This Morning in Metals: Steel Imports Fall 1% in August

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This morning in metals news, U.S. steel imports fell in August, the Federal Reserve raised interest rates again and Ford’s CEO says the Trump administration’s metals tariffs have cost the automaker $1 billion in profits.
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Finished Steel Market Share Hits 21% in August

According to an American Iron and Steel Institute (AISI) report citing Census Bureau data, U.S. imports of finished steel fell 1% in August from July.
The U.S imported 2,966,000 net tons in August.
Meanwhile, finished steel import market share reached 21% in August, down from the year-to-date mark of 24%.

Raising Rates

The Federal Reserve announced another interest rate hike this week, Reuters reported.
“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2 to 2-1/4 percent,” the Fed said in a prepared statement.
“Information received since the Federal Open Market Committee met in August indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate,” the statement added. “Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.”
MetalMiner’s Take: As expected, the Fed raised its range for the federal funds rate by 25 bps from 2% to 2.25% during its meeting yesterday, confirming more of the same is on the way.
Most expect that to mean another rate hike in December, followed by three more next year, and possibly one increase in 2020. The increase strengthened the dollar against all major currencies and sent a shiver through emerging-market currencies, while Wall Street reacted with a fall.
Going forward, a stronger dollar remains broadly bearish for commodity prices but is expected to have little impact on a relentless oil price, which continues to remain firmly in bull territory.

Ford CEO Says Metals Tariffs Cutting Into Profits

Many companies have issued statements claiming the Trump administration’s metals tariffs have had a negative impact on profits — Ford CEO Jim Hackett was among the latest to make the claim.
During a Bloomberg conference this week, Hackett said the metals tariffs have cost the automaker approximately $1 billion in profits.
“From Ford’s perspective the metals tariffs took about $1 billion in profit from us,” Hackett was quoted as saying by Reuters. “The irony of which is we source most of that in the U.S. today anyway. If it goes on any longer, it will do more damage.”
MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel
MetalMiner’s Take: Many companies found themselves “covered” for 2018, particularly when they placed long-term buys earlier in the year. However, as 2019 contract negotiation season has fully commenced, buying organizations are seeing price increases not only for the semi-finished materials that they buy but also for the parts they purchase that contain metal. Though most major automotive OEMs negotiate steel and aluminum pricing using should-cost models and clean-sheeting (and likely did so well in advance of Section 232), producers and mills will still be looking to capture price increases next year compared to 2018 levels.

The real challenge for automotive OEMs, on the other hand, is having the visibility into the cost impact on the multi-tiered supply chains — here the OEMs may struggle to manage and help suppliers mitigate rising part prices.

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