Subscribe
Share
Share
Embed
Welcome to Cup o’ Joe, your go-to podcast for a fun and informative look at the dynamic world of metals! In each episode, we bring the latest factors influencing the price and availability of metals, led by the Director of Risk Management and Commodities Hedging at Ryerson, Nick Webb, and hosted by Mike Carrozzo.
Everyone, welcome to this special episode of Cup of Joe. I am Mike Carazo joined always by Nick Webb. Nick, how are you doing?
Speaker 2:Mike, I'm doing very well. How are you doing today? Pretty excited about this one.
Speaker 1:Yeah. Yeah. This is gonna be a a really good one. You'll see on screen here, we have special guest. We're gonna stray from the norm on our episodes with the commodities updates and and hone in on some talk around the some of the metal indices, CSPs, talks that that are that have been going on.
Speaker 1:So, we're very excited to have, Josh Bors. He's the head of steel analysis in the Americas for the CRU. Josh, welcome to Cup of Joe.
Speaker 3:Good. Thanks, guys. Thanks for thanks for the invite. I'm I'm really excited to be, yeah, in in your metal verse.
Speaker 1:Awesome. I love it. I love the reference from the last show. He's been listening.
Speaker 2:And, Mike, before we hop into it, I'm gonna give just a quick flash of our safe harbor provision before we get into the nitty gritty. But, just as a reminder, these are the opinions of Nick Webb, Mike Carazo, Josh Spores. These are not the opinions of the CRU nor Ryerson. But we've got some we've we've got some pretty good content. We're gonna we're we got a lot of questions for Josh.
Speaker 2:We wanna just get some more detail around what's going on with the CSPs, how they compare, how they may complement, the CRU and some of the existing entities that are already out there.
Speaker 1:Yeah. Yeah. Super excited. So, let's let's level set the conversation first. So, Josh, why don't you tell us about the CRU for those who may just have a familiarity with it.
Speaker 1:Right? What what is it what does it do? And then, a little bit about yourself and your role there.
Speaker 3:Sure. Yeah. So maybe I'll I'll I'll switch the order of that. So I've I've, been in steel. This is the 20th year I've been in the steel industry.
Speaker 3:So I first was at a steel service center. So I first was at a steel service center. I had my own analysis company. I worked at a steel mill. Steel service center.
Speaker 3:I had my own analysis company. I worked at a steel mill. And then for the last 12 years, or just about 12 years, I've been at CRU. So for for 10 of those years, I've been the person that does the forecast for North America, the analysis, and the weekly price every single week. So, yeah, well versed in what's going on with with the CRU price, how it is has made up, and and and and all of that.
Speaker 3:So, yeah, just generally CRU is a market intelligence company. We focus on metals, mining, fertilizer, commodities. We have some expansion in some of the the battery metals more recently, but it's it's a company around for over 50 years owned by, you know, the same owner that started up still comes to the London headquarters virtually every day. So it it's it's a company that, like I said, it's it's Market Intelligence. So we deal mainly with manufacturers, the mills, producers, miners, banks, hedge funds, all that sort of fun stuff.
Speaker 3:First part of the question was was really more so about the price, you know, what what what it is. And for the for the most part, it's our price is published every week. It's every Wednesday. It's reflective of actual transactions from the prior week. So there is inherently a bit of a lag with it, but that lag is actually what we've been told.
Speaker 3:It's been told as a a selling point. So that's what allows our contract to settle contracts or to settle the futures market because it's a reflection of what's actually taking place rather than, you know, what bids and offers might be or market sentiment from day to day.
Speaker 1:So it's fair to say anybody who's purchasing steel is looking at the CRU price on for on on average. Correct?
Speaker 3:Yeah. Yeah. I mean, it's it's yeah. You look at any kind of earnings transcript or earnings calls from the public companies and they talk about a steel price, it's the CRU price just for that.
Speaker 1:So and and this is kind of the crux of our conversation here is is this and and these, CSPs. So before we kinda get into it, would you mind defining what a CSP is and how it differs from what the CRU offers?
Speaker 3:Sure. Yeah. With Nucor announced, I think it was April 4th of this year, the the CSP, which is just their acronym for the consumer spot price. So it's a price that they are offering. They they publish it at the beginning of every week, and it's it's it's valid for the week to say that it's a price they will charge for lead times of 3 to 5 weeks for anybody to buy steel.
Speaker 3:Not, you know, it's it's it's their customers, but anybody that maybe isn't a customer that could go to them because they need steel, it's a price valid for them. So they they announced 1. We're working this on a Monday. They announced 1 this morning. It's valid for this week.
Speaker 3:The following week, when our price publishes the CRU price, that will show you a good view in terms of what actual transactions took place in the week, not just what Nucor, what Nucor booked.
Speaker 2:And is it is it fair to say that, you know, at this stage, we're now 6 to 8 weeks into the the CSP and and Cliffs has an index as well. I guess, I don't know if this is something you could share. We're kinda getting into the details already, but, you know, do you see the actual data flowing into your system that's showing that there are transactions going through at these at these prices that are published? You're kinda you're kinda making the cake with with the data that you see.
Speaker 3:Right. So we get data in generally Mondays. We process it on Tuesdays and publishes on Wednesday. So when we see the data come in, yeah, it's it's a scattering of prices. The the range will move from week to week right now, and and recently, the range has been pretty wide.
Speaker 3:You have some some on the high end, some small orders, and then some bigger ones on the on the low end. We've all kind of heard where where some of those are. But, yeah, we'll see numbers around, the Nucor price. We've not yet had our price reflect the actual Nucor price, but I'm sure it'll happen. It's inevitable just the way the you know, the prices work.
Speaker 3:It'll be a tighter range probably. But, yeah, we we see it all come in.
Speaker 2:We which I think makes some sense. Right? Because, I mean, Nucor is obviously a very large player. Cliffs is a very large player within the steel market, but there are other mills who are who are transacting on steel prices. Most, I would say, most likely at prices that are going to differ, which I I think makes some sense for why maybe the CRU is kind of an amalgamation of the entire space, not just, you know, the 2 or 3 big ones.
Speaker 3:Right. Yeah. We are a volume weighted average of all the data points that we get in for the week. And our data providers are, the majority of domestic producers, and the balance is is buyers. So it's service centers predominantly and then some manufacturers in there as well.
Speaker 3:So you would you would need to see, you know, just just the the math work out right for the the prices to be equal. But they should be pretty close, I would imagine, if if that's truly what's happening. And I guess that's that's the the crux of it all is it's it's what's truly happening is what our index is designed to show.
Speaker 1:And to and to clarify that, so there's or, Nick, you had mentioned one from Cleveland Clips, now they publish monthly, and is that considered a CSP as well by definition?
Speaker 2:I would say technically. Yeah. It's it's got a slightly different parameters on it where it is subject to change. I I don't believe that they specifically reference the 3 to 5 week lead time, but but, yeah, in in general, the spirit of it is is very similar, I would say. Gotcha.
Speaker 2:Yeah. Okay.
Speaker 3:For us, it seemed like Cliffs was kind of reactionary to all this in in terms of what that is. And as their order book opens up, that's when they open that price up. So far, it's it's been on the high side. And, you know, as much as the CSP might be kind of a ceiling price, Cliffs came in ahead of that. So we'll see over time how that evolves.
Speaker 3:I I've heard a rumor it might go to weekly, as they, you know, spend some more time with it. But if if not, I think the biggest issue really is it's it's it's new core and and it's weekly price that they they've clearly put a lot of thought into it to to work with the market.
Speaker 2:So, Josh, you you talked a little bit of that about the lead lag relationship between the CRU and potentially some of these CSPs or just market prices in general. Is it fair to summarize that by by saying that generally, just mechanically, the CRU would be a lagging function to physical spot transactions that are going into the market from a prior week or maybe even prior 2 weeks. Is that is that a fair
Speaker 3:Yeah. The way it's the way it's designed is it's it's really it should be a lag of a week, but sometimes there's cases where, because our data comes generally right out of the, you know, the, you know, your order book software for the week. Okay. Whether you're a producer, you're a buyer, you have your reports that you run that says this is what transacted last week. You take out your one offs, your contract orders, or things that aren't repeatable in in the in the, I guess, in the realm with the the steel world, and that should spit out a price.
Speaker 3:So inevitably, you might have something that was talked about on a Thursday Friday and wasn't fully closed out, You know, PO ordered issued until Monday, and that that might lead to a little bit more of a lag. But, generally, it's about a week.
Speaker 2:Okay. A question for you with regards to differentiations between CRU and and, you know, some of these some of these index indexes that are coming out. CRU obviously publishes a hot roll index, a cold roll index, a galvanized, coding index. You have a plate you have a plate index. So thus far, these CSPs, both from Nucor and from Cliffs are only referencing a hot roll price.
Speaker 2:Any any thoughts on why, you know, they're just doing hot roll? Is that just, you know, that's gonna represent the entire entire carbon complex or I guess what are your thoughts around them just having a hot rolled index, not the value added products?
Speaker 3:Right. Yeah. It it was a little bit of a surprise when they only talked about a hot rolled price. I think over time, what we've seen is it it really allows I guess I'd go back a little bit. When previous previous to the CSP, they would announce a price hike.
Speaker 3:And sometimes they would announce a minimum price, sometimes they would just say prices are up $50 a ton. And, when they announced specific prices, they would talk hot rolled and cold rolled at times. So it was kind of a surprise they didn't list a cold rolled and gout price. But I think what it gives them to not do that is a freedom in terms of what the spread is. It's generally, cold rolled is gonna be some spread over hot rolled depending on the that specific market dynamics.
Speaker 3:And then the same on galvanized, whether it's a hot rolled substrate or cold rolled substrate. So I think it all works in the whole realm of of carbon.
Speaker 2:Okay. Excellent. Yeah. Perhaps perhaps not coincidentally or, you know, I guess we'll we'll see over time, but it is worth noting that the futures market that trades on the Chicago Mercantile Exchange, there there also is only a hot roll futures market. Although, I guess, there's the premium contract now too, which represents the coded space.
Speaker 2:But for the most part, the most actively traded contract is still a hot roll market. So it is interesting even this morning. And I think it's worth noting. We're doing this recording on June 10th. So any prices, any, any specific numbers that we're referencing, it's as of this day.
Speaker 2:And I think that's important because Good
Speaker 3:call.
Speaker 2:You know, we're gonna see I think we're gonna see deviations, depending on the day and time, whether, you know, Nucor is above a certain index or Cliffs is above a certain index or, you know, CRU is is wherever it's pricing, but, you know, we are seeing those spreads bounce around pretty volatility. And and what's interesting is, you know, when when these numbers are getting reported, for instance, like the new core CSP number, it does appear to be having a pretty quick feed through into the futures markets. So for instance, today, we saw print lower by $60 per short ton from 780 all the way down to 720 on that hot roll index. And notably, we we did see futures markets correct lower today. And I think that's it's it's reflecting upon, that that publication.
Speaker 3:Yeah. Absolutely. I when it came out, I took the screenshot of the future to say, okay. This is where we started. And, you know, you can you can, you know, keep that as a reference of where this the features is versus what what New Core does.
Speaker 3:So, yeah, today was, interesting. I didn't think they drop it as far as they did. I did think they'd they'd bring it down. They did the same thing last month, and then they started to raise it, what, 2 of the 4 weeks since then. But I think one thing that they've been going for, and I and I've I've written about this in an insight that we put out in in May.
Speaker 3:And if anybody's interested, you can just go to crewgroup.comcrugroup.com. And it's under knowledge and insights, just filter by my name. But I I think what Nucor was looking at was how do they get away from this boom bust order cycle where when prices get low, their customers order 5 months of steel at a time. And then they don't order anything for 4 or 5 months, and then they come back into the market. They wanted to create something that's a little bit more level.
Speaker 3:So I think where we are is our price this Wednesday, it's the 2nd Wednesday, it's going to set set the July contract for variable contracts based on our price. And if you think about that as maybe a 6% discount from our price, that's the $700, $700,720 steel price depending on where the price comes out at tomorrow or on a on Wednesday. So I think Nucor is trying to get ahead of that to say, we don't wanna see a buyer strike. We don't wanna see buyers just wait and not order anything for 2, 3 weeks until that contract is ready. We wanna entice them today with a somewhat transparent price and known price.
Speaker 2:So, yeah, I actually I wanna dig into that a little bit more because I think our viewers may not know quite the the level of, depth that we're gonna get into here. But, you know, you you mentioned this idea that this week's CRU is going to set July contracts in a lot of cases. I think it's worth noting that a lot of service centers, a lot of big OEMs, their contracts are based on the prior month, 2nd Wednesday, CRU index. That's oftentimes how these contracts get set. And then we're in an interesting week right now because, you know, as as Josh had kind of alluded to, I think, you know, this number that got published today based on the way the CRU compiles its index, it arguably will not get fed into the 2nd Wednesday price.
Speaker 2:That 2nd Wednesday price is gonna be based on any transactions that went through last week. So I I guess there is a little bit of a question and this this there is a question in here, which is, do you think, and I don't wanna use the word manipulation, but I, do you think there's a possibility that, you know, influencing the timing of these publications for the CSP could impact, either higher or lower the CRU and the way the CRU publishes its 2nd Wednesday contract?
Speaker 3:I I think there's definitely some thought into the timing and the price movement. I think the biggest amount of that, I guess, strategy of the timing in this instance so far seems to be to smooth out the order variability, the just the the flow of orders. So I think that's where they got aggressive last month. They did the same thing, and they're doing the same thing this month with that low price early on in the month. But, yeah, if if you look through the history, and I accept I've got 20 years in this.
Speaker 3:Nick, I know you're very well versed in this, and I can see a lot of different data where you see at times when mills typically try to raise prices is around when they announce earnings. So they have something good to talk about if it's not all, you know, rainbows and unicorns at the time. So I think there is timing that does work strategically. And in terms of you you have a wide audience here. I I would think that it seems strategically better to base a contract price off of at least 2 weeks of data.
Speaker 3:You know, you could do the first two weeks, and you're gonna smooth out some of that that volatility. And I think you're just well, it may not be a perfect double in terms of data points coming in, but it's it's it's almost double that data point. So I think that might be a better way to go rather than just rely on on the one week a month.
Speaker 2:Yeah. Very fair. Yeah. So I guess from a high level, how is how is the CRU, I guess, is CRU excited about these indexes coming out? Does it add more to talk about, I guess, how I I gotta imagine this is creating a lot of new types of conversations for you and for the organization, because there could be some impact to to the ultimately, you know, the indices or the way things get published.
Speaker 2:I guess, how how are you viewing these these new indexes come out?
Speaker 3:They're very interesting for sure. I mean, it gives us something, you know, different on Monday to, to think about where it might be and then see where it is and what it might mean and and why. But, I I think overall I I think what Nucor is doing is they're driving more attention into the spot market, which I I think is more impactful to to CRU. Yeah. We have, you know, what was the research we had conducted was that 95% of people with a a market based contract choose the CRU price to settle their contract.
Speaker 3:I don't see really anything changing in that manner. I I I think more so it's we might see more volume come into the spot market that can further enhance the spot price that we that we do assess. So I I think it's a good thing for us. I think it creates more volume in the spot market, where in the past we had seen a lot more volume move into these discounted contracts where I mean, there were periods where some people probably shouldn't some buyers shouldn't be getting those contracts just because of who they are and what they do, but it was a way for mills to lock in, you you know, known volume to to their customers and lock in market share.
Speaker 2:Could we maybe see a
Speaker 1:time where other steel mills jump in the fray and are are publishing their own and you're gonna have a lot of different ones then to to choose from or to to look at?
Speaker 3:Yeah. You know, that's it's such an interesting question because, I mean, right now, it's it's Nucor's doing it the most. Eclipse has their buy, steal, price. That's that's fine. So far, it's monthly.
Speaker 3:Maybe it goes weekly. But I think Nucor is the most transparent in in what they're doing with it. So if you have, say, you know, Big River wants to have their own or Steel Dynamics wants to have their own, they can all have the same price because that's collusion, of course. But there would be some mishmash of different prices, and I'm not sure there's any real big benefit to that and and what the point is. I I think more so it it's really I think it just strengthens the CRU price over time that it's always going to be, well, Newcross says this, what does CRU say?
Speaker 3:And you have that lag, which I think works in our favor to understand, you know, last couple of weeks, Newcores trying to get $780 and our price have fallen down towards 7 just under 760. And we are offered, you know, different price points in the market as well, but I think it was more of a check-in terms of where is the market trading versus what what Nucor is trying to accomplish there.
Speaker 2:So so, Josh, with regards to the construction of the the CRU index itself, since these CSPs have been launched, have you noticed any changes in the trend of the range between low prices and high prices? Have you or or has it tightened? Has it expanded? Has there been any statistical impact you that you can note, thus far in, let's say, the 1st 2 months of these being around?
Speaker 3:I don't know that we've seen anything really different just yet. We had a couple weeks where I think the range was a little bit tighter and then most other weeks has been pretty wide. So, no, we haven't seen any period where the majority of data points were at that new core price. It it's it's always kind of scattered in terms of who the buyer is. And and the buyers are reporting typically more than 1 purchase a week from multiple mills.
Speaker 3:So it it will vary from week to week of what they have. That makes sense.
Speaker 2:So question for you on the 3 to 5 week lead time, at least in within new course CSP, the way it's written is it says, for any volume, and I believe that's, you know, 1 ton up to 10,000 tons, they are essentially saying, we will stand by this price for the next, 5 business days, and they also know a 3 to 5 week lead time for that material. Now I think we've fortunately been in a situation where the environment is such that lead times for the last 8 weeks have been fairly lean, but I guess the question would be if in the event things change, we get a, we get another supply chain issue. We get, you know, a large, let's say stockpiling of OEMs, the service centers buying a ton of material and lead times happen to extend across the market. Just an opinion or a thought, how do you think that plays out with this guarantee of a 3 to 5 week lead time if the market more broadly lead times maybe extend out to 8, 10, 12 weeks? How do you think
Speaker 1:that goes out?
Speaker 3:You know, those 8, 10, 12 weeks, that that was such an anomaly after the the pandemic, but it very easily I mean, 3 weeks is really short. We really don't see that that often. You'll see it fall under 4, but 3 is is short. And often you can see it push over 5 pretty easily as well. So I think it really does bear watching what we've we've picked up insights so far from a variety of sources saying not all Newport Mills have that availability.
Speaker 3:Only it was only available at at some of them. And so inevitably and we're gonna come on to a period here in the next couple of months where we may very well see that inventories get destocked too low and the economy starts to turn higher, industrial demand starts to pick up a little bit, you know, to a more healthy rate in in the fall. And and you can have that surge of orders to order for demand and order for building some inventory, and we can very easily see lead times push push up to 6 weeks. So it it really bears watching what happens with this lead time, you know, as it goes. I mean, the whole thing could just kind of, I guess, it it it could break, or you really need to see Nucor manage your order book in a way that allows this to consistently, show availability for their customers.
Speaker 2:So quick there's there are times when you know whether it's a service center, maybe a larger service center or a larger OEM, sometimes they'll take package deals of, you know, rather than taking 500 tons to 1 mill supplier for a price, they, they, they leverage together a much larger buy and they say, let's see what the best number is that we can get in the marketplace. So maybe they go out for a a 2,000 ton order or a 5,000 ton order with the expectation that they should be able to negotiate a bit harder on price. Do you do you think that having these, you know, transparency CSPs, I guess, throws a wrench in that plan? Because, again, ideally, either, I guess, in this scenario, the CSP says whether it's 5 tons or 5,000 tons, it should theoretically be the same price. So it kind of throws a wrench in that ability to sort of leverage, you know, large buys.
Speaker 2:I guess you have any thoughts around how that could potentially change?
Speaker 3:Yeah. I can see that bundling happen more so for contract orders to create a bigger, I guess source of demand for that, that monthly contract order. But I I I think it could still work. I think it most people so far seem to think the CSP is a ceiling price. And as far as we've seen, Nucor's been pretty strict with it in terms of negotiations.
Speaker 3:I think they've held pretty, pretty firm on it. But it's the other mills. You know, there there's a number of other mills that would probably wanna say, capacity is rising, demand's not that great. We want those orders. And and, I mean, you're talking different key to some different orders.
Speaker 3:So I think it all works well from a mill production point of view.
Speaker 2:Yeah, it is interesting. There's almost a preferred, perverse scenario where if somebody's number is transparently put out in the market, there are other mills who may see that as, well, we, we, we at least know what our, what our bogey is. We know, we know what we have to compete against. So there is an interesting dynamic there from a, from a pricing standpoint, for sure.
Speaker 3:Yeah. We think it's gonna get interesting too over time here at I mean, the market cycle will fluctuate. And as we see prices fall down, I I think there's gonna be a point where Nucor just decides not to fully participate in the market and they can hold their price steady for a few weeks. They can let their competitors take that market share temporarily. They essentially run it out to them at at low margins, and that could clear up their order book.
Speaker 3:You know, that that could give them the the, I guess, capacity to to to do a little bit better here going forward as as the market comes back.
Speaker 2:Which which could be could be the phenomenon we saw taking place for the last few weeks where, you know, the the CSP number was 780, 780, 780, and then it dropped. And maybe that was that was a signal that they wanted to to win win a little more business potentially.
Speaker 3:That very well could be it. Yeah. We we've heard of others being pretty pretty competitive in the market at at pretty low prices. So and that may very well be it.
Speaker 2:Okay. So Josh, I know in addition to constructing the, the index itself for the CRU across all the various carbon products, We we know that you also, you know, wear some hats with regards to forecasting and and and pricing. Definitely wanna get your opinion or your thoughts on, you know, where CRU stand, where does Josh Spohr stand with regards to where are we heading for the balance of the year? Where where's where CRU think, you know, carbon prices, whether it's just hot roll or, know, the whole gambit of products, where are we heading from here for the through the end of the year? Right.
Speaker 1:Careful. This could drive futures prices. This could have a big impact. Careful what you say.
Speaker 2:Josh Bores moves to markets.
Speaker 3:I have Borer. Yeah. We have a conference in August. So CRU owns steel market updates, huge steel conference, and we generally give, you know, forecasts at that point in time to talk about the year ahead. And last year for the key point that I had was that 2024 was kind of a, a challenging year.
Speaker 3:It's it's one to kind of invest through and think about planning for 2025 when demand starts to pick up and rise faster. And I think that's still somewhat the case. So it's still our view that we should see industrial activity pick up faster next year than what we've seen so far this year. In terms of where prices are, like, our average on hot rolled, bear in mind that, we are working on our full we update our full, supply demand forecast quarterly, so we're working on that right now. And we'll have that update out at, in a couple weeks.
Speaker 3:But the price on Hot World is just under 7.50 right now for the second half of this year, and then it goes higher for next year. So I I think there's, you know, that's the the sandbox, I guess, we're playing in. I think there's the opportunity that we could see prices dip down, maybe drop below 700 very briefly. At this point, just the capacity coming online and and some of that flat line industrial activity. But like I said, I think there's the bigger opportunity is what happens when demand does start to improve later this summer and inventories are at a low point and and buyers need to purchase for not just demand, but also to rebuild inventories that that get too low.
Speaker 3:So you you could see that cycle start to turn pretty quickly. In terms of plate, we've got plates. I think that's that's made, you know, talking points on on your your podcast here. We have it I think it's I wrote I wrote down a cheat sheet over here. A 1074 for the second half of the year.
Speaker 3:So pretty flat to where it is, maybe a little bit lower than where we are right now. So, yeah, that's a nice spread that you have then between plate and hot roll, but, of course, they're separate markets and and, you know, different suppliers, different importers, different areas of demand.
Speaker 2:Yeah. We we've had, we've talked about Dempsey on.
Speaker 1:Yeah. We had
Speaker 2:Patrick Dempsey on our, our, our podcast. Maybe what was that close to a year ago now?
Speaker 1:Probably about a year ago. Yeah. And we,
Speaker 2:I was kind of hammering, hammering on the idea that plate prices are so far out of whack from the hot roll market. And his response to me was, why should they be in line with one another? He said, yeah.
Speaker 1:Yeah. Same. Different industries, different use cases. Yeah. Yeah.
Speaker 1:That's
Speaker 2:that's what Yes. Where can you
Speaker 3:import it from? And even if you look at just the last 4 years of history, that spread of plate to hot rolled, I think it's it's been like a negative 400 to, what, close to $1,000 over Hot Roll. It was just it's just been bonkers, and it clearly shows they're they're very different markets. You can't really have any more substitution than you already have in in those. Steel Dynamics with their sent in line, they're producing a little bit more of that coil plate up to an inch thick.
Speaker 3:So that helps a little, but generally you want a 2 inch plate. There's you're limited in where you can get it.
Speaker 2:So not only we get in school by, McDreamy, we're also getting schooled by Josh Bores. A lot of it. Yeah. Yeah.
Speaker 1:I think, they both hammered you on that one, so we gotta we gotta move on from your hypothesis.
Speaker 3:Well, we we get asked that all the time too. So, yeah, we're we're very versed in answering that.
Speaker 1:And, Josh, with
Speaker 2:regards with regards to the spreads, we know we're talking about the plate versus hot rolled spread. Similarly, I'm I'm curious if you have any thoughts on, you know, will we see any normalization between, like the cold rolled coated spread relative to hot rolled? Because that's been a pretty elevated market for the last, I mean, re really the most part of the last 3 or 4 years, really.
Speaker 3:Right. Yeah. So I think right now, what we're looking at is capacity on Hot Rolled is, the biggest issue. So as more capacity comes online, sentence further ramped up, we will get Big River 2, later this year. I think that further weakens, hot rolled prices relative to cold rolled prices.
Speaker 3:And then still you have galvanized capacity ramping up as well. And and so you have this weird mix where cold rolled base cold rolled is higher than a base valve, in many times. And and again, that's just your specific market. So maybe you could find, you know, a g 30 galvanized coating that works, you know, for a cold rolled application. But, yes.
Speaker 3:With the spreads, we expect the cold rolled to hot rolled spread to start to come back. I think 200 seems like a good number, but it really is at the whim of how much competition there is for hot rolled, how low hot rolled goes relative to what cold rolled is. Cold rolled is pretty small market too. I think it's only like 20% of the mill shipments versus hot rolled and Galv each, about 40%.
Speaker 1:Speaking of of galvanized, any insight or direction on where you where you think those prices might be headed?
Speaker 3:Generally, the way that we're forecasting is we forecast hot rolled. We forecast the spread for for cold rolled and and then the coding weight on on galvanized. So as hot rolled moves, generally, it's it's the same sort of trend that we see on cold rolled and galv.
Speaker 1:So, Josh, I guess our listeners, what what should they really be taking away from this conversation? I mean, they're they're trying to navigate what all what this all means. And we appreciate you coming on and and helping us clarify this a little bit, but I guess, you know, we're we're probably heading into contract season very shortly here. You know, what what do, what should customers or metal buyers in general just, take away from this conversation as they try to navigate?
Speaker 3:Well, I think the biggest point with with Nucor's CSP is it's it's a new data point in the market. It's something you can reference at the beginning of the week. It's not really at a lag, and I I think they're being pretty consistent in their efforts to to be competitive with the market. We'll see as it as it goes, see how it really works through the whole cycle. You know, one question we've had is will will this price set contracts?
Speaker 3:And I talked about it briefly in in that insight that we had put out. I really don't think so. I think there's maybe you could have small portion of Nucor contracts, getting adjusted on it, just because relationships in the steel industry are so important to make sure you get the supply you need at prices you want as a buyer. But you can't see all the other mills setting a price based on what what their competition set. So I I think maybe we see some movement around in there, but any it it really what we found is it doesn't matter what you set prices on.
Speaker 3:At some point, as demand supply negotiations happen, you're gonna get back down to whatever level you are. And I know you guys have talked about like, a fair value, you know, like a scrap plus 250 or a scrap plus 300. Generally, you're gonna see that over time, you know, as as cycles move around is that's just where you're gonna get to. So there's there's specific no no margins that you have to hit for them to earn enough capital to reinvest in their business. And I I think that's really where where we kinda go with it.
Speaker 1:And if the last few years have taught us anything, the best laid plans go awry. So expect the unexpected. Josh, you mentioned a few times, the insights that you publish, had a chance to look at those. They're very, very insightful. Can you mention again where people can find those and maybe how often you put something out?
Speaker 3:Yeah. Those are just at our public website. It's crugroup.com. And I think on the right side of the page, you just click knowledge and insights, and you can search by my name. And other than that, I I'll try to post some things up on LinkedIn.
Speaker 3:So, yeah, if anybody has LinkedIn, just feel free to connect there.
Speaker 2:Yeah. Mike, I don't know if I told you this, but when I was first getting started in the steel industry, I was on the brokerage side and, and I would occasionally receive this weekly report called the spores report from 1 of the, one of the service centers here in North America. And, honestly, it was extremely useful to just get my feet wet and get get used to the industry and get familiarized with the main drivers in the industry. So, yeah, Josh has been at been back been out a while, but he's been helping helping people in the space for a really long time. So, again, I'll I'll reiterate what Mike said and and say, thank you.
Speaker 2:We know you're extremely busy. We know these are are busy times for index providers, and, we really appreciate your time today.
Speaker 3:Yeah. Thanks for having me on. It's always a pleasure. It's great to talk to
Speaker 2:you.
Speaker 1:And if I heard that right, you you you taught Nick everything he knows about the metals market. Right?
Speaker 3:That's a great place to end it. Yeah. I like that. I don't think it's true whatsoever.
Speaker 2:Just send that straight to your boss.
Speaker 3:That's right.