Final Thoughts

Let’s just say the impact of the latest tariffs on the domestic steel market is uncertain at best. Or as one service center source said, it’s feeling “spooky.”

March feels like a distant galaxy

Sheet and plate prices ticked lower. Scrap prices are expected to settle lower. And many of you tell me you’re buying only as needed until you have a better idea of the tariffs’ impact.

More companies on the sidelines means it could be tougher for mills to fill order books. That’s just one of the reasons why our sheet and plate momentum indicators are all at neutral right now. And CME HRC forward settlements suggest that might be too conservative.

If you’re feeling a sense of whiplash, it’s not just you. We haven’t seen a market whipsaw like this outside of external shocks like Covid-19 or Russia’s invasion of Ukraine.

A month ago (it feels like another galaxy now), the high end of our HR range shot to $1,000 per short ton (st). That came ahead of the re-imposition of 25% across-the-board Section 232 tariffs. And there was speculation that prices could move even higher. HRC settlements on the CME now indicate that smarter people than me think prices will dip below $800/st this summer.

What changed? For starters, Section 232 was a relatively known commodity. It drove prices up after rolled Trump first rolled it out in March 2018. And the market reasonably expected prices would rise again under similar circumstances.

The difference in April? The scope of Trump’s ‘Liberation Day’ tariffs encompass almost everything and almost everyone. (Except for Russia, Belarus, and North Korea, weirdly enough.) With US tariffs against China now at more than 100%, and retaliation almost inevitable not only from China but also from US allies, there are a lot more variables to consider.

Short-term pain is here. When is the long-term gain?

Maybe some of the positive outcomes are already happening? A service center source, for example, said one of his customers who supplies big-box stores was seeing increased volumes. Perhaps because that customer now faces less competition from abroad, and from China in particular.

Still, he said his business, while hopeful, was being very cautious with its steel buys. So, if there is good news, it’s mostly anecdotal. Or it’s new projects that might not be realized until after Trump’s term is over.

In the meantime, we’ve seen trillions of dollars wiped out of stock markets in a rout that has few precedents. Besides maybe March 2020 – the early, scary days of the pandemic. The kind of event that can make your 401k feel like a 401 (or a 401jk).

SMU’s Stephanie Ritenbaugh has a good article on the potential fallout from tariffs. I think this quote from Institute for Supply Management (ISM) CEO Tom Derry sums it up well:

“We might be adding manufacturing jobs in some communities, and I understand that many communities have suffered real pain have not yet recovered from the hollowing out of manufacturing the United States. I don’t mean to discount that at all, but at the same time, we’re asking every consumer in this country to pay more for everything.”

Already we’re seeing pushback – at least anonymously – from shale oil producers, not exactly a bastion of left-wing activism. And we’ve seen some very critical comments from SMU readers in our “Market Chatter” section. That criticism came before “Liberation Day”. I am curious to see what people will have to say when we post the next edition of Market Chatter on Thursday.

Don’t forget CORE

Amid all the Trump/tariff headlines, you could be forgiven if you missed the preliminary anti-dumping duties in the coated trade case. Those were posted last week.

There was significant variation from one country to the next and at times within the same country. A helpful chart listing the duties is here.

Business will probably continue as usual for companies that were already subject to a Section 232 tariff of 25% and got no dumping margin, like Turkey’s Borcelik, or a low margin like Taiwan’s Yieh Phui (2.64%). Also, while Canada and Mexico are subject to Section 232 again, which is a big change, this ruling didn’t make life too much more difficult if you’re, say, Dofasco (2.31%) or Ternium (3.43%).

But it’s hard to see how coated exports don’t decline from, say, steelmakers in Vietnam (40%-60%) or Brazil. (CSN was tagged with a preliminary AD rate of nearly 138%.)

SMU Community Chat

Speaking trade matters and Canada, don’t forget to tune in to our Community Chat on Wednesday, April 9, at 11 a.m. ET with Algoma Steel CEO Michael Garcia.

We’ll discuss the market, tariffs, and what it all means for business. We’ll also geek out on cool stuff like Algoma’s transition from integrated to EAF steelmaking.

You can find out more and register here.