We also found out during Trump 1.0 that presidents have broad powers to not only make but also to break trade deals. That’s especially so when national security is invoked – and even when the alleged threat comes from traditional US allies.

– As I alluded to above, we discussed many of these issues – and current steel market conditions – during a very well-attended Community Chat (more than 700 registered!) with Timna. A recording of the webinar and the slide deck are here.

Tampa Steel Conference

The conversation will continue at the Tampa Steel Conference, Feb. 2-4, 2025 at the JW Marriott Tampa Water Street.

Trump will have been inaugurated and started what will no doubt be a consequential first 100 days in office. What is educated speculation now will be turning into real-world policy. So we’ll have much to discuss with leading steel industry executives and analysts! You can learn more and register here.

In the meantime, whether you’re a Republican, Democrat, or Independent, or you wrote in your dog (or cat), thank you for your support of Steel Market Update. We appreciate all of yinz!