The world is changing. Are you ready to change with it?

Supply

Steel Distributors and PVF wholesalers say that there is still a lot of supply in their respective markets. Conversely, we have seen an increase in ordering throughout the month of March for an August delivery date. I think the smart distributor should be communicating to end users to lock in steel pricing at current prices out of their stock. New prices will be higher due to increased replacement costs.

We think we will see some supply disruptions into Q3/Q4. Especially if shipping lines call into less ports because of the proposed US port fee for all Chinese made container vessels. Also keep an eye on Chinese steel output, plant closures and HRC prices in the coming months. I believe Asian HRC starts moving up quickly as a strategic counter measure to US steel tariffs.

This would force US HRC mills to increase, causing a tough situation for the US economy trying to re-tool its manufacturing sector and weather out what is seemingly an incoming recession due to US stock market performance this past month.

What would happen to your business if you lost 70% of your sales overnight?

Demand

This month’s sales were largely driven by incoming tariffs. We saw a lot of activity in US import sales. Which are serviced by our partner mills who have a stable and robust position with US Customs. As they have been paying a 25% tariff since 2018. We don’t expect additional or reciprocal tariffs on these countries, which has given our customer base the confidence to book aggressively.

The Eastern Canadian real estate and construction markets are a shadow of their former selves if we look back at the last 6 years, however jobs are being bid on and won, just a bit more fighting to win.

In reference to Canada, we have strong bookings year to date across our business categories wholistically. We continue to purchase steel monthly as we continue to be bullish on hard assets for the rest of the year, especially steel!

Elections in Canada whether a conservative or liberal government win both are pledging to support industry impacted by US tariffs. I expect the Canadian movement towards economic independence will involve infrastructure spending.

Whether that is pipelines, refineries, re-tolling our steel and automative sector, all this will require steel.

Policy

US tariffs are set to come into play on April 02. Where section 232 tariffs (25%) will apply to all countries selling steel to the US. If tariffs on the auto and energy industry at put in as well, Canada is going to be hit very hard in the short

term. As stated before, I expect this to have an impact on USDCAD, reaching 1.55 within the quarter. This will be devastating to the consumer; however, it will allow the Canadian steel industry to export to the US, even with a 25% tariff. Rio Tinto expects to continue business as usual into the US, I don’t see how carbon mills don’t expect the same.

We cannot rule out Ottawa implementing some kind of protectionist measure to help the Canadian steel mills, this will strain supply and increase prices. Potential Canadian duties and or tariffs on steel coupled with a weakened Loonie signal much higher costs for steel up north.

Taiwan, Vietnam, South Korea, India have all placed 30% tariffs on Chinese HRC, whether politically driven or for real economic reasons this will continue to close path ways for Chinese steel, limiting supply and putting pressure on melt and pour mills in those countries listed.

Raw Material

- WTI Crude falls since February. (Expect CAD to weaken)

- Iron Ore moves upward.

- Scrap prices continue to rise.

- NA HRC prices are flat, Black Sea and Asian HRC tick up slightly.

- Ocean Freight unchanged (for the moment).

- Nickel in historic highs, expect a downturn and potential lower stainless prices if there are no tariffs keeping prices high).

- USDCAD remains 1.44, when tariffs are announced and stick, expect a run to 1.51 within a week.