The waiting is the hardest part for US steel markets

The American steel industry is desperately in need of relief, but it's not what you think.

We have heard a lot about the possibility of import restrictions stemming from the government's ongoing Section 232 investigation — that is the big issue. But the smaller, more pressing matter right now is the announcement of that relief, or lack thereof.

American steel markets are seemingly at a standstill because Commerce Secretary Wilbur Ross has suggested on several occasions that while his department has 270 days to make a 232 steel import recommendation to President Trump, it would come much earlier.

The investigation to determine whether steel imports are impacting America's national security is less than 70 days old. But some thought a recommendation would come as early as last week. Now they believe it will be on the president's desk before the Fourth of July holiday and domestic mills could be celebrating not only their freedom from the British, but from unfairly traded steel as well.

President Trump himself has suggested relatively quick action that should please the industry, further fanning the fires of anticipation.

Meanwhile, steel buyers are hesitating to buy and sellers are hesitating to sell. If the Commerce Department recommends import tariffs, quotas or tariff-rate quotas, it is a whole new ballgame and many steel market players fear being committed to old-ballgame prices.

If the recommendation is to do nothing against imports, then American steel prices could drop dramatically across the board and buyers, especially distributors, do not want to be sitting on what effectively would be a high-priced inventory.

If the Commerce Department recommends restrictions and President Trump seems amenable, then prices could skyrocket and mills could regret making big pre-restriction deals favorable to buyers.

Some US mills have refused to open order books for August deliveries of hot-rolled coil, the industry's biggest selling product, and are willing to turn down currently priced orders because they expect 232 import restrictions to boost steel prices.

Currently, the mere possibility or likelihood that import restrictions are on the way appears to be propping up prices amid low demand.

In the plate steel market, a US producer has floated a $30/mt price increase, presumably confident of government import action.

"That's the only thing that matters," a plate distributor said. "If it's big, this increase and more will stick. If it's a fizzle, look out, this market will drop like a rock because demand is horrible."

A sheet distributor agreed. "Everything seems to be in a bit of a holding pattern."

Steel producers are increasingly shortening the decision time given to buyers on offers for sizable orders. Knowing that the market could change at the drop of the 232 hat, some deals are only available till the end of the day.

While real demand is sagging a bit, business has been strong in some steel markets because buyers have been holding out for so long and are now forced to make purchases to replenish stocks. But the level of real demand remains a question.

A sheet steel buyer recently criticized mill efforts to stimulate demand. "You drop the price to create demand and when that doesn't work, you raise the price to create demand."

One thing is clear: an indication that imports will be restricted under 232 actions will raise the prices of sheet steel and most other steel products.

Domestic market participants are not the only ones in a quandary. The investigation alone has resulted in a pullback in import offers and domestic buyers are careful to avoid being the "buyer of record" for importing, as sizable duties could be in the offing.

The CEO of Turkey's Colakoglu Metalurji, Ugur Dalbeler, said recently that a 232 ruling might not end speculation over its impact on global markets. He expects challenges to the ruling and said that the last time the US imposed blanket import restrictions, in a 2002 Section 201 case under former president George W. Bush, "immediately the Europeans took a similar action and all of a sudden, everyone else in the world came out with a safeguard. I believe a similar action will take place again."

While the steel market is in limbo currently, a lengthening 232 watch could cause concerns among US producers. The longer the investigation goes on, the more steel users will urge their congressmen and senators to push against any government action that could hurt their business.

Furthermore, free trade advocates are increasingly sounding alarms. "Trump could start a trade war this week," was the headline Tuesday on a CNN Money story about the 232 investigation. For the sake of everyone involved, a timeworn bromide may be the only encouragement available: Good things come to those who wait.