The biggest takeaway from this week’s steel market report is the second round of mill price increases that were announced mid-last week. This second $40/ton increase, combined with the first announcements three-plus weeks ago, should help push pricing higher in the short-to-medium term.
What does that mean for the domestic steel industry?
For starters, the weekly domestic steel production utilization number dipped below 80 percent last week for the first time in nearly a year. This is mainly due to the idling/maintenance of a few integrated sheet mills and comes at a time when pricing is turning higher. This could tighten the domestic supply and help push mill lead times higher, giving strength to the rising market pricing.
What’s more, President Trump recently signed an executive order mandating greater use of U.S.-made steel and iron in federal infrastructure projects. Will the move single-handedly save the domestic steel industry? No. But it can’t do anything but help.
I’ve heard for a long time that this move was coming. The problem is what kind of actual activity is going to take place? If there is none or little projects in the pipeline, it really will not make a difference. However, if activity is even adequate, it could help boost steel production/consumption and tighten supply chains.
Now, you may be wondering if we are fighting the inevitable when it comes to keeping the domestic steel market healthy. Shouldn’t we just let the market dictate what happens?
The short answer: it all depends on where you stand on the whole trusting China issue. If you don’t think China is doing anything below brow then sure, why worry about the health of the domestic steel industry? But I believe I would much rather have my electrical grid, houses, bridges/highways built with domestic steel rather than foreign entities.
God forbid, if something ever were to go down on a global scale, do we want to be the country relying on foreign countries to supply our steel?
This goes back to the whole “national security” designation in the implementation of the Section 232 steel tariffs. It all depends on what side of the fence you stand on.
With all that said, we are still steel short as a country and rely on imports. It is in everyone’s best interest to make sure those imports are coming from reputable sources.
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