One customer was presented with contract pricing for $16.61 on 11/17/17 and wouldn’t sign because he thought it was too expensive. The salesperson presented new contract pricing on 2/14/18 at $18.01. The customer finally signed a contract on 3/2/18 for $21.46 LOCKED IN for a managed supply that will see him through the end of 2018, which he now considers a bargain. He could have locked it in at $16.61 instead of paying 23% more. He can also make some money by billing the metal to his customers at the market replacement cost, which is going up almost daily. The market price could quadruple between now and the end of the year.
That specific product has gone up 17% since end of October 2017. It is one thing to simply absorb the price difference, but shortages are happening now and it will come down to AVAILABILITY. Those not on a managed inventory contract may not be able to purchase if inventory availability becomes too much of a problem. We reserve inventory for our contract customers first and additional supplies are managed closely to others.
We expect prices to reset much higher than they were, and the supply issues will eventually work out.
New trade deals are being negotiated with NAFTA, Vietnam, South Korea, Australia, ASEAN nations, and then China and the EU. We predicted the volatility for both prices and supplies.
CHINA – China Zhongwang Holdings, which had already opened a facility in Vietnam as a tariff workaround, moved a $2 billion stockpile of aluminum to Mexico with the intention of using Mexico’s current NAFTA exemption to avoid paying tariffs. Mexico is about to have a tariff problem.
CANADA – Canada’s Border Services Agency is now aggressively investigating any attempts at circumventing of Section 232 tariffs on steel and aluminum. Canada does not want a 25% tariff levied on their exports to the US.
Unionized workers at the Iron Ore Co. mine in Labrador City, Newfoundland announced plans to go on strike, which will squeeze a short supply market. It could remove an annual 19 to 23 million tons of iron pellets and concentrate from the market.
SOUTH KOREA – got an exemption from tariffs but will be subject to a quota of 2.68 million tons, around 70% of their annual exports between 2015-2017, further shortening market supply.
RUSSIA – a Russian steel producer has filed a court injunction against the Section 232 tariffs, claiming a failure to provide fair notice and stating it would bankrupt its Miami division.
USA – Without going into too much detail, domestic mills have raised their prices considerably for May shipments, continuing the upward trend for this year. Most mills are not accepting all the orders offered to them and in some cases no accepting any orders saying they don’t have the availability.
There are numerous mill restarts, expansions and new builds planned throughout the US. The biggest news is the planned expansion of a mill in Baytown, Texas and a new mill by JSW Steel (USA), an Indian company. We don’t know how long these projects will take. Given that so many facilities were stripped, we do not expect these mills to have any effect on supplies or prices for several years.
HOUSTON STEEL SUPPLIERS
(Minimum 750$ Order)