Final Thoughts

The 2021 SMU Steel Summit started with a bang on Monday morning. Turns out it was a transformer that blew. Just as the opening video and music was revving up and host John Packard was getting into his opening remarks, the Georgia International Convention Center was plunged into darkness save for some emergency lighting. Thinking on his feet, showman that he is, John quickly decided the show must go on and he introduced the first speaker, popular TV and radio host Michael Smerconish, who wowed the crowd without skipping a beat.

One doesn’t have to look very hard to spot an apt analogy here. COVID almost turned the lights out on the U.S. economy and the steel industry a year ago, and yet we persevered. America emerged from the shadows stronger than ever. Steel prices and profits have never been higher. It’s something to be proud of. The show must go on, indeed.

Here are a few quotable quotes and some interesting stuff we learned during the Steel Summit over the past two days:

• If you believe the analysts, steel prices are going to trend down, perhaps beginning in just a matter of weeks. As John Anton of IHS Markit said, “This won’t last. The price of steel will come down. Bubbles pop – they always do.”

• If you believe Leon Topalian, the leader of Nucor, the country’s largest steelmaker, the hot rolled steel price could still be above $1,200 per ton at this time next year, sustained by demand that is stronger than many of the experts forecast. That’s likely down from the current price that’s approaching $2,000 per ton, but hardly the disaster scenario that many fear.

• Cleveland-Cliffs is getting into the scrap business. Cliffs’ CEO Lourenco Goncalves was coy about what that means, but it immediately stirred up some speculation during cocktail hour – will it be some sort of startup, a big acquisition, perhaps something creative like a deal to buy prime scrap directly from the auto companies?  Like Nucor and SDI, which have their own scrap operations, Cliffs is looking for greater control over its scrap costs. Cliffs already has mining operations and produces HBI, so scrap is a logical new piece of the puzzle.

• Scrap may not be a “precious metal” such as gold. But the growth of electric arc furnace steel production around the globe will add to the pressure on scrap supplies and could push prices higher. Panelists described scrap as “semi-precious” based on the emerging trends. “I wouldn’t call it ‘Scrapmageddon,’” said CRU Senior Analyst Ryan McKinley, “but it will become more challenging for the mills to find the scrap they need in the years ahead.” The Chinese are sitting on an enormous supply of obsolete scrap, they just don’t have the means to cultivate it yet, he added. When they do, they may restrict its export and keep it for themselves, which has potentially serious implications for the rest of the world

• “Decarbonization” is finally more than just a buzzword. Mill execs who took to the stage all touted their companies’ plans to drastically reduce harmful CO2 emissions that are contributing to climate change. It’s not all altruism; their customers are now demanding it.

• What is going to happen to the Section 232 tariffs? Opponents say it’s hard to justify continuing to restrict imports when steel prices in the U.S. are by far the highest in the world. Proponents say the tariffs are needed to prevent a new surge of unfair imports in the future. Some panelists predicted trade negotiations with the EU in November and December could lead to a compromise that will yield some sort of modification to S232, if not a full repeal.

• Delivering some not-so-good news, popular economist Alan Beaulieu from ITR Economics reported that the rate of rise in steel demand and production will level off somewhat in 2022. “Things are going to slow down next year – as will demand for steel,” he said, though offering a generally positive forecast for the U.S. in the next couple years. If his prognostication holds true, 2026 may be a bit dicey.

SMU’s Steel Summit wraps up tomorrow with a combined in-person and virtual attendance of more than 1,000 industry executives – who deserve thanks for wearing their masks, and keeping each other safe, without protest.

SMU Events

SMU will host two workshops in October and November. On Oct. 5-6, we will virtually host our next Steel 101: Introduction to Steel Making & Market Fundamentals Workshop. You can learn more about the Steel 101 workshop by clicking here.

On Nov. 2-3 (half day each) we will virtually host the next Introduction to Steel Hedging: Managing Price Risk Workshop. You can learn more by clicking here.

As always, your business is truly appreciated by all of us here at Steel Market Update.

Tim Triplett, SMU Executive Editor, Tim@SteelMarketUpdate.com