Flat rolled inventories at service centers declined only slightly over the last month, suggesting that the inventory hangover of 2018 continues to roil the market. Shipments have remained steady, implying that high cost material sold at losses is being replaced at current market prices. However, service centers have not restocked amid an uncertain outlook. Imports continue to remain at historically low levels, driving most of the purchasing to domestic mills. Current import prices, including tariff, will prevent any significant amount of material coming in from abroad, with the exception of countries that have import quotas in place, such as Korea.

There continues to be strong demand for domestic material. However, exports have decreased and production has increased, preventing higher prices. Furthermore, these market dynamics, steady demand, declining inventory, low import and low exports, are likely to continue. Without a catalyst, sideways pricing will continue.

An update on the USMCA and Mexica/Canada tariffs:  Last week, the U.S. International Trade Commission released their report about medium term impact of the USMCA, finding that it will have a modest positive impact on economic growth and employment. This outlook contrasted the robust growth the administration forecasted, possibly leading to reduced support for the agreement among Democrats in Congress. This assessment assumed the tariffs would remain in place. Trump has expressed and shown his desire to maintain tariffs in order to ensure compliance with trade deals. Turkey’s steel tariffs still sits at 50%, despite significant lobbying and concessions to the U.S. In the China trade deal negotiation, the U.S. wants to maintain tariffs on goods from China well after a deal is reached. The tariffs on Mexico and Canada appear to be firmly in place.