On day two of the SMU Steel Summit, held in Atlanta, Georgia, Bank of America steel analyst Timna Tanners warned attendees that new capacity is “a freight train that’s coming toward us.”
“There’s been some pushback to this thesis,” she said. “Pushback includes theories that demand will absorb new supply, that not all of the projected capacity will come online, and that obsolete mills will shutter, which will take capacity out.”
Others, she said, have suggested that imports will disappear. Tanners said she disagrees with these theories.
“I think the argument that demand will absorb new capacity is an aggressive one. The nation doesn’t have the money or the political will to get an infrastructure bill passed,” she said. “As far as obsolete mills closing, does anyone here work for a mill? Is it obsolete? No one? No one is going to raise their hand to close their mill. They’re reinvesting to make sure it doesn’t become obsolete.”
As far as imports, Tanners said she doesn’t think they’ll disappear.
“Imports have fallen but they are still high. For the US to go to zero, well the US imports more steel than any other market. These relationships just don’t go to zero.”
Tanners said she believes that the steel market should “prepare for the mother of price wars,” calling it “steelmaggedon.” She noted that mills don’t shutter easily and will not hand off market share for a smooth translation to new capacity.
“The impending glut could drive HRC below $450/nt in 2022,” she said.