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POSTED June 1, 2018

Market Overview – Late May 2018




On March 8th President Donald Trump officially implemented tariffs of 25% on steel imports and 10% on aluminum imports, but temporarily excluded a number of trading partners that included Canada, Mexico, and the European Union (EU) while separate arrangement negotiations were expected to occur. On April 30th the US reached a product specific quota arrangement with South Korea and on May 31st the US reached arrangements for steel with Australia, Argentina, and Brazil, leaving Canada, Mexico, and the EU subject to tariffs as of June 1st 2018. Imports from Canada, Mexico, and the EU have accounted for over 40% of the total steel imports to the US over the past 12 months according to the Department of Commerce steel import monitoring system.




The AMM Shredded Auto Scrap Index for Chicago decreased to $370/GT down $10/GT from early May ’18 but is up $107/GT from early Dec ‘17. The index is modestly lower than the high point achieved in Apr ’18 which was the highest price point in three years. Scrap is a general indicator used by some domestic electric arc furnace mills to help determine price changes for finished steel products. Increased domestic consumption compared with slower scrap exports have left market participants mixed as to the direction of scrap price changes in the coming 30 days.




Mill lead times have held at 9-11 weeks from the West Coast and 10-12 weeks when rail is included from plate mills east of the Rockies. Domestic plate mills announced (7) price increases totaling $330/ton between Nov ’17 and mid-Mar ‘18. Price increases are believed to be issued due to increased demand, rising raw material prices, and fewer imports resulting from Section 232 steel tariffs that were announced in Mar ’18. Some market participants anticipate prices to rise further due to rising freight rates and the elimination of the temporary 232 exclusion for Canada, Mexico, and the EU, while others point to horizontal prices moves as the summer doldrums may cool demand.




Mill lead times are at roughly 10-12 weeks for delivery from the Midwest to the West Coast with similar lead times from West Coast mills. Domestic sheet mills announced roughly $290/ton in price increases between Nov ’17 and mid-Apr ’18. Domestic mills experienced strong demand over the first few months of 2018 contributing to bullish price announcements. Supply and price outlooks are uncertain as the ramifications of 232 continue to unfold.



Tube mill rolling cycles are roughly 4-8 weeks for domestic tube mills. Domestic Midwest tube mills announced (7) price increases totaling $350/ton between mid-Nov ’17 and early to mid-Apr ‘18. Tube demand has been strong since the start of 2018 with price increase announcements starting to outpace that of the sheet mills. Sheet is tube mills’ primary raw material input. Some of the largest tube producers also announced freight increases of $20-$40/ton in late Apr ’18 due to rising fuel and logistics.



Lead times remain at roughly 4-7 weeks for most production runs on the West Coast. Domestic merchant bar mills announced (4) price increases totaling $135/ton between mid-Dec ’17 and mid-Apr ‘18. The total price increases since Dec ’17 are similar to rising scrap prices over the same time period. Domestic merchant bar mills may see additional business based on tariffs starting to apply to Mexican merchant bar competitors in Jun ’18.



Lead times are roughly 7-8 weeks for West Coast delivery. Domestic beam mills announced (5) price increases totaling $205/ton between mid-Dec ’17 and mid-Apr ‘18. Fewer imports, rising raw material prices, and a bullish sentiment are components fueling elevated beam prices.



Chicago shredded scrap prices decreased by $10/GT since early May ’18, but up $107/ton since early Dec ‘17. Sheet, tube, merchant bar, and beam mill last issued a price increase announcement in mid-Apr ’18 with plate mills last announcing an increase in mid-Mar ’18. Freight expenses, including hauling surcharges, and logistic difficulties are causing domestic steel mills to reevaluate shipping rates. President Donald Trump implemented Section 232 tariffs of 25% for steel and 10% for aluminum imports in Mar ’18 and ended the temporary exemption for Canada, Mexico, and the EU on June 1st, 2018, while previously striking deals with South Korea, Australia, Argentina, and Brazil. It is unknown how long the Section 232 tariffs will last. According to the Institute of Supply Management (ISM), the overall economy grew for the 108th consecutive month in Apr ‘18. ISM indicates domestic manufacturing expanded with an index of 57.3 for Apr ‘18, which is down from 59.3 in Mar ‘18. The ISM New Orders and Production Index expanded with readings of 61.2 and 57.2 respectively in Apr ‘18, down from 61.9 and 61 Mar ‘18. ISM readings greater than 50 signal expansion. The US Labor Dept. showed non-farm payrolls increasing in May ‘18 by 223,000 jobs with an unemployment rate decreasing to 3.8%. The US Dept. of Commerce issued an estimate of GDP expansion of 2.2% in Q1 ’18. Previous GDP readings were 2.5% in Q4 ’17, 3.2% in Q3 ’17, 3.1% in Q2 ’17, and 1.2% in Q1 ‘17.

Sources include: AMM, ISM, Bloomberg, AP, US Labor & Commerce Departments, the White House, Domestic Steel Mills

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