Episode Transcript
[00:00:05] Speaker A: Good morning, Nate. How are you today?
[00:00:06] Speaker B: Good. Kind of. It's a Friday though.
[00:00:10] Speaker A: It is Friday. It's good day.
[00:00:13] Speaker B: My name is Nate Bishop and this is Matt Mitchell. And this is our weekly podcast covering steel market updates, particularly Flat Roll and domestic and Offshore where we discuss the state of the union on steel. And that's correct. Mr. Matt has all the answers for us.
[00:00:37] Speaker A: I wish I had all the answers. Yeah, we'd both, both be rich if I did.
[00:00:43] Speaker B: Yeah.
So, Matt, a sad but true fact in our business is hurricanes.
[00:00:53] Speaker A: Absolutely.
[00:00:55] Speaker B: And tornadoes.
But every year it's what, August through November I believe is hurricane season.
[00:01:04] Speaker A: Yep.
[00:01:05] Speaker B: Sounds like we had one last night. I haven't gotten to talk to one of my buddies down there in Horseshoe beach, but man, I think that thing went right over that little community down there where the Reed's families all, all originated from.
[00:01:21] Speaker A: Yeah, well, and we, we sincerely send out our best wishes to people and hopefully people are safe and being able to make good decisions about whether or not to evacuate their areas and all that kind of thing. But we really hope that everyone's getting the help that they need and, and staying safe, being prepared.
And according to the news this morning, it looks like these storms are lining up. This is the first of possibly three storms to hit between now and the middle of October, so.
[00:01:53] Speaker B: Right.
So yeah, I mean, the part, the sickening part of the steel business is, you know, these things will cause a little bit of demand, it seems like. Just dive in right into. It seems like things are pretty flat this week, eh?
[00:02:10] Speaker A: Yeah. Yeah.
And of course, you and I have talked a little bit about this. The CRU has kind of been a gauge in the past, but the market's kind of moving away from that, not using the CRU so much as a gauge. But that being said, the numbers have stayed fairly flat clear back as far as, you know, March or April.
You know, March, you know, hot rolled was 765 and it's fluctuated up and down and it's 704 this week. And so just. Just little bumps up and down.
[00:02:50] Speaker B: Yeah, that's what I show that, you know, it's not showing much movement at all.
You know, of course we had interest rates were, were taken down a little bit.
The Feds. Feds indicate that they're probably going to continue to do that all the way into 2025.
[00:03:09] Speaker A: Correct.
[00:03:09] Speaker B: I think the interest rates are still at way beyond pre post pandemic levels.
[00:03:20] Speaker A: Yes.
[00:03:21] Speaker B: So I think what we were at 3.5 before the pandemic and Went all the way up to 8% and now we're at like 6.5%, I believe.
[00:03:33] Speaker A: Yeah.
[00:03:35] Speaker B: So that's, you know, and that's not really spurring anything.
Again, domestic prices still are just pretty soft. I saw everything was pretty much flat.
If anything, I see prices going down.
They went down in China.
China. China had a huge stimulus package and it sounds like that they're not increasing or decreasing their rates, their interest rates, borrowing rates at the same time.
[00:04:12] Speaker A: Yeah.
[00:04:16] Speaker B: Another thing too is inventory.
It seems that most service centers are not moving as much inventory as they were a year ago.
[00:04:30] Speaker A: Yeah, it seems to be correct. And some of the people that I talk to are saying the same thing. They're, they're saying that people have more or less purchased kind of what they need. So they're either buying on strictly as needed basis because lead times on the steel market are still pretty good.
You know, availability is not really an issue. Transportation other than, you know, when you have storms and things like that, it's really not an issue. So I don't think people are too worried about stockpiling anything and bringing a bunch of material in and the prices are pretty flat. So they're not worried about them shooting up so much, I don't think.
And a lot of the indicators in my mind at least say that it's probably not going to have a significant increase anytime soon.
[00:05:25] Speaker B: Yeah, I'm just reading here that they're basically ticked up a little bit from a three month supply compared to a 2.9 supply in July. So in August the numbers came out at 3.0. Yeah, there's not that much news on section 232. I mean overall, basically the theme of the week is flat and going into winter, that's not, that's not good news.
And I think, you know, even with some mill maintenance schedules, I don't think that that is having a big impact at all either. It.
[00:06:08] Speaker A: Right.
[00:06:10] Speaker B: So would you say that mainly, I mean, it's a demand, demand issue. Is that the problem?
[00:06:16] Speaker A: I think so.
Some of the other related industries that I looked at this week were automotive and large truck inventories and demands. And for example, you know that the industry, the auto industry kind of put out their, what their top 10 worst selling vehicles are currently and those happen to be three out of the 10 just happened to be Ram trucks, the 15, 25 and 3500. The bottom line was the 3500. They felt like there was inventories for over 300 days on that particular unit.
And then in the large truck industry, Class 8 trucks, which are the, the largest, you know, the semis, the.
The demand was up slightly for August. However, year over year it's down over 16%.
So that leads me to believe that the auto manufacturing is not headed in a. In a real upward trend right now. We already know about some of the cancellations of production on some electric vehicles, some EVs in the United States, things like that. So, you know, I looked at automotive because obviously automotive is a big steel user, and I don't see a huge demand coming from automotive. And therefore, again, you know, one of those indicators that, to me says that the demand is not really increasing in that. In that sector for sure.
[00:07:52] Speaker B: Right.
The other big news is we got is, you know, this rumored strike, the ports. It's rumored to be the largest strike since 1977. Yeah. Which I can do. That means you're 40, 47 years old.
[00:08:10] Speaker A: Yeah, yeah, that's.
That. That could have. That will have a significant impact on. On things. Steel and other things, for sure.
[00:08:21] Speaker B: Right.
The bad part about it too is that, you know, the President has the authority to get these guys to work with the Taft act, but I read in the news this week that he's not going to be doing that.
[00:08:34] Speaker A: Yes, that's what I understand.
[00:08:36] Speaker B: Doesn't want to upset the union.
[00:08:39] Speaker A: Yep.
[00:08:40] Speaker B: But my goodness, these guys talk about timing. I mean, it's. Well, I guess it would be never, you know, never a good time. But to go on strike, specifically in Tampa during a hurricane.
[00:08:55] Speaker A: Sure.
[00:08:55] Speaker B: Or, you know, shortly after. The hurricane is going to be pretty devastating. So I'd be really surprised if they still don't invoke that act in order to do it.
[00:09:08] Speaker A: Well, I think there certainly needs to be some reasonable things looked at in regard to that. And especially when, you know, you take the impact of this hurricane, those poor people are going to need products being brought to them for sure. More so than normal.
It's going to be a big deal. And of course, we're going into kind of the winter season when a lot of people want to go to Florida and they want to visit there. And so tourism is going to have an impact there. The lack of tourism, I guess, but still, you know, a strike there would be. Would be pretty devastating. I know you can remember just in recent years when we had the last strike or slowdown, you know, ships were waiting to get into the Port of la, for example, for weeks upon weeks.
In fact, some of the shipping lines actually started telling people, we're not going to come to the Port of la. Because we're not going to let the vessel sit, you know, offshore for that long. And it's cost some money every day just to sit there. And so they pretty much boycotted that part of California. And we saw those ships go to a lot of other ports and then you got truck freight from there, which cost consumers quite a bit of money because no longer are their products coming from the closest port of entry to their destination.
There's a lot of factors in that.
[00:10:44] Speaker B: Yeah.
You know, just on a wider scale. I was reading in the news, it's interesting you think about these interest rates going down would spur the housing market, which is something we definitely need. But it's always a double edged sword. Meaning if the lower down interest rates, that just means that there's going to be more buyers coming in. So the price of housing actually might go up.
[00:11:16] Speaker A: Yeah, yeah.
[00:11:19] Speaker B: Just from a simple supply and demand.
[00:11:23] Speaker A: Right.
And we know that the part of the housing market that's really suffering is the budget conscious, you know, first time homeowner, you know, the young couple that's trying to get a start in life, maybe trying to get out of an apartment or living with a family member or something. They're trying to get into their own home. And those are the homes that are hardest to find.
We've seen that for quite some time.
The answer to that seems to be building multifamily housing as a more affordable option than single family homes.
And so, you know, it's going to be interesting to see how this, this all plays out. Because even those multifamily dwellings, condo type scenarios, boy, those are not cheap.
You know, I'm not sure it's really bringing the price down.
The space is going down for the same money. What's happening?
[00:12:29] Speaker B: Yeah, for single family home.
[00:12:31] Speaker A: Yeah.
[00:12:31] Speaker B: Buyers the first time home buyers.
Not to worry, the government will step in and what?
Well, give you some money.
[00:12:42] Speaker A: Yeah.
[00:12:43] Speaker B: No, what is it? 25,000 is what.
[00:12:46] Speaker A: Yeah.
[00:12:46] Speaker B: What the candidate is saying.
[00:12:50] Speaker A: Yeah. And you know that that sounds great on the surface, but when you really dig into that, the people who are able to effectively take advantage of that, that offer, if you will, or few and far between, it's kind of like the same thing with the.
Is it $50,000 tax credit for new businesses. So the idea being at the end of the first year you start a new business, at the end of the first year, you know, you're eligible for this $50,000 tax credit. Well, everybody knows that when you start a new business, you're pretty much putting everything back into it. And so in order to actually capitalize on that tax credit, you would have to make over six figures in profit your first year as a business to have that do any good. So it's kind of one of those empty open, you know, it's kind of an empty promise. It sounds good on paper, but when people really dive into it, you know, it makes you wonder, you know, what's it really doing?
[00:13:59] Speaker B: Yeah, just switching gears. This is kind of interesting. You know, there was news on Wednesday, announced that the, that China is putting sanctions on the United States for selling any more arms into Taiwan. I guess there's some sales for some F16s, some Abram tanks.
So that issue is something I keep on putting an eye on.
That would be interesting to see what happens there as far as supply goes to the U.S. taiwan being a good, I think, a good partner to the US Trading partner, at least.
[00:14:38] Speaker A: Well, and I think the fear that we're talking about here really is, you know, China taking over Taiwan. You know, China's been talking about taking, taking it over for some time. Right. And it seems to continue to build a little steam in, within China to, to take over Taiwan. And obviously in the steel industry, that's a major issue for us because like you said, Taiwan's been a good partner to the United States. We're bringing in a lot of prepainted, you know, light gauge material especially, and it would have a serious impact on the availability of steel here in the United States.
[00:15:22] Speaker B: Right.
So I know we're kind of dancing around here, but basically through the week I saw coke and coal is down.
Everything, everything was down except zinc, basically.
So I, you know, believe. I think we're in a recession right now.
What do you think?
[00:15:47] Speaker A: I think we're, we're headed that way for sure. I, I feel like all those indicators that we're talking about kind of point to that.
You know, it used to be that you could pretty much take the, you know, the price of these goods and kind of say to yourself, well, this is, this is where it's headed based on those. And, and that hasn't been 100% true in the steel market and say the last 10 years or so. But prior to that it was, it was a pretty good indicator. But all in all, at this point, I think those indicators are telling us a story. And all of those are pointing, you know, to a downward trend.
[00:16:26] Speaker B: Yeah, sad but true.
Fuel costs have been coming down a little bit. Oil futures up, gasoline futures down. Yeah, that's a mixed bag right there.
[00:16:41] Speaker A: Yeah.
[00:16:43] Speaker B: And as we Said, you know, inventory levels seem to have gone up.
Nothing really new on section 232. I know that there were some loopholes as far as quantity is concerned that the Chinese were getting through, but that's more related to textile and chemicals that not related to us as much. Yeah, I'm just going through it, you know. So hot roll went up 10 bucks, basically. Cold roll, no change. Galvanize went up 24 bucks.
Nucor's price stayed flat, flat Midwest flat, West coast flat.
So overall I think, you know, it's trying to be inching up and right now it should be the time that prices should, should be at probably the highest peak during the year. Just because it's time to build.
[00:17:42] Speaker A: Yeah.
[00:17:43] Speaker B: And I mean, traditionally, don't you see that? When do you see prices peak?
[00:17:50] Speaker A: It's usually been kind of in this, this area from August to about now.
A lot of times we've seen kind of softening happen, you know, in November and December. Last year it happened about the middle of October though.
That's where prices kind of hit the bottom.
Keep in mind, they were coming off some pretty high prices too. So we were seeing significant fall in that. But with that being said, I mean, when you look back at October of last year, you know, just hot roll prices, for example, you know, November of 23, you know, 853.
So I don't know, they, they're, they're, they're down from where they were a year ago.
So year over year, we're, we're seeing this, this downward trend.
So, yeah, there's, I don't see, I don't see much pushing those up. Like you, like you mentioned a little bit earlier, you know, there are some outages that are scheduled with the steel mills, which, you know, that happens all the time. It's a very regular thing. They're announced and well in advance and people are prepared for those. And so people have either bought or placed orders based on that. The spot market doesn't seem to be having a ton of demand either, which is one more indicator that they're saying, yeah, I don't know prices have any. There's just not a foothold for prices to go up significantly in my mind.
[00:19:42] Speaker B: Yeah. And it, and it seems that any driver curveball thrown into the market just so, for example, the ad issues with, I mean, there was a lot of countries named in that, Brazil, Canada, Mexico, just that that alone would spur panic.
[00:20:02] Speaker A: Right.
[00:20:03] Speaker B: And buying. Yeah, giving.
[00:20:08] Speaker A: Yeah, in years past, we saw a lot of panic buying going on when those kind of Announcements will come out, but not really seeing that.
[00:20:17] Speaker B: Yeah, it's kind of sad. We've become immune.
[00:20:19] Speaker A: No, we kind of have.
[00:20:20] Speaker B: If somebody fires a rocket, we just say, that's a rocket.
[00:20:23] Speaker A: Yeah.
[00:20:25] Speaker B: But yeah, so far this week, I mean, it seems to be business as usual. I have not seen any slowdown from Brazil, slowdown from Mexico.
Canada has obviously retreated a little bit. Some of the other countries, like Taiwan, business as usual. These guys are experts in these ad issues. I have to say that Vietnam has been very quiet. I don't think traders are buying from Vietnam right now.
So that should have some indication as far as what pricing. I think, you know, overall, once we get through this slump and I can't believe that an election, I mean, on the surface it seems so funny that people determine on what the market's going to be on who's going to become president.
[00:21:18] Speaker A: Yeah.
[00:21:18] Speaker B: I mean, but as far as buying steel, I mean, like you're not going to go buy a piece of steel because you're waiting to see who the President's going to become.
[00:21:28] Speaker A: Right.
[00:21:28] Speaker B: Seems kind of funny, but that's the truth, really. I mean, I hate to admit it, but I think, I think that has a lot to do with the psychology of the market and I think that has a lot to do with what's going on a little bit right now that people are literally waiting.
[00:21:45] Speaker A: I, I think, and this is just my opinion, but I think if, say the Republicans felt like they had a huge lead, you know, an insurmountable lead, it's kind of a slam dunk.
I think people would probably be willing to buy now while prices are moderate with the intent, with the hope that, you know, we're going to see increases in production, increases in economy, increases in manufacturing going on here. But the flip side, the Democrat side, I don't think that people feel like there's going to be a real insurgence of manufacturing and a high demand for steel. And so they're, they're not amp. They're not ample to buy. You know, they're just going to sit tight and wait. And where this race, they keep saying is so close, I think people are just, just going to hide and watch. And we, and we've seen this before. This is not uncommon. Even as volatile as this election is, it's, that's not uncommon. We've always seen kind of slowdown leading up to an election and it doesn't, it honestly doesn't matter who wins. They've proven that time and time again that whoever wins things are Kind of slow. And then after the election and after the new president's put in, then people make adjustments and, and they start moving from there.
[00:23:10] Speaker B: Yeah.
I think this is one of the muddiest, sluggish bottoms I've ever seen.
[00:23:17] Speaker A: Yeah.
[00:23:18] Speaker B: I mean, it just cannot just, it's just, it's just a continuance of just slug. Sluggish, muddy. A muddy bottom. Yeah.
So I do think that, you know, perhaps our three hurricanes, an election, interest rates continuing to go down.
I don't, I can't tell you that I quite know what a recession would do as far as pricing steel pricing specifically.
I think if there is a recession, I think the federal government will do everything that's in its power to make us get out of the recession. So it could only probably be beneficial medicine poured into the market.
So, you know, right now what I would, I, I would think is that we're going to continue to see a sluggy bottom. You know, the mills have creeped up a little bit by a little bit by a little bit. You know, 10 bucks here, 10 bucks here, 10 bucks Here. Well, you look back, that's 30 bucks.
But I do think that what we got five more weeks of this circus.
[00:24:35] Speaker A: Yeah.
[00:24:36] Speaker B: Circus being the election.
[00:24:39] Speaker A: Sure.
[00:24:39] Speaker B: And then after that, supposedly everybody will know what the future is. And it is important, I guess, too, just because it's not only just a presidential election election. The contrast is so huge.
[00:24:55] Speaker A: Right.
[00:24:55] Speaker B: So you are really waiting to see if this is going to be black or it's going to be white. It's not a, you know, I don't know who to compare it to. I guess every single president election is pretty black and white as far as their policy, but it's not like a, you know, Dukakis vs.
George W. Or.
[00:25:14] Speaker A: Yeah.
[00:25:15] Speaker B: Ronald Reagan.
[00:25:16] Speaker A: I think this one, I think this one's completely divided, divided on the, on the issues, divided on the policies, divided on all those things. So I think that's your point. There is that there is a huge division and I guess kind of the polls show that, you know, that it's a close race and that means that there's a big divide, you know, and.
[00:25:43] Speaker B: I guess just to be honest and you. We will probably never see another Trump kind of guy kind of character.
[00:25:52] Speaker A: Yeah.
[00:25:53] Speaker B: To where it's even more drastic as far as, look, if he wins, there's going to be tariffs and again, I, you know, it's, it's, it. That alone would make the prices go up. Yeah.
Whereas I think Harris win would probably just continue in the Sluggy bottom.
[00:26:20] Speaker A: Yeah.
[00:26:23] Speaker B: Yeah.
[00:26:26] Speaker A: So that is, yeah, one other thing. You know, the, there is the potential buyout, you know, from Nippon Steel. Buying U.S. steel.
[00:26:40] Speaker B: Right.
[00:26:40] Speaker A: And you know, U.S. steel is saying that if they don't get that buyout through and approved, then U.S. steel is going to move their headquarters out of Pittsburgh.
I haven't seen any reasons for that. So I'm curious to see, you know, what their reasoning behind that is as well. But it sounds like they've, they've got plans to make a move whichever way things go, you know, whether they, the sale goes through or whether it doesn't. It sounds like US Steel's got plans to make a move of some, some nature. And, and I don't know how that's going to affect the, the steel industry. It's, it's a big question mark in, in my book. Especially when you're talking about the sale of kind of one of the big four steel makers in the US to, to a foreign country.
[00:27:31] Speaker B: Right, right.
[00:27:32] Speaker A: There's some concern there.
Although I will reiterate on the flip side, Nippon Steel probably would do the company some good. You know, some of the innovation that they would bring, some of the upgrades they would bring, the investment that they would bring, all that kind of thing probably would be healthy in terms of what steel is available and how they produce steel if they did buy US Steel. So I don't know, it's a two edged sword.
[00:28:00] Speaker B: Yeah, I saw that.
Basically what they did is refile for approval which gives them after, after the election to prove approve it. But it seems to me, from what I understand, it doesn't matter if Harris wins or Trump wins. Both of them oppose the deal.
[00:28:21] Speaker A: That's what I understand. So that's, that's what I'm curious about. So what is US Steel's next play?
Because they've certainly hinted that they have a move that they're going to make if the sale doesn't go through. And so I'm curious to see what I mean.
[00:28:36] Speaker B: Yeah, I mean, how is that even.
I just don't understand how the government can get involved with, you know, I understand it's really not that big of a deal. I mean really, as far as the scope of thing, it's not like a Microsoft and Google merging kind of deal. I mean, I can understand the government getting in there to prevent monopolies, but other than that, I, I don't understand why, why they even have a right to come in and even approve or disprove as if we live in some communist country.
[00:29:11] Speaker A: I mean, I, you know, and, and back to.
I think it's, it's the, the military. The security issue that, that's what the government's making out to be is without, without those steel producers, we don't have security in our own country. And so I guess, you know, Japan is our ally. You know, Nippon Steel would be a Japanese company and be our ally, so to speak.
But the unfortunate thing, truth is, is that we've been to war with Japan before and then. So, you know, is that a possibility? Again, I don't know. I don't know if I think that's what the government's position is. There is. We can't guarantee that an ally won't turn into a. An opponent.
[00:29:58] Speaker B: And, but there's no way. I just know that again from section 232, which was an old Civil war law citing that, you know, you have to have whatever product you have to always have enough to make in case you do go to war.
[00:30:18] Speaker A: Right.
[00:30:19] Speaker B: But I mean, off the top of my head, I just remember that it was something like 1% of what we currently produce. The, the military needing. If we go to war, they would need about 1%. Yeah, I, I think the real. I just look on the surface, U. S Steel, It's U S Steel. It's got a romantic history.
[00:30:40] Speaker A: Sure.
[00:30:41] Speaker B: Of course you don't want to. If you had a din. Dinner table conversation with your, with your family over this issue, as if that would ever happen. But my point is that the kids at the table would say, well, we don't want to sell our steel company, US Steel, to the Jap, you know, to Japan. Of course not. That doesn't sound good.
[00:31:04] Speaker A: Right?
[00:31:05] Speaker B: That's just. Does not sound good. But when you like anything, if you get educated in the subject and then I think you're able to make a better decision. But politics being politics, they don't have, you know, Harris is not going to sit there and analyze the whole US Nippon Steel purchase in a speech.
[00:31:31] Speaker A: Right.
[00:31:32] Speaker B: And so it's much easier in a speech just to say, no, I'm absolutely against it. It is interesting that they did refile. I kind of feel like the. They'll refile and let it, let the elections go by. And I don't know again, on a. As a political move, why you would approve it.
[00:31:55] Speaker A: Yeah, I don't either.
Yeah, I don't, I don't see. I don't see the political advantage to the United States. So.
[00:32:03] Speaker B: So what you're saying though, that it's probably not going to be approved. And therefore U.S. steel, when you say move out of Pittsburgh, are you talking about moving offshore?
[00:32:17] Speaker A: Well, that's the thing. They don't specifically say what they're going to do, but they just say that they're going to move their headquarters out of Pittsburgh. And first, my first question is why would you if you've already got it established there? And then, then secondly, where do they plan to move it to?
Those are my questions that I don't have answers to and I don't know. I don't know if they've published those answers.
[00:32:43] Speaker B: U.S. steel is going to go to Ireland, huh?
Well, we'll have to stay tuned for that.
I think that should probably do it for us. Matt, what do you think? Do we probably should have to go back to work?
[00:32:58] Speaker A: Yeah, I think that's, that's it. We got to get back to doing the daily grind here.
[00:33:04] Speaker B: So any predictions, Matt? Prices go up, down, recessions, what do you say?
[00:33:10] Speaker A: I think we're going to see continuing softening for the next while.
Like I said, other related industries that utilize steel are showing a downswing in my book. And so, yeah, I'm, I don't know what the actual complete definition of recession is, so to say recession. I don't know. But I definitely see, you know, softening in the steel market.
I don't see it, I don't see it rebounding and I don't see prices, you know, shooting up significantly probably till after the first of the year.
[00:33:54] Speaker B: Okay, I'm gonna say again, I think Harris wins the election.
I think it will be tight all the way to the election just to keep everybody watching TV and getting their commercials.
[00:34:10] Speaker A: Yeah.
[00:34:13] Speaker B: But Harris will win.
I think prices were just going to stay relatively flat. Inventory levels are going to get built up.
I do think we'll go into recession. I think the feds will pour every medicine on there to make it go, go back up. But I would say that, I know this sounds far out, But I say second quarter, 20, 25, the mills have everything together. The stars align and there'll be a rally. So, you know, that's going to be, you know, what, April, April arrivals, which sounds like a far away, you know, far away, but we're already in January, December, January arrivals. So I would say if I was a buyer right now, I would wait.
I would wait basically, November. I would, I would make a big buy in November. I mean, a lot of people didn't hit it out of the park this year with that, but who knows? I think, I think this would be the year to hit it out of the park. I think you might hit a home run. All right, bud. All right. Thank you, Matt.
[00:35:25] Speaker A: By.
