Prices Are Still On The Rise
Prices have continued to rise in the steel market since the signing of the Section 232 steel tariffs four months ago. Hot rolled, cold rolled, and coated products have all seen increases of 25 to 40 percent over the past few months. Though the increases have been slowing as of late, many in the market are currently wondering if the increases will continue through Q3 and potentially through Q4. Some in the market feel that there are not enough overseas imports to bring the prices down, and early indications are that there are no drastic import booms on the horizon. Others have seen the gap between current import pricing, and that of the domestic mills, as a sign to try to buy more imported material than they have since the new tariffs have come into effect. However, though the gap seems large, after the 25% tariff and freight costs to transport material from the ports, many manufacturers find that the total in-house price of imported steel is comparable in price to that of domestic sources. However, typically the lead time for domestic steel has been several weeks faster than that of imported steel.
The Spot-Buy Steel Market Is Also Seeing the Effects
Another side effect of the new trade tariffs has been the changes to the excess and secondary spot-buy market. Many manufacturers and steel suppliers are having an increasingly tough time at sourcing spot tons on the open market. Though several staples of the industry remain easy to find and readily available, more technical items requiring certification to a particular spec or in tighter gauge ranges have been harder to find or nonexistent on the open market. This likely comes as a direct result of suppliers and manufacturers reacting to both higher prices and longer lead times from the mill. Quickly after the announcement of the Section 232 steel tariffs, many sought relief from the secondary and excess market to cover their needs, hoping that the spike would only last a month or two. Likewise, many steel brokers may be sitting on their inventory, electing to try to ride the wave of price increases from the mill. Jump ahead four months later and the spot-buy steel market has been extremely scarce. Manufacturers should look to source their material several weeks in advance in order to give plenty of time to their purchasers if they are looking to source through secondary channels.
NAFTA Negotiations Hoped To Be Completed By Labor Day
The slowing of price increases may be due in part with the status of current NAFTA negotiations. Several Months back, the White House announced that Mexico, Canada, and the EU would not be excluded from the 232 tariffs. However, these tariffs may be on the negotiating table during these rounds of NAFTA discussions in light of rumors of a retaliatory tariff on US products. As both the largest exporter and importer of steel to and from the US, adding Canada to the list of countries exempt from the tariffs may have a significant effect on domestic pricing. Secretary of Commerce Wilbur Ross has said that he hopes to have these NAFTA negotiations completed by Labor Day. Until then, steel suppliers and manufacturers may have to sit and wait for information on these talks before making decisions about long-term buys.