Final Thoughts

Written by Michael Cowden

The spot market remains quiet on fears of a potential United Auto Workers (UAW) union strike late next week.

US President Biden said a UAW strike against Ford, General Motors, and/or Stellantis is “not gonna happen.” That might be vindication for those of you who’ve told me that the market has erred in baking in a strike.

UAW Negotiations

But it didn’t seem to change many minds among those of you who think the only real question is not whether there will be a strike but rather how long and how widespread one might be – a stance that appears to be shared by UAW President Shawn Fain.

The UAW is asking for a lot. It’s possible a deal will be reached within the next 10 days. But if progress is being made, it’s being kept very close to the vest.

I can see the UAW getting some of what they want – a significant pay increase, for example, as was negotiated by the United Steelworkers (USW) union last year.

But is it realistic to also ask for pensions for all workers and more paid time off? True, automakers are enjoying record profits now. But record profits, by definition, are not the norm.

Frankly, I don’t have a lot to the subject of UAW negotiations beyond what’s already been reported. But I’d like to bring a couple of other issues to your attention – ones that probably won’t be picked up by the mainstream business press.

European Sheet Prices Up

For starters, European sheet prices have risen on the heels of price increases there, according to a report by CRU, SMU’s parent company. It’s not clear whether that trend is durable. But let’s set that aside for a moment.

I’ve noted in past columns that US prices tend to fly way above those in the rest of the world and then, for brief periods, to drop below them. I’ve also noticed over time that it’s almost like US sheet prices bounce on top of European prices like a ball. Once the US and Europe hit parity, it’s sometimes only a matter of time before we start seeing price hikes here.

If there weren’t the threat of an automotive strike looming, I’d suggest keeping a close eye out for price increases. As it stands, it’s hard to look past Sept. 15.

Strike Impact on Prime Scrap

As for the potential strike, we all know that if there is one, it will result in reduced demand for steel and, presumably, lower sheet prices. If there is an unexpected last-minute deal, we could see the opposite.

What about scrap prices? I ask because if there is a strike, it will reduce not only steel demand but also prime scrap generation.

In my last Final Thoughts, I compared sheet prices trends in the fall of in 2019, the last time there was a UAW strike, to current price dynamics. Another useful point of reference might be the early days of the pandemic.

In late April of 2020, HRC prices fell to $460 per ton, according to our interactive pricing tool. That was on the heels of pandemic-related shutdowns – including of automotive assembly plants.

Those shutdowns slowed prime scrap generation to a crawl. When it turned out that the economy, and demand for steel, had not entirely stopped, prime scrap prices shot up in May. HRC prices soon followed.

If there is a strike on Sept 15, could we see something similar? Namely, finished steel prices falling until scrap rebounds.

I don’t have firm answers for you. Still, I think it’s worth adding these two to your list of things to think about: (1) What’s the relationship between steel prices in Europe and the US? And (2), what would a strike do to prime scrap generation and prices?

Tampa Steel Conference

The Tampa Steel Conference, which SMU does together with Port Tampa Bay, is Jan. 28-30, 2024.

That might seem far away now. But keep in mind that January is the high season for tourism in Florida. So consider registering now, especially if you don’t want to spend an exorbitant amount on airfare and hotel.

Also, we’ll have a great program. Stay tuned for more!

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