Section 232 a Wild Card, Uncertainty Slowing US Sheet Price Momentum

Section 232 a Wild Card, Uncertainty Slowing US Sheet Price Momentum

The following article appears today, discussing the repercussions from the announcement that the Section 232 trade ruling on steel is being delayed indefinitely.  I am encouraged by this delay, as I see this trade action as unnecessary, extremely costly to our manufacturers in the USA and a wild card as to the effects it will have with our trade partners around the globe.  Our steel producers are currently enjoying good business.  They have modernized, streamlined their production and reduced production so that supply and demand are reasonable balanced.

“The US steel market on Wednesday was uneasy after President Trump indicated that the long-awaited Section 232 report on steel imports would be delayed indefinitely.

Trump told the Wall Street Journal on Tuesday that the administration was “waiting till we get everything finished up between healthcare and taxes and maybe even infrastructure” to make a decision on whether US national security is threatened by imports. Trump reportedly said, “we don’t want to do it at this moment.”

By statute, the Department of Commerce has until January to issue its report, but remarks by Commerce Secretary Wilbur Ross and Trump had market participants and observers expecting the recommendations to be published as early as late June.

In earnings calls this and last week, sheet mill executives said that they have been positioning themselves for success – with or without the trade remedies under Section 232 that they seek.

“When the president announces his actions under Section 232, we are prepared to respond quickly,” US Steel CEO David Burritt said on the company’s earnings call Wednesday. Burritt said the company’s response would depend on how broad the trade remedies are.

“We’d expect it to be sufficient [in] duration. We expect it to be comprehensive. And of course, we have to wait and see how that all plays out, but we would turn on Granite City, a blast furnace, maybe two blast furnaces and be as responsive as we could.”

Burritt said the company would need maybe 10 weeks for that adjustment, depending on how fast it can bring people back to work.

When asked about whether the delay could allow customers to buy more imports, Burritt said: “The administration needs to be thoughtful. There’s a lot of other issues rattling around right now that they’re dealing with.”

A mill source said Trump’s comments Tuesday could dramatically alter the market outlook. “If I’m buying today and I see this [Wall Street Journal] article, I’m going to freeze,” he said. Lead times were extending in anticipation of the Section 232 recommendations, but in absence of the report, he said there will be worry that sheet pricing that was trending up could reverse.

The delay could also mean that there will be “a watered-down version” of the Section 232 trade remedies coming, the mill source said.

A service center source said a mill had just raised his galvanized sheet base substrate price to $800/st from $790/st, and he expected that the mill would soon raise prices to $820/st. If there’s no resolution on Section 232, he said that $820/st could slide back to $800/st and then eventually $790/st again, where he was before mills announced $25/st price increases.

Another service center source said he was not worried about the sheet market without a Section 232 recommendation because people did not stock up in anticipation of the Section 232 decision. “I don’t think there’s going to be a collapse. If there’s no 232, it’s just not going to run up like people thought,” he said.

The service center source also said that he thinks the steel industry will ultimately see a trade remedy. “You can’t really plan on him (Trump) at all,” he said. “The guy you can kind of count on is Wilbur Ross.””

by Estelle Tran – Steel Business Briefing 7/27/17

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