Final Thoughts

But I’ll do my best. I’m also going to preview some of the results from our latest steel market survey, which we’ll release to our premium subscribers tomorrow.

Keep an eye out for that survey. The steel market has been mostly flat since last summer. This time is different. We’ve got a clear picture in these latest results of prices inflecting upward – even if there are still a lot of questions about just how high and for how long that upturn might last.

Survey shows Timna’s ‘Trumplications’ are in the house

As Wolfe Research’s Timna Tanners put it in her opening talk at Tampa on Monday afternoon, we’re living in a world of “Trumplications” now. That probably means – at least in the short term – higher scrap costs, lower imports from countries hit or threatened with tariffs, and higher steel prices.

SMU data reflects that. Scrap went up in January. More than 75% of the respondents to our more recent survey expect scrap to go up again February, maybe by a lot. Lead times, meanwhile, have been ticking higher this month. It started with hot-rolled coil and plate earlier this month. Now we’re seeing coated lead times extending too.

About two-thirds of folks who responded to our survey expect lead times to continue to extend. Meanwhile, nearly 25% of respondents now think that HR prices will get to $800/st or higher. (Several mills are already targeting that level.) A month ago, only 5% thought anything with an eight-handle was in the cards.

A lot has changed since early January, of course. The year started out a little slower than many had hoped it might. Some of that resulted from bad weather. We didn’t see anything as catastrophic as Snowmageddon in early 2021. But a lot of shipping days were lost here and there. And that adds up.

Now, that Arctic weather is gone. And so, too, are any doubts about whether Trump would threaten tariffs.

Put IEEPA on your radar ASAP

As Wiley trade attorney Tim Brightbill told Tampa attendees Monday afternoon – as we were all finding out in real time that Canada had received a 30-day tariff reprieve – you should add a new acronym to your vocabulary ASAP. Namely, “IEEPA”, which is short for the International Emergency Economic Powers Act.

IEEPA allows Trump to invoke a national security emergency – with China, Canada, and Mexico, that emergency was illegal immigration and fentanyl. That emergency then allows him to impose tariffs without going through Congress.

And Trump still has all the sections at his disposal too: Section 301 tariffs, which he deployed against China in his first term. Section 232, which he used to hit foes and allies alike with 25% tariffs on imported steel and 10% tariffs on imported aluminum. And let’s not forget good, old-fashioned AD/CVD cases – which walloped some imports of coated flat-rolled steel this week.

Whether you agree that immigration or fentanyl are national security emergencies or not (reasonable people might disagree, and that’s OK), the policy pattern that’s emerging seems clear enough: Use IEEPA to threaten tariffs, extract concessions, and move on to the next region the US might have a beef with.

And Trump has made it clear in public remarks that more IEEPA tariff threats are coming.

Maybe the European Union is next. Trump might say that Europe is not spending enough on defense to support NATO. And that’s a national security threat. Perhaps he’ll single out Taiwan and say advanced semiconductors are a national security threat. The BRICS (Brazil, Russia, India, China, and South Africa) should also have their IEEPA radar active. Because Trump really doesn’t like the idea of them backing a currency that might rival the greenback.

You could hire a political scientist and get them to determine the risk profile of each nation or region from which you might want to source steel. Or maybe Ryerson CEO Eddie Lehner said it best during a thoughtful, heartfelt fireside chat to close out the Tampa Steel Conference on Tuesday – the US is the best risk-adjusted place in the world to do business in.

What’s it mean for foreign steel suppliers?

What’s a mill in Mexico or Canada to do until there is more clarity on tariffs? If you’ve got operations on both sides of the border, maybe you can serve US customers mostly from US mills and customers in your home country from mills there.

If you don’t have operations on both sides of the border, then it might get tricky. Canada, for example, (and as our parent company, CRU, highlighted last week) relies on the US for 90% of its steel exports. There are no good options if tariffs are imposed. Meanwhile, 25% is a lot to “eat” – even if you somehow share some of the tariff with your customers.

This isn’t just a North America story. I’ve heard that major overseas mills have recently pulled offers. Is that because they’re about to increase prices along with US mills? Because of tariff risks? Or both?

What happens downstream?

That brings me to some of the things that Tom Derry, CEO of the Institute for Supply Management (ISM), said about supply chains and potential tariff- or immigration-related inflation.

Automotive companies, for example, already had a very tall task making long-term plans when US policy might swing wildly every four years depending on whether a Democrat or Republican was in the White House. Now, policy is shifting by the day, by the hour, and even by the minute (as we learned this week), often on live TV or social media. How do you make a business plan around that?

In fact, the biggest concern of ISM members is tariffs on imports. That’s not to say that things are grim out there. As Tom noted, manufacturing activity has been picking up recently after tough times in 2023 and throughout most of 2024.

As ISM sees it, the US was in a manufacturing recession for 25 months. That’s historic, even if it didn’t get many headlines. The Great Recession in 2008-09 led to a manufacturing recession of 18 months. (For you history buffs, the recession of 1982 led to a manufacturing recession that lasted for 19 months.) Things should get better from here. Assuming no major shocks.

Manufacturing is a key part of our economy. But it’s a smaller part of it than it used to be. And it should be a more important piece of economic activity going forward, as Eddie noted. That said, and as Tom warned, the one thing you really can’t do in a consumer-driven economy is overwhelm buyers with high prices.

It looks like we’ve gotten a reprieve from expensive beer (whether you like Corona or Molson) and avocados ahead of the Super Bowl. What about a few months from now when it comes to complicated manufactured goods like cars and trucks?

Tim noted that there was a new, radical mood in D.C. A lot can change in a situation like that. Will the Trump administration tear down trade policy as we know it and build back something better? Or will it lead to supply-chain chaos, as we saw during the pandemic shutdowns?

Well, whatever you might think about the president, he has given us no shortage of things to write about.

Scrap survey coming soon to an inbox near you!

SMU will send out its inaugural ferrous scrap survey on Friday. We think you’ll be able to draw a lot of useful insights from it. We also thank those of you who participated (a lot more than we expected!) for your time.

Like our steel survey, our scrap survey will be available only to our premium subscribers. If you’re an executive member, information like this is a great reason to upgrade to premium. And if you’d like to upgrade from executive to premium, please contact SMU Sales Executive Luis Corona at luis.corona@crugroup.com.

And thanks again, from all of us at SMU, for your continued business.