Flat rolled and plate steel prices are all over the place this week. We are seeing a distinct difference in pricing from those mills who still have November and December tonnage compared to those whose lead times are into January and beyond. Hot roll appears to be the strongest product with virtually all of our HRC price sources advising that prices are firm at $600 per ton and higher. The weakest products appear to be galvanized and cold rolled. However, when you take into consideration the wider-than-historical spread between hot rolled base prices and that of cold rolled and coated (up to $200 per ton instead of $100-$140 per ton), there is room to move, and that may be what we are seeing now.

Flat rolled steel service centers apparently do not have the luxury or ability to raise spot prices, even after two price increases by the domestic steel mills, according to the latest flat rolled steel market trends analysis by Steel Market Update (SMU).

In a news conference on Sunday, Chicago Mayor Rahm Emanuel said the city of Chicago intends to file a federal lawsuit against U.S. Steel alleging the steelmaker has violated the Clean Water Act. U.S. Steel’s Portage, Ind., mill has spilled more than its permitted amount of chromium into a Lake Michigan tributary in two incidents this year.

Emanuel criticized U.S. Steel for its lack of transparency and its delay in reporting the latest incident. He also criticized the EPA for lax environmental enforcement under the Trump administration. “The silence from the Trump EPA has led the city of Chicago to sue and to also shake up and wake up the EPA to their responsibilities,” Emanuel said.

Argentinian steel pipe manufacturer Tenaris has begun full operations at its new Bay City, Texas, mill. The $1.8 billion facility southwest of Houston will provide seamless pipe for shale and gas wells in the region.

"Tenaris is the architect of a new business model in the steel pipe sector," said Germán Curá, Tenaris' president for North America. "The heart of this transformation is in Bay City, with the most advanced pipe manufacturing facility in the world."

Flat rolled steel inventories ended the month of October in a balanced situation based on the Steel Market Update Apparent Excess/Deficit proprietary model, which is applied to the MSCI inventories and shipment data.

U.S. raw steel production for the week ending Nov. 18 totaled 1,745,000 net tons, a 9.7 percent increase from the same period last year, and up 0.3 percent from the prior week. The mill capability utilization rate for the week averaged 74.9 percent, up from 74.6 percent the prior week and 67.1 percent the prior year, reports the American Iron and Steel Institute in Washington.

Adjusted year-to-date production through Nov. 18 totaled 79,958,000 net tons, up 4.2 percent from the same period last year. The average mill capability utilization rate for the year to date was 74.6 percent, up from 70.8 percent in 2016.

The Keystone XL pipeline was approved by the Nebraska Public Service Commission on Monday giving TransCanada the access it needs to complete the $8 billion 1,897-mile pipeline.

The commission rejected TransCanada's preferred route, however, and in a 3-2 decision approved an alternate route that moves the pipeline further east and away from Nebraska's ecologically fragile Sandhills region. That means TransCanada will have to seek approval from more landowners along the alternative route, which could cause further delays. At the commission hearings, TransCanada called the alternative route "unworkable."

The office of the U.S. Trade Representative has finally updated its summary of NAFTA objectives in response to pressure from the Senate Finance Committee to provide transparency regarding the negotiations.

Ron Wyden (D-OR) put the confirmation of two deputy USTR nominees on hold until the updated objectives were made public. Wyden said the summaries are "critical to provide a window into the process so that the public -- and their representatives in Congress -- can provide relevant input into the talks." He added that the American public should not have to rely on media reports to "know what the government is purportedly seeking on its behalf." The confirmations will move forward, but hearings on the nominations are not expected to be scheduled until the tax reform legislation is settled.

Existing home sales increased for the second month in a row and at the strongest pace since early summer. Total sales in October, including single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent from the previous month to a seasonally adjusted annual rate of 5.48 million.

Lawrence Yun, National Association of Realtors chief economist, says sales activity in October picked up for the second straight month, with increases in all four major regions. "Job growth in most of the country continues to carry on at a robust level and is starting to slowly push up wages, which is in turn giving households added assurance that now is a good time to buy a home," he said. "While the housing market gained a little more momentum last month, sales are still below year-ago levels because low inventory is limiting choices for prospective buyers and keeping price growth elevated."

This is the last Executive issue of Steel Market Update until Sunday evening. We will produce a Premium issue for our Premium clients tomorrow.

Our offices will be open tomorrow (Wednesday) and closed on Thanksgiving Day. We will have limited coverage on the Friday following Thanksgiving. Our offices will return to normal staffing and hours on Monday, Nov. 27.

Twice per month, Steel Market Update (SMU) conducts an analysis of the flat rolled steel market and the trends that affect pricing, demand, etc. Each analysis is conducted via an email invitation to complete a questionnaire. SMU invites approximately 650 individuals who are active participants in the manufacturing, distribution, toll processing, trading and steel mill segments of the flat rolled steel industry.

The questionnaire is broken into two parts: a main section where all respondents answer the same questions. It is from this section that we derive our current and future SMU Steel Buyers Sentiment Indices. At the end of the main section, we ask our respondents to identify their market segment. At that point, each market segment is broken out into individual surveys with questions that are germane to that specific market.

Were you surprised by the price increases announced this week by the major mills? If you were, don’t feel bad. You were among the majority of steel buyers who could foresee no clear direction for steel prices.

On Monday, Steel Market Update sent its market trends questionnaire to 650 steel buyers asking, among other questions, “Where do you see the price direction right now?” On Wednesday, a number of the flat roll mills raised prices by $30 per ton. Earlier in the week, the plate mills led with a $40 per ton increase.  The close timing of the questionnaire and the price hikes makes respondents’ comments particularly revealing.

Overall, 53 percent of the steel buyers said they saw no clear-cut price direction. About 40 percent predicted correctly that prices would head higher. The other 7 percent expected prices to decline.

The following calculation is used by Steel Market Update to identify the theoretical spread between foreign hot rolled steel import prices (delivered to USA ports) and domestic (USA) hot rolled coil prices (FOB Domestic mills). We want our readers to be aware that this is only a "theoretical" calculation as freight costs, trader margin and other costs can fluctuate, ultimately influencing the true market spread.

Our primary numbers for this analysis are from Platts as we compare European HRC export pricing (FOB Ruhr), Turkey HRC export pricing (FOB Turkey) and Chinese HRC export pricing (FOB Chinese port). Be aware that Chinese hot rolled pricing is not available to the U.S. market, so the Chinese spread is nothing more than an exercise in "what if." SteelBenchmarker is the secondary data provider of foreign hot rolled coil prices and is noted further down in this article.

Flat rolled steel prices are still mixed, according to the various steel indexes followed by Steel Market Update. SteelBenchmarker produced prices this past week and saw all items as moving higher. Platts, on the other hand, had a modest increase in hot rolled and a fairly significant decrease in cold rolled while plate remained the same. Steel Market Update (SMU) was also mixed with hot rolled and cold rolled rising, galvanized remaining the same, Galvalume dropping and plate rising.

On Wednesday, Nov. 15, 2017, Nucor Sheet Mill Group advised their customers that galvanized orders placed for the first week of January 2018 would have new zinc coating extras. The change in the extras is due to the high cost of zinc, which has been trading in the $1.45-$1.50 per pound range over the past 60 days. A number of mills had already made changes to their extras. Included are AK Steel, NLMK USA, California Steel and USS/POSCO.

Mexico continues to take a larger share of light vehicle assemblies from the U.S. and Canada, according to Steel Market Update’s analysis of October industry data.

U.S. Vehicle Sales

In September, sales of autos and light trucks surged to an annual rate of 18.6 million units. October fell back to 18.1 million units. Economy.com had this to say: “At a seasonally adjusted annualized rate of 18.1 million units, October new-vehicle sales retreated only 2.6 percent from the 12-year high set in September and were still 1.2 percent higher than sales in October 2016. This marks only the second time this year that sales were higher than a year earlier. Replacement vehicles and postponed purchases in the wake of Hurricane Irma helped propel sales, but vehicle damage costs were not as high as from Hurricane Harvey. Light-truck sales captured a larger share of the market than the recent historical norm. Incentive spending stayed inflated to help automakers clear existing inventories.”

Cold-drawn mechanical tubing imported from China, Germany, India, Italy, Korea and Switzerland was determined by Commerce to be sold below fair value. In its Nov. 16 preliminary antidumping determination, Commerce assigned dumping margins ranging between 5.10 percent and 186.89 percent.

"What if President Trump's ultimate goal is to kill the World Trade Organization?" That was the question submitted by journalist Eduardo Porter in the New York Times last month. Porter's question seemed even more to the point last week when President Trump accused the WTO of ignoring its own rules while the United States has followed them.

"Simply put," the president said to CEOs at the Asia-Pacific Economic Cooperation summit, "we have not been treated fairly" by the WTO. "Organizations like the WTO can only function properly when all members follow the rules and respect the sovereign rights of every member. We cannot achieve open markets if we do not ensure fair market access. In the end, unfair trade undermines us all."

The weekly U.S. rig count increased this week, according to Nov. 17 data from oilfield services company Baker Hughes. The number of active U.S. drill rigs increased by 8 to 915 rigs, with oil rigs unchanged at 738 rigs, gas rigs up 8 to 177 rigs, and miscellaneous rigs unchanged at 0 rigs. Compared to this time last year, the 915 count is up 327 rigs, with oil rigs up 267, gas rigs up 61, and miscellaneous rigs down 1. See the first graph below for a history of active U.S. rig counts.

Demand for architecture design services increased in October after contracting in September. The October Architecture Billings Index jumped to 51.7 from 49.1 the previous month, indicating a return to growth.

The new projects index gained more than one point to 60.2, while new design contracts posted a reading of 52.9, compared to 52.8 in September.

Housing starts leapt 13.7 percent from September to October, rising to a seasonally adjusted rate of 1.290 million and beating economists' estimates. Single-family housing starts increased 5.3 percent, while housing of five units or more jumped 37.4 percent, reported the Commerce Department.

We asked a question about Section 232 in last week's flat rolled steel market trends questionnaire. The question was, "Do you think President Trump will invoke Section 232 and add duties on steel imports early next year on national security grounds?"

Despite all the uncertainty regarding possible trade action and steel prices, the Steel Market Update Steel Buyers Sentiment Index is holding steady, and at a higher level than last year. Steel buyers’ sentiment appears to have bottomed out in October and November and, in Steel Market Update’s opinion, is poised to pick up along with business in the coming first-quarter if the market follows the pattern of the past few years.

Nucor became the first sheet mill to step out and attempt to nudge hot rolled, cold rolled and galvanized steel prices higher. On Wednesday afternoon the Nucor Sheet Group announced a new $30 per ton ($1.50/cwt) price increase to be “effective immediately.”

Over the past few days, all of the domestic plate mills have announced a $40 per ton ($2.00/cwt) price increase on plate products.

The Metals Service Center Institute (MSCI) released service center shipment and inventories data earlier this week. According to the MSCI data, flat rolled inventories now average 2.1 months of supply based on the 104,600 tons per day shipment rate reported for the month of October. October 2017 shipments were 9.6 percent better than one year ago.

The latest lead time data based on the Steel Market Update flat rolled steel survey—largely unchanged from two weeks ago--offers no clear indication of whether this week’s price announcements by three of the flat rolled steel mills will be accepted by the marketplace.

SMU began collecting responses from steel buyers on Monday of this week, prior to the mill price hike announcements which began on Wednesday for flat rolled. At least 90 percent of the total responses were received prior to the announcements. One of the key indicators tracked by SMU is the lead times for hot rolled, cold rolled, galvanized and Galvalume steels. The farther and faster lead times move out, the more support the mill price hikes are likely to see. Lead times on each product are somewhat higher than reported in mid-October, but have seen little change in the past two weeks. Calculated on a three-month moving average basis, lead times on all four products are considerably shorter than they were at mid-year.

Buyers of flat rolled steel report that most domestic steel mills are open to negotiating spot prices, especially on cold rolled and coated products, even though the major mills announced price hikes this week.

About half of the respondents to this week’s Steel Market Update market trends questionnaire reported a mixed market, with some mills firmer than others when it comes to negotiating price. About 42 percent said mill order books are weaker than advertised and suppliers are willing to talk price. Only 8 percent described mill pricing as firm. Note that most buyers responded to SMU’s questionnaire on Monday and Tuesday, before the mill price announcements on Wednesday.

Domestic steelmakers got a taste of good news this week when the U.S. Department of Commerce released foreign steel import license data for the first 14 days of November. Steel Market Update sees the trend for November imports to be 2.6 million net tons or lower. If correct, this would be the first month during the 2017 calendar year for imports to come in at 2.6 million net tons or less.

With October imports looking to be at 3.1 million net tons (we do not have Preliminary Census Data yet), this puts November as trending 17 percent lower than the prior month, as well as the 12-month moving average (12MMA). The steel market has been expecting this move for some time, but this is the first month where the data is supporting expectations.

The following article on the hot rolled coil (HRC) futures markets was written by David Feldstein. As the Flack Global Metals Director of Risk Management, Dave is an active participant in the hot rolled futures market, and we believe he provides insightful commentary and trading ideas to our readers. Besides writing futures articles for Steel Market Update, Dave produces articles that our readers may find interesting under the heading "The Feldstein" on the Flack Global Metals website, www.FlackGlobalMetals.com. Note that Steel Market Update does not take any positions on HRC or scrap trading and any recommendations made by David Feldstein are his opinions and not those of SMU. We recommend that anyone interested in trading HRC or scrap futures enlist the help of a licensed broker or bank.

Steel shipments by Canadian service centers in October totaled 391,700 net tons, up 9.8 percent from the previous month, and also up 9.8 percent from October 2016, reports the Metals Service Center Institute (MSCI). On a daily basis, total shipments were 18,700 tons per day in October (a 21-day month), up from 17,800 tons per day in September (a 20-day month), and up compared to a year ago when they were 17,800 tons per day (a 20-day month). Total steel inventories at the end of the month were 1,170,400 tons, up 0.6 percent from last month, and up 8.3 percent from this time last year.

Canada’s Stelco, Inc., reported revenues totaling $1.15 billion (all figures Canadian) for the nine months ended Sept. 30, an increase of 16 percent over the prior-year period. Operating profit totaled $61 million, up from $8 million last year. The average selling price for the year to date was $814 per net ton, up from $654 in 2016, due to the improved market price of steel.

In the third quarter, the Hamilton, Ontario-based flat rolled steelmaker reported revenue of $336 million, a 10 percent decrease from the same period last year primarily from lower shipping volumes due to its planned blast furnace outage. Operating profit for the quarter was zero, down from $44 million in 3Q 2016.

Members of the United Steel Workers Local 1915 have ratified a three-year labor agreement with AK Tube LLC, a subsidiary of AK Steel, covering about 100 hourly production employees at the company's Walbridge, Ohio, facility. The new agreement is effective from Jan. 22, 2018, to Jan. 22, 2021.

Commerce Secretary Wilbur Ross pushed back at critics of the Section 232 investigation this week, saying steel-consuming businesses don't "deserve" dumped steel.

Associations such as the American Institute for International Steel and U.S. Chamber of Commerce assert that Section 232 restrictions on steel could lead to economic disaster for the steel supply chain, ports and agriculture industry. U.S. tariffs and quotas could cause trade retaliation and "dangerous, unintended consequences," claims AIIS (which represents foreign steel interests). The steel industry is already the most protected industry in the U.S. and is vastly outnumbered by steel-consuming manufacturers that rely on foreign steel, say critics of the trade action.

A dispute over OCTG dumping duties assigned by the U.S. on imports of Korean OCTG drew mixed conclusions from a World Trade Organization dispute panel.

The WTO sided with South Korea on claims that the U.S. violated rules in the Antidumping Agreement regarding the calculation of fair value of OCTG. The panel determined that Commerce did not use data pertaining to sales of a like product from the home market of Korea to determine the value of the product. Commerce excluded line pipe and standard pipe, which Korea claimed is the same like-category as OCTG, and instead made its comparison to profit data from a multinational corporation outside of Korea.

Canada and Mexico will "come to their senses and make a sensible deal" for NAFTA, said Commerce Secretary Wilbur Ross at The Wall Street Journal CEO Council on Thursday.

Ross defended U.S. NAFTA negotiating tactics, saying Mexico and Canada have more to lose than the United States if the NAFTA agreement collapses. He called a U.S. withdrawal from the agreement "devastating to the Mexican economy" and a "big-time problem for Canada."

More than 100 trade organizations representing a cross-section of U.S. business and industry sent a letter to USTR Robert Lighthizer on Tuesday urging the U.S. to maintain, and even extend, trucking provisions in the new NAFTA agreement. The trade groups called for the U.S. to permit Mexican carriers to haul freight further into the United States.

“We strongly urge you not to eliminate NAFTA’s trucking provisions in an updated agreement. We depend on the trucking industry, both American and Mexican, to safely and efficiently haul our products in both countries. Eliminating NAFTA trucking, including any investment protections, would have a long-term negative impact on our businesses,” the group wrote.

The Chicago Tribune was the first to report that U.S. Steel released toxic chromium into Lake Michigan on Oct. 26 due to a malfunction in the wastewater treatment system at the steelmaker’s Midwest Plant in Portage, Ind. The 56.7 pounds of chromium was 89 percent higher than U.S. Steel’s water pollution permit allows in a 24-hour period.

U.S. Steel is being criticized for not reporting the spill right away and asking Indiana officials for confidential treatment of the incident. U.S. Steel defended its actions in a statement that asserts the incident “did not pose any danger to the water supply, human health or the environment.”

I have a feeling if I were to write a long drawn-out final thoughts article that our readers would shoot me... I think we have 16 articles in tonight's newsletter - many of them top-line articles (price increases, MSCI data, Sentiment, Lead Times, Negotiations, Section 232, etc.). What you don't know is we actually moved five articles out of this newsletter to Sunday evening's issue...

Flat rolled steel prices were mixed this past week. Benchmark hot rolled continues to be one of the better performing of the group. Our HRC average was up $5 per ton this week. Cold rolled was also up, galvanized was sideways and Galvalume dropped $30 per ton. Plate prices on a delivered basis were up $5 per ton for the week, but don't read too much into that number... The SMU Price Momentum Indicator is still pointing toward Neutral meaning our perception is there is no clear-cut market direction right now. We expect this lack of leadership to continue until lead times slip into the first quarter. At that point demand, inventory levels and lead times will dictate where prices go from here.

On a side note, SMU did hear from a couple of mills today who admitted things were not quite as rosy as they may have looked a couple of weeks back. A steel buyer sent us the lead time sheet just released by one of their suppliers, which referenced lead times as being one to two weeks shorter than what was being referenced just a few days ago. Is this an isolated incident? SMU will continue to ask and will report when we find out.

Will the rest of the domestic steel mills announce new coating extras in first-quarter 2018, raising the price on galvanized steel? There was no clear consensus among members of the Heating, Air-conditioning, and Refrigeration Distributors International (HARDI) during their monthly conference call earlier today.

Recent mill price announcements have stemmed the decline in galvanized prices, but the market does not appear strong enough to support much of an increase. “I think the mills were fairly successful in stopping the slide, but prices have not really inched up too significantly,” observed one distributor. “We have not seen support on the service center level. If price increases are going to stick, the service centers have to support them,” said another.

Stelco, Inc., Canada’s iconic steelmaker, has new life under the new ownership of Bedrock Industries. Bedrock Executive Chairman and CEO Alan Kestenbaum makes a strong case that the oft-troubled steelmaker is poised for a turnaround.

Stelco went into creditor protection in 2004, was bought by U.S. Steel in 2007, then went back into bankruptcy in 2014 before being bought by the Bedrock investment group late last year. It emerged from creditor protection at the end of June with $3 billion in debt and $1.4 billion of pension and retirement liabilities removed from its balance sheet. The steelmaker employs nearly 2,200 workers at its Hamilton and Lake Erie facilities in Ontario, which have an annual capacity of about two million tons of steel products.

Through a complex formula negotiated with the unions and the Canadian government, workers and retirees will continue to receive pension and health benefits, an achievement that Kestenbaum points to with pride. Stelco has pledged millions and the sale or lease of real estate to help fund the pensions over time. The company was also able to raise an additional $230 million through a successful public offering, which will be used for capital investments, pension payments and development of new products, such as advanced high-strength steels. Among various initiatives, Stelco plans to upgrade its galvanized steel offerings to regain sales to the important auto industry.

In the following Q&A, Kestenbaum shares his views of the company and its prospects with Steel Market Update. Following are excerpts of a Nov. 10 interview, edited for length and clarity:

U.S. raw steel production for the week ending Nov. 11 totaled 1,739,000 net tons, a 9.3 percent increase from the same period last year, and up 1.4 percent from the prior week. The mill capability utilization rate for the week averaged 74.6 percent, up from 73.6 percent the prior week and 67.1 percent the prior year, reports the American Iron and Steel Institute in Washington.

Adjusted year-to-date production through Nov. 11 totaled 78,213,000 net tons, up 4.0 percent from the same period last year. The average mill capability utilization rate for the year to date was 74.6 percent, up from 70.8 percent in 2016.

Apparent steel supply for the month of September totaled 9,144,648 net tons, according to the latest data from the U.S. Department of Commerce and the American Iron and Steel Institute. Apparent steel supply is calculated by adding domestic steel shipments and finished U.S. steel imports, then subtracting total U.S. steel exports.

The Commerce Department announced a preliminary finding of dumping in the investigation of metal tool chests and cabinets imported from China and Vietnam.

The investigation was initiated by a petition from Waterloo Industries, in Sedalia, Missouri. The investigation covers all metal tool chests and cabinets, including top chests, intermediate chests, tool cabinets and side cabinets, storage units, mobile work benches, and work stations from China and Vietnam including those prepackaged for retail sale in a third country prior to importation to the United States.

Georgia Ports Authority announced Monday the approval of $42.27 million in funding for a rail and gate project that will significantly expand capacity at its Garden City Terminal in Savannah. The project is part of the GPA's $128 million Mason Mega Rail Terminal and will increase the Port of Savannah's on-dock rail capacity by 100 percent to one million containers per year. So far, GPA has allocated $90.7 million toward the project.

Below is the latest data released by the the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) regarding residential and commercial heating and cooling equipment shipments through September 2017. You may read the press release on their website here.

As I move around the flat rolled steel industry, communicating with manufacturing companies, service centers, traders and steel mills, I am receiving mixed messages about the market. A good example is the HARDI steel committee conference call that was held earlier today. HARDI wholesalers, the companies who supply the HVAC mechanical contractors in the building industry, reported a tightening at the bottom of the market while at the same time reporting prices that were a long way away from what the domestic mills were touting when price announcements were made. The wholesalers also reported a weak to weakening price market coming out of the service centers. One wholesaler told the group about service center pricing to contractors, "They are cheaper now than two to three weeks ago. The contractors believe they can get a lower price by playing one [service center] off another."

Steel Market Update (SMU) has been working on developing and then expanding a new steel service center flat rolled steel inventories analysis. We are providing a sample of the analysis, which will be available initially to Premium level customers, as well as those service centers that participate by providing data to Steel Market Update. If your service center would like to be a data provider, please contact SMU at info@SteelMarketUpdate.com. We are looking for both flat rolled and steel plate distributors located in the United States and Canada.

The number of months of supply of flat rolled steel inventories on service center floors in the United States at the end of October is essentially the same as what we recorded at the end of September.

With 90 percent of the registered flat rolled steel service centers reporting, inventories stood at 2.86 months of supply at the end of October compared to 2.89 months as of the end of September. (Note, as we add service centers, we revise previous months supply as new data becomes available).

Flat rolled prices were mixed this past week with benchmark hot rolled dropping some of its recent gains. The spread between Steel Market Update (SMU) and Platts on cold rolled shrunk compared to what we reported one week ago. Coated products were mixed with galvanized steel remaining at prior-week levels and Galvalume increasing by $10 per ton. Steel plate prices saw minimal gains.

U.S. steel exports in September totaled 903,388 net tons (819,541 metric tons), down 1.5 percent over August, but up 13.6 percent from September 2016. Total exports have averaged around 885,000 tons over the last few months after reaching a 2.5-year high in May (1,006,087 tons). The total September export figure is above both the three-month moving average (average of July 2017, August 2017 and September 2017), and the 12-month moving average (average of October 2016 through September 2017). Here is a breakdown of flat rolled and plate steel exports:

The dry bulk shipping market continues to recover from its historic lows of 2016. Carriers are reporting positive earnings and a more optimistic outlook for the next two years. Fleet growth in 2018 is expected to be at its lowest level since 1999, a mere 1 percent, according to the latest MID-SHIP Report.

Contributed by Justin Philipp, People Area Director, Pacesetter Steel

When you hire a new salesperson from within the industry, are you hiring them or their book of business? 

The term “book of business” originated in the legal industry, where two lawyers would combine their client lists to form a law firm. In the steel industry, a book of business is more of an old school, trunk of the car, salesman with a Rolodex kind of thing. Where they go, their book of business goes.

Chinese steelmakers in the heavily industrial “2+26” region—Beijing, Tianjin and the 26 surrounding cities—are expected to cut steel production by 34 million tons this winter under government guidelines designed to reduce air pollution during the home-heating months.

Analysts at Wood Mackenzie estimate the government restrictions will reduce China’s hot metal supply by about 14.2 million tons in the fourth quarter and by 20.2 million tons in first-quarter 2018. The environment is unlikely to see the full benefit of a 34-million-ton cut in steel production, however. Mills outside of the 2+26 region, which account for two-thirds of the nation’s steel capacity, are expected to hike production, offsetting the net benefit to China’s air quality. Wood Mackenzie estimates actual steel curtailment will total only about 4 million tons in Q4 2017.

ArcelorMittal reported its best third-quarter shipment performance since 2008. Shipments of 21.7 million tons were 1.0 percent higher than second-quarter due to a 1.2 percent increase in Brazil shipments, a 4.3 percent increase in NAFTA shipments, and a 3.2 percent increase from the ACIS segment. Shipments from the three segments offset a decline of 3.3 percent in Europe. Iron ore shipments were up 8.1 percent year-over-year to 15 million tons.

Sales for the quarter were $17.6 billion as compared to $17.2 billion for Q2 and $14.5 billion for Q3 2016. Net income was slightly lower at $1.2 billion in the third quarter compared to $1.3 billion in the second quarter, and higher than $700 million posted in Q3 2016.

The Steel Market Development Institute has released "LEED v4 for Steel Products Used in Construction Applications," a guide for the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) green building certification program.

Oil prices have topped $63 in recent weeks, up from $43 in June, but don’t expect a big uptrend in the price per barrel in 2018. Experts expect oil to continue trading in a tight range, keeping demand for oil country tubular goods in check at least through the first half next year.

High energy demand, increased exploration in unconventional reserves, new technology such as horizontal drilling, and the rise in the number of wells per drill rig are all positive long-term developments for OCTG suppliers. Oilfield services company Baker Hughes reported that as of Nov. 10, the U.S. rig count was at 907, up by 9 rigs from the prior week and up 339 from this time last year. In Canada, there are currently 203 active rigs, up by 11 from last week and up by 27 from last year.

But analyst Christopher Plummer, managing director at Metal Strategies, Inc., West Chester, Pa., offers a flat forecast for the energy market until the second half next year. “There’s a bit too much oil in the market in the U.S. and around the world right now,” he said.

Have you ever seen the metal mushrooms that seem to be growing on Route 51 near Century III Mall in West Mifflin, Pa.? They are actually remnants of the Pittsburgh steel industry that dominated the industrial landscape in decades past.

We will begin conducting our mid-November flat rolled steel market survey on Monday. If you receive an invitation to participate, please take a few moments to click on the button in the message, which will take you to our questionnaire. The questionnaire shouldn't take more than a few minutes to complete. If you would like to be invited to participate in one of our surveys, please send an email message to John@SteelMarketUpdate.com.

There was a surge in foreign steel imports during calendar year 2014. That high rate continued into the first half of 2015 at which time the domestic steel mills filed antidumping (AD) and countervailing duty (CVD) cases on CORE (coated steels), cold rolled and hot rolled steels. The U.S. Department of Commerce investigation found most of the accused countries guilty of dumping and imposed duties intended to curb or totally eliminate imports from those countries into the United States. The AD/CVD cases worked, well, at least for a couple of years. The year 2017 (and possibly PresidentTrump) appear to be working against the domestic steel industry. Let us explain:

The following article on the hot rolled coil (HRC) steel and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:

Ryerson Holding Corp. posted net income of $1.7 million in the third quarter, up from $600,000 in the second quarter, but down from $8.2 million in third-quarter 2016, as commodity challenges pressured margins.

"The third quarter of 2017 can best be described by margin compression, driven primarily by nickel and chrome deflation in the second and third quarters of the year," said President and CEO Edward Lehner during the 3Q earnings conference call. "Surprisingly high levels of carbon, aluminum and stainless imports muted pricing power, which was further spurred by panic Section 232 metal buying in advance of an anticipated trade ruling that never materialized."

Foreign steel imports for the month of October 2017 were just over three million net tons, based on the license data released by the U.S. Department of Commerce (DOC) earlier this week. The 3,110,002 net tons were essentially unchanged from the Final Census Data released for the month of September when the U.S. imported 3,086,196 net tons.

Olympic Steel posted significantly improved results for third-quarter 2017. Demand is strong across all three business segments at Olympic, but is expected to soften due to seasonality and the holidays. "Looking ahead, we are encouraged by both the positive demand trends our customers are projecting for 2018 and by the market's outlook for improved metal pricing," said Chairman and CEO Michael Siegal during the Q3 earnings conference call on Wednesday.

Registration is now open for Steel Market Update’s next Steel 101: Introduction to Steel Making & Market Fundamentals workshop. This steel training workshop will be held at the Hilton Garden Inn in Merrillville, Ind., located just outside of Chicago. As part of this workshop, we will be touring the NLMK USA Portage, Ind., steel mill.

Chemcoaters and its Eco-Green Coatings subsidiary say they are winning over skeptics who doubt the company’s claims it can dramatically lower the cost of galvanized steel with its InterCoat ChemGuard coating. Mike Tieri, vice president of sales and marketing for the Gary, Ind., toll coater, says the product continues to gain converts. “There’s a Who’s Who of manufacturers and major mills doing testing now. We are really working hard to get the mills to apply the coating because it will simplify the logistics and be so much more cost effective.”

The American Transportation Research Institute (ATRI) just released a new report assessing the nation's infrastructure needs. Entitled, "A Framework for Infrastructure Funding," the report concludes that a federal fuel tax increase is necessary for attaining the large-scale infrastructure program envisioned by the administration. Generating enough revenue through other mechanisms, such as mileage-based user fees and increased tolling, would place undue hardship on system users.

The expectation, even among the naysayers, is there will be a bounce in flat rolled prices once lead times reach the end of December and into the New Year. The expectation is that the domestic steel mills will raise prices in the coming days. We have heard rumors that the first mill to move may come as early as next week.

One steel buyer told us that the first increase back in October was to put a bottom on the market and to then hold on until lead times get through the end of the year. With hot rolled lead times at three to six weeks, we are getting close. Cold rolled and coated lead times should be a week or two further out. Some of the mills are already sold out for the year. Others are getting close.

Flat rolled steel prices were mixed this week. There was no clear-cut direction being set, although the expectation is for prices to rise once lead times go into January. For that matter, we did hear from some steel buyers who placed December HRC orders for $600 per ton and at the same time placed January at $620 per ton. Watch the lower end of the ranges in the coming weeks. If there is going to be strength, it will come from the bottom up.

A couple of weeks ago, ArcelorMittal USA announced price increases taking flat rolled steel base prices on hot rolled to $625 per ton and $41.25/cwt base on cold rolled and galvanized. We have yet to see spot prices out of the domestic steel mills reach the prices suggested by AMUSA. The rest of the industry asked for prices to rise by $40 per ton, which would put prices in the $38.50/cwt-$40.50/cwt area. Many steel buyers are telling Steel Market Update (SMU) that pre-increase pricing is still available, especially on cold rolled and coated products.

Speaking at the FABTECH Expo on Monday, Chris Kuehl of Armada Corporate Intelligence offered his unique perspective on the U.S. and global economies, including the following excerpts of his comments on jobs, trade issues and tax reform. Kuehl serves as the chief economist for the Fabricators and Manufacturers Association, International (FMA), a sponsor of the annual trade show that will draw nearly 40,000 attendees to Chicago this week. The exhibit of the latest metal-forming and fabricating equipment continues Wednesday and Thursday at Chicago’s McCormick Place.

Republican legislators are too worried about passing tax legislation to stand up to Trump on NAFTA, reports Inside U.S. Trade. Although legislators are receiving heavy pressure from the business community to stop the president from withdrawing from NAFTA, behind closed doors Republicans say they won't publicly intervene due to possible negative consequences from the White House and constituents.

U.S. raw steel production for the week ending Nov. 4 totaled 1,715,000 net tons, a 9.0 percent increase from the same period last year, but down 1.4 percent from the prior week. The mill capability utilization rate for the week averaged 73.6 percent, down from 74.6 percent the prior week and 68.7 percent the prior year, reports the American Iron and Steel Institute in Washington.

Adjusted year-to-date production through Nov. 4 totaled 76,474,000 net tons, up 3.9 percent from the same period last year. The average mill capability utilization rate for the year to date was 74.6 percent, up from 71.1 percent in 2016.

The termination of U.S. Steel Corp.'s Section 337 transshipment claim was upheld by the U.S. International Trade Commission on Nov. 1.

U.S. Steel alleged in its false designation of origin claim that Chinese steel companies misrepresented the country of origin in paperwork in order to evade U.S. antidumping and countervailing duties. The seven respondents (Baosteel Group, HeSteel Group, Masteel Group, Shougang Steel Group, Shagang Steel Group, WISCO Steel Group, and Ansteel Group) argued that U.S. Steel presented insufficient evidence to substantiate a claim of false shipment. Agreeing with the Chinese companies, Judge Dee Lord issued a summary judgment Oct. 2 stating that U.S. Steel presented "little or no evidentiary support" for its claims.

On Monday, SSAB sent a letter to customers advising of the company's intention to raise spot transaction prices by a minimum of $40 per ton ($2.00/cwt) effective immediately.

Chinese steel production and consumption took a downturn in September, though they trended ahead of 2016 for the first three quarters of this year. China’s exports to the rest of the world are down considerably in 2017, however, according to data from the China Iron & Steel Association and Bradford Research.

Year to date, China’s crude steel production totaled 638.7 million metric tons, a 5.6 percent increase over the first nine months of 2016. Shipments for the year totaled 829.8 million tons, a 1.2 percent increase. Apparent consumption totaled 780.3 million tons for 2017, up 4.7 percent from last year. Exports of 59.6 million tons, on the other hand, showed a decline of 29.8 percent compared with 2016.

I am in Chicago this evening having conducted a shortened version of our Steel 101 workshop at the FABTECH conference. We had a good group of people who were totally unaware of Steel Market Update and, in many cases, were attending to gain more knowledge about the steels their company uses. We had energy people who had questions about steels used to protect people working in nuclear power plants. We even had a teacher/professor from Kodiak, Alaska.

Twice per month, Steel Market Update (SMU) conducts an analysis of the flat rolled steel markets and trends associated with those who buy and sell hot rolled, cold rolled, galvanized, Galvalume and steel plate. One of the key areas we review is how steel service centers are handling spot pricing to their end user customers. It is our belief there is a clear correlation between service center spot pricing and the success or failure of the domestic steel mills' ability to collect price increases. What we found during last week’s queries was a change in direction, but not a wholesale acceptance of higher spot steel pricing out of the service centers.

Ferrous scrap prices for the month of November began coming into focus on Friday with SMU scrap sources advising prime grades as being down $10 per gross ton compared to October levels. Obsolete and cut grades were reported as trading sideways (same prices as October).

Not all regions are trading at the same pricing or even moving in the same increments. One of our Chicago area scrap sources advised that his company was moving down $10 on primes and sideways on other grades. Another scrap source on the East Coast reported some of the Chicago-area dealers and those in the Southeast as tracking sideways and not lowering their prime pricing.

Flat rolled steel prices moved higher, while steel plate prices slipped this past week, according to the steel indexes followed by Steel Market Update.

Benchmark hot rolled price averages exceeded $600 per ton ($30.00/cwt) on both Platts ($620 per ton) and Steel Market Update (SMU), which was a little lower at $605 per ton. SteelBenchmarker did not report steel prices last week as they only report prices twice per month.

Is another mill price hike likely? Nearly 60 percent of respondents to Steel Market Update’s market trends questionnaire earlier this week said they do expect the steel mills to make another price announcement this month before the Thanksgiving holiday on Nov. 23. The other 40 percent are doubtful. Following are some of their comments:

ArcelorMittal Indiana Harbor will get a $100 million upgrade over the next year. The investment is part of $276 million in capital spending the steelmaker plans for it U.S. operations next year.

A rail line servicing Canada's Algoma steel mill is in financial jeopardy over track maintenance costs. The Huron Central Railway, which connects Sault Ste. Marie and Sudbury, needs $46 million to cover infrastructure repairs over the next five years.

This is the second time in the last decade that Huron Central has appealed to Ottawa for funding to keep the line operational. In order to secure funding from the government, the rail line requires a commitment from a provincial partner to match the dollars.

The fifth round of NAFTA negotiations will be Nov. 17-21 in Mexico City, but contentious U.S. proposals are making a compromise between the three trading partners problematic.

The U.S. has proposed a sunset clause, rules of origin tipped in favor of the U.S., restrictions on government procurement and elimination of dispute settlement mechanisms, none of which Canada and Mexico endorse. In fact, very few U.S. industries back the proposals as currently outlined.

House Republicans released details of their vision for tax reform on Thursday, raising many questions in constituents’ minds, the primary one being: What does this mean for us?

The headline provisions of the bill—which its sponsors contend would simplify the tax code, provide tax relief to the middle class and spur economic growth—include cutting the corporate tax rate to 20 percent from 35 percent and reducing the number of individual income-tax brackets from seven to four. But the devil is surely in the details.

Some quick final thoughts this evening - I will be traveling tomorrow (Monday) to Chicago to attend FABTECH and to teach a mini-version of our Steel 101 workshop (they call it Steel 101: Mill to Fabricator) on Tuesday afternoon. John Eckstein and I will be in Room 502B in McCormick Place, and the workshop is from 1:30 until 3:30 PM. The workshop is free to those registered to attend FABTECH.

The real news coming out of this week's flat rolled steel market trends analysis is the jump in the SMU Steel Buyers Sentiment Index when looking at the index as a single data point, as opposed to a three-month moving average, which is our preference. Measured as a single data point, the average among those responding to this week’s flat rolled steel market trends questionnaire was +66, up +11 points from early October, but about average for the second half of the year. Our index took a bit of a respite during the month of October posting a +55 in early October and +61 in the middle of October (just as the mills announced price increases). SMU Publisher John Packard is of the opinion that October was the low end of the market cycle and he expects Sentiment data to be even more optimistic as we enter the New Year.

Despite all the uncertainty in the market, the Steel Market Update Steel Buyers Sentiment Index appears to be holding steady, and at a higher level than at this time last year. Most buyers and sellers of flat rolled steel remain optimistic about their company's ability to be successful in the current market environment, as well as three to six months into the future. Buyers’ attitudes offer some insight into their likely decision-making on such factors as purchasing and inventory levels.

With the notable exception of AkzoNobel, leading suppliers of paint and coatings to the prepaint market have announced price hikes of 5-7 percent, effective in January. And some coil coaters and their customers are not happy about it.

One prepaint buyer who closely tracks raw material costs questions whether the current hike is justified. “While materials, particularly titanium dioxide, have risen this year, chemicals used in paint are not back to the levels they were in 2014 when the paint companies had their last price increase. Chemical costs dropped significantly in 2015 and 2016. Paint companies never decrease prices, they only raise prices,” he said.

After price increase announcements, it is important to follow steel mill lead times (and other keys) as a way of seeing if the increases are being seriously considered by steel buyers. The farther and faster lead times move out, the more support for the price increases announced by the domestic steel mills.

Steel Market Update (SMU) conducted an analysis of the flat rolled steel markets and market trends over the course of the past four days. One of the key indicators produced out of our analysis is the change in lead time trends in hot rolled, cold rolled, galvanized and Galvalume steels. Respondents to this week’s questionnaire noted that lead times on each product were higher than what was reported during the middle of October.

According to the buyers and sellers of flat rolled steel, the domestic steel mills are willing to negotiate spot steel prices. The percentages of those reporting the mills as willing to negotiate has shrunk, but continues to be well above 50 percent. This is a bit of a surprise considering the price announcements made in mid-October by ArcelorMittal USA and most of the other domestic steel mills.

The following article on the hot rolled coil (HRC) futures markets was written by David Feldstein. As the Flack Global Metals Director of Risk Management, Dave is an active participant in the hot rolled futures market, and we believe he provides insightful commentary and trading ideas to our readers. Besides writing futures articles for Steel Market Update, Dave produces articles that our readers may find interesting under the heading "The Feldstein" on the Flack Global Metals website, www.FlackGlobalMetals.com. Note that Steel Market Update does not take any positions on HRC or scrap trading and any recommendations made by David Feldstein are his opinions and not those of SMU. We recommend that anyone interested in trading HRC or scrap futures enlist the help of a licensed broker or bank.

U.S. Steel is undertaking a massive asset revitalization program to reduce unplanned outages and improve profitability and competitiveness.

The company plans to invest approximately $1.2 billion from 2017 through 2020 on repairs and upgrades. By 2020, slab production capability at Gary Works, Great Lakes Works and Mon Valley works will be increased by 1 million tons from the current 10 million tons. In 2017, costs from outages, regular maintenance and asset revitalization are expected to total $1.325 billion, up from $950 million in 2016.

U.S. Trade Representative Robert Lighthizer is widely expected to attend the Global Forum on Steel Excess Capacity Nov. 30 in Berlin, though the USTR has made no official announcement of his participation. The forum will include representatives of the G20 nations, as well as other steel-producing countries, gathered to discuss concrete policy solutions to reduce excess steel capacity.

U.S. manufacturing slowed a bit from September but remained robust in October, according to the latest Manufacturing ISM Report on Business from the Institute for Supply Management. The headline PMI registered 58.7 percent, a 2.1 percentage point decrease from September's score of 60.8 percent. A reading above 50 indicates growth. Comments from respondents suggest that at least some of the weakness may be due to the impacts from the recent hurricanes.

Hurricane recovery, fleet sales and rental car companies contributed to a strong month for U.S. auto sales. Pickup trucks and SUVs continue to be snapped up by consumers.

"We did see continued hurricane replacement at the beginning of the month," Michelle Krebs, an analyst at car-shopping website Autotrader, told Bloomberg. "The economic factors are also in trucks' favor. People are back to work and construction activity is up, which is good for truck sales."

Global manufacturing hit a six-and-a-half year high in October. The JP Morgan Global Manufacturing PMI rose to 53.5 from September's 53.3. Most components of the PMI rose at faster rates in October. Output and output prices softened slightly during the month. Output charges increased reflecting supply chain constraints and longer vendor lead times.

Allegheny Technologies, Inc., has agreed to form a 50-50 joint venture with an affiliate of China's Tsingshan Group to manufacture and sell 60-inch-wide stainless sheet in North America. Tsingshan is the world's largest stainless steel producer. The joint venture, which still needs regulatory approval, expects to begin shipping products in early 2018.

Tsingshan's operation in Indonesia will supply slabs that will be first rolled into hot-rolled into coils at ATI then further processed to stainless sheet using the Direct Roll Anneal and Pickle (DRAP) process. The DRAP line was idled early last year and the ATI Midland plant closed in October 2016.

Another reminder that mill metallurgist and Steel 101 instructor John Eckstein and I will be in Chicago next week for FABTECH 2017. We will be conducting a mini-version of our Steel 101 workshop during the expo. Our workshop will be held in the McCormick Place Convention Center in room 502 B on Tuesday, Nov. 7, from 1:30 PM until 3:30 PM. There is no cost to attend the event (I assume you have to be registered for FABTECH). If you have an interest in having some of your employees attend one of our two-day Steel 101 workshops around the country and you want to get a feel for a piece of the program, come join us in Chicago.

If you would like to register for FABTECH, here is a link to their registration page.

We have been watching the market very carefully looking for signs of a complete change in momentum, which would spur prices to move higher over time. We are finding hot rolled and cold rolled prices strengthening at the lower end of the range, and there have been some adjustments to coated products on a weekly basis. But, SMU is not yet convinced momentum has turned completely in favor of the domestic mills on all products. We will discuss this further in Thursday evening's edition of our newsletter as we report on lead times and negotiations.

Today the U.S. Department of Commerce released foreign steel import license data for the month of October. Based on the license data imports for October will be approximately three million net tons. This is essentially unchanged from the 3,050,618 net tons reported as Preliminary Census Data for September.

As you can see by the table below, finished imports (which eliminate semi-finished imports, most of which are slabs going to the domestic steel mills) are flattening out around 2.4 million net tons per month.