I didn’t want to write anything, but I wanted to see what would happen next, but the situation is changing rapidly, and there are reasons for that. Yes, and many asked my opinion, I could not answer everyone, so I had to write.
And so, in my last publication, we examined where prices for hot-rolled coil and semi-finished products can fall. And what can we expect in the near future.
My question is: are you ready for the shocks that await us? Have you taken care of your business?
I am a practitioner, not an analyst or a journalist. And everything I tell you about is from personal experience that I went through at one stage or another of my life, through ups and downs, the joy of success and the disappointment of failure. I say this because no one taught me at the time, and I had to go through all this and let it through myself.
All traders and manufacturers should think about how to survive a difficult time, keep the business afloat, not lose partners and customers.
What is happening now is that inflation in the US has already skyrocketed to 9%. According to the latest data, and reached a 40-year high. I immediately saw how in Turkey the price of scrap metal collapsed by 5% at once. Then we will see a fall in India, the USA, Taiwan, and so on down the chain. For me, this is a wake-up call. Metallurgists are very sensitive to the purchase of raw materials. This suggests that orders and sales are falling. The buyer is no longer ready to pay more and demands a price much lower than it was.
Everyone needs to prepare and get their finances in order and balance their inventory. There should not be too much stock; otherwise, you will have to sell it for a very long time. Banks and insurance companies, which yesterday raised the limits for everyone, offered better financing. And tomorrow they'll be at your doorstep and call for inventory cuts, credit lines cuts and interest rates to rise. Insurance companies will reduce the limits on counterparties and increase the percentage for their services. Nobody will spare anyone. You must be ready for this and act now, take care of yourself until they come to you and offer tough conditions.
Tomorrow won't be the same. To begin with, your sellers will increase your discount for reliable partners and payment terms under contracts. You will feel very confident because you are appreciated. You should think about it, and no one gives gifts to anyone. You are no exception.
Repay loans and obligations to counterparties as much as possible, reduce the warehouse, accumulate resources on your accounts. Otherwise, when it's time to buy, you won't have the resources and no one will give you a delivery delay. No, it's not because you've become bad. It's just that the requirements from banks and insurers have become tougher by that time, and sellers will not be able to do this physically.
After the publication, many people asked me what the price of a hot-rolled coil would come to. For example, in 2008, the maximum price for a hot-rolled coil was about $1,050 per 1 ton and dropped by $250 (unfortunately, I also received this bonus of $1,050). The rebar price is usually the same per roll +/- $40 per ton. We can determine when and at what price we will be willing to buy based on simple calculations. Most importantly, your customers will begin to actively buy from you and take more volume than before.
I remember very well how rich people with millions of dollars were scared, so they could not adequately respond to the situation. They were not ready for this and subsequently suffered heavy losses. Nasty Nicholas Taleb described it very well in his book. "Black Swan".
In conclusion, I will say $580 for HRC, but we will not see discounts for large buyers purchasing more than 100,000 tons. They will still give discounts of at least $50.
And remember, there should always be a purchasing and sales strategy, and most importantly, discipline and a sober, calm calculation. This is the only way out of any situation.
I had to save the business three times in 2001, 2004 and 2009 in order to revive, prepare and implement an anti-crisis program to increase purchases, production and sales. You already have experience, but nerve cells and sleepless nights cannot be returned.
I am ready to help now, while there is still time for this; it will cost you much more.
Thus, the ECB raised interest rates to zero for the first time in decades.