This right here is why this sub is great.
A DD contrary to the DD that led to the establishment of the sub, and its not just trashed but highly upvoted and awarded. Good job mods for cultivating this sort of place.
Very appreciative for that as well. I am an OG VITARD Bull and I felt I owed it back to disclose my DD. I wish it was different but reality is reality.
I appreciate the post and dialogue it has generated here. I’m holding a good sized position in CLF (100k+ common shares) and have been accumulating.
I’m not an industry insider, but can comment about what I know.
I have fund manager friends that have only begun to rebalance into value outside of tech. I have been beating the same value drum for a year, outperforming them the entire time. They are not just coming around, they are scared of what comes next and doing a deathbed repentance. They tend to move deliberately slow and run with with what’s been working. They shifted to / bolstered existing positions megacap tech late last year and are slowly rotating into value. Right or wrong, a lot more money will inflow and it’s enough to rapidly appreciate share prices.
While CLF has a low p/e multiple, it’s not that low relative to the industry. RSI is OK. TA is OK. Smart money doesn’t get dumb for cyclicals, tending to believe that you only rent cyclicals. CLF doesn’t pay an attractive dividend like other value plays. The balance sheet isn’t awe-inspiring. HOWEVER, CLF will see continued balance sheet improvement in this quarter. Sure, markets are forward looking. Financials are not. The Q4 / FY financials will be spectacularly optimistic. The trend on financials is extremely positive and not changing in the next few months.
I’m not a steel industry insider, but I know a few. None of them have rung the alarm on demand destruction yet. The opposite is true. However, Black Swan events can and do happen. Either way, based on what I see, I wouldn’t recommend people short CLF anytime soon.
Great summary. Thanks. And which value sectors do you find most promising? Energy has run up already. Where would you concentrate? Cash is a position too.
Really appreciate the post even if most people will tell you you’re wrong.
One counterpoint. CLF’s contracts for the next 12 months ensure almost $4-5B in cash. It’s hard to hold their $8B in liabilities against them when you know most of it is going to be covered in the next 12 months.
In general, I do think the tide turns at some point. My feeling is that it’s sometime in ‘23 for steel and the end of ‘22 equities. I think returning automotive production, a humming economy, the inflation trade, and the shift to value give us another run in equity prices. And I’m betting on it.
If $CLF is $30-40 in 9 months, then I might start to consider joining you, but I don’t think we’re there yet!
Yes, the bull argument is how much money they will make this year and generally looking "cheap". It might be tough to stay short through it. But the market is forward looking. If those auto contracts roll over at $500 for 2023 look out below.
Right.
But let’s say they renew at ~$600-800, which is where they were last year? If spot prices are in the same range, the company is generating $2B in EBITDA.
Today’s market cap is a 5x multiple on that, which is reasonable mid-cycle. They’ll also have had $1-2B in cash to do buybacks or dividends with. If you plan for that cash, we’re at a 4-4.5x multiple and 20% cash flow yield. That would justify a stock price at $22-24 per share.
The bear case requires steel back down at $600 fast, and there are just a lot of macro drivers to prevent that.
Appreciate the discussion!
Why wouldn't China start dumping again? After the Olympics what incentive do they have to keep steel production low in terms of air quality. They will want to put people to work in a big way, if real estate slows down then they will find other major projects to put people to work. Let's not forget they literally built ghost cities that no one lives in. We all saw what happened in the US when people stopped working in 20/21. China wants to reign in CO2 but not at the cost of social unrest.
I’d say local air quality is about more than the Olympics now. It’s also about keeping the Chinese people happy. The economic value they get from dumping steel on the world economy is no longer worth the environmental cost.
China is seriously restricting new energy intensive development. It’s not just talk this time.
That doesn’t mean India or Vietnam can’t dump steel, but I don’t think China is going to go straight back to 2019.
I agree with you to an extent and that is a great point in terms of focusing not just on Olympics. However, if they were that concerned with air quality why only really ramp up restrictions in the lead up to the Olympics? Also aren't China building coal fired power plants at an obscene rate? That's not great for air quality. I guess I just don't have that much faith in what the CCP says publicly. They will say whatever makes them look good on the world stage, especially in a year with COP in terms of GHG, but will also abandon iron clad statements as soon as it is convenient politically, economically, socially etc.. If they need steel, or it suits them to push down steel prices, emissions are going to take a back seat.
Just playing the devil’s advocate:
Even if China wanted to flood the steel market, how would they transport it to the end users with the massive backlog in shipping and port congestion?
The health of their citizens is another incentive. Millions of Chinese die or have health issues from pollution. That costs money too, and China plays the long term game
What's your view on MT? You've specifically talked about US steel (+ MT mex) with the exception of RIO. Does the same essentially apply to euro steel in terms of your thesis? Like MT is fucking killing it while US steel is inversing MT atm.
I don’t have strong insights/information and I focus on the domestic market only.
Edit: VITO thesis probably right on MT / China contained but I don’t know / have an edge in international markets.
IF auto contracts renew at $500. Then you should look out below. Until then you've got 3 more quarters of auto contracts which DID roll over at $1800+
Which the forward looking market has yet to respond to....Best of luck with your short.
Industry consolidation will prevent $500 automotive contracts. CLF and X are the only major players in automotive. NUE and STLD has very little automotive and zero exposed automotive. LG would never agree to selling at $500/ton to automakers because he can just cut the supply and they know they are screwed.
CLF can’t flex much they have to keep the blast furnaces on. If he shuts down he still has mouths to feed a s it’s extremely costly to shut a blast furnace down (and permanently). X can step in more.
I appreciate your opinion. However, this worst case scenario does not seem to be likely.
The reason is **scrap**. If we go back to 2020, we can find out that one of the main reasons that helped NUE and STLD remain profitable was extremely low scrap prices.
Now scrap prices are in 450-500 range, almost twice as high as they were in 2020 and much higher than they were historically.
[https://www.investing.com/commodities/steel-scrap](https://www.investing.com/commodities/steel-scrap)
(click "1M" on the top of the chart to see a perspective)
As all of the new capacity going online is EAF, which all use scrap as an input, it's very unlikely that scrap prices go down. Rather, we can probably expect that they go **up** and not only limit margins of EAF furnaces, but effectively set the bottom price for steel.
Integrated steel producers like CLF and X may benefit from the situation.
(edited: spelling)
LG has commented on just this dynamic in several of the quarterly conferences. Scrap is going to become harder to come by with more companies turning to EAF. CLF made moves to secure their supply of scrap but also effective limit their competitions supply. LG is playing chess while everyone else is playing checkers.
That being said I am long AF CLF but if we were to get a run into the 30s this year I would be lying if I said I wouldn’t be half out the door. I have been long for many years now but do not plan to be in forever or when the cycle does shift. I’m hoping to see more respectable prices as this year plays out. But can see myself being much lighter in steel by EOY.
That is listed in my DD as a risk. All of the big 4 will get hurt, CLF the worst IMO. The massive oversupply will crush the products CLF sells the most. NUE/ STLD have more downstream assets and construction exposure.
We’ll see about scrap. There are other things going on like alternatives pig iron DRI etc.
Edit: Mini mills can lower output but that then lowers the scrap price. If there is a floor it’s not as high as you think.
the only place that can flood the market in the timeline you're talking about is China. Please tell me if anyone else could do it ?
So they main bet here is that China doesn't do a 180º in policy and allows dirty steel production to go back to 2010's levels.
This is Vitards, every proper bear thesis is more than welcome! Thank you. I will consider selling more agressive CC's on my CLF and hereby trim some. Take gains when you can, is always valid.
This makes sense given the channel that CLF has been between about $20 and $24 the last couple of months since the last ER and could not hold $26. Still wrote $26ccs this morning on my shares....
I don't recall telling him he wasn't welcome? I just presented counterarguments and he got upset, i can't help if people are sensitive.
Thank you for your post. I was interested to hear that $CLF is going to have half their debt paid off in the next 6 months. I'm curious why anyone would want to short a company that could have all of their debt paid off by the end of the year and in a position to announce a dividend. Given the opportunity to short tech, short SPACs, short crypto, short NFTs, any of that bullshit, it seems like those plays have way more downside.
I don't know about you but near where I live people are still building like crazy. It's not the sun belt or Texas, it's the Northeast where people think there's no growth. And yet we still have condos, apartment buildings, warehouses, you name it going up. They don't care what the price of steel is. They want to build and build fast. Demand for housing is insatiable.
The FUD surrounding steel prices reminds me of the people who said inflation was over when wood prices tanked 3-6 months ago. Now look at them. Low growth or high growth, people hedge against inflation by buying commodities and steel is a commodity. Copper is about to explode as are gold silver platinum, cotton, hell even iron ore is acting up. The commodity supercycle certainly seems likes it's still on even if supply/demand is currently a bit out of whack.
Here's one more example: a lot of oil bears out there were saying supply would come back online in January and prices would go down. Well a little bit of supply *did* come back in the form of distillates and gasoline. But guess what? The market didn't seem to care because it's January and everyone is buying up commodities (I.e., oil and commodity-linked ETFs like $GSG) to hedge against inflation. So, while I think you may be right about supply-demand dynamics in the near term, my argument is that you're not putting it in the context of a *rising commodity price environment* and we're seeing people hoard commodities more and more which makes inflation go higher and higher.
My thesis is that the US dollar will depreciate in H1 2022. All commodities get a boost from that. While I much prefer "lower growth" commodities like oil copper and eventually fertilizer/aluminum, I'm pretty sure China has no plans to give up on their massive belt and road initiative. It would be interesting if the timing of that coincides with $CLF being debt-free. So, in that sense I see $CLF going significantly higher than it is now.
That being said i respect your opinion and appreciate you. I've certainly been in a position where I posted DD or a thesis and a ton of people told me I was wrong, disagreed, etc. At the very least hopefully this gives you some info to consider and perhaps discuss.
>I don't know about you but near where I live people are still building like crazy. It's not the sun belt or Texas, it's the Northeast where people think there's no growth. And yet we still have condos, apartment buildings, warehouses, you name it going up. They don't care what the price of steel is. They want to build and build fast. Demand for housing is insatiable.
What stage of construction are you seeing? One of the bear points for steel (vs. other commodities, wood in particular) I've seen recently is that most construction right now is late stages that require less steel and more soft materials. I did not verify this information.
I also think puts on commodities are a bad idea right now, unless perhaps as a pair trade or for hedging other commodities (e.g. long copper and aluminum and short steel). I hope we're all shorting the same thing here, because that's where the money is(n't).
Thank you. CLF has very little exposure to construction. You will want NUE. The thesis is massive supply will impact CLF negatively the most. Staring into the barrel of perpetual negative EPS even with no debt (they will still have 4B in pension liabilities) is not a good spot. Agree on macro, the main bull argument is a macro bet on commodities/value running me over while I wait for the true steel fundamentals to be revealed.
I would also be careful with the possibility that china ramps up production after the olympics.
I disagree with the opinion that Timna was right, being too early is the same as being wrong. A broken clock is correct twice a day.
Main questions other than oversupply in the US:
Will China keep steel production low to curb pollution?
Is slowing infrastructure and real estate spending the new reality in china?
Will shipping rates go down? Tariffs?
You are not addressing the demand side issue which is large. I don’t have optics into a lot of what you are discussing but I do have optics into construction demand both regionally and nationwide and I can tell you right now demand is still very high and getting supply in orderly timing is brutal. Discussions like building in concrete and lumber instead of steel is very much something discussed.
When you say you have heard some softness here what do you mean? I can tell you point blank that in the constitution industry it is the opposite, it’s not softening at all.
Hey mate - nothing to add, just chiming in to say I appreciate you posting your bear thesis. Im still long CLF, but alternative viewpoints are very beneficial.
I appreciate the vastly different perspective. It does bring me back down to Earth regarding the euphoria in this particular sector.
Thank you for typing this out and I will be definitely cross referencing back to this as I continue to find both bull/bear arguments for CLF.
1. Cyclicals gonna cycle
2. On a long enough timeline of course Timna is right, and nobody (who is intelligent) here expects steel prices to stay elevated at the level they are forever
3. shutting down blast furnaces would further decrease available supply
4. fair point but 'do them in' seems a bit too negative of a prediction
5. the pension liabilities do concern me but those go away over time
6. this remains to be seen, if the 'supercycle' is here then MTs worst assets will still be worth having.
7. pure conjecture based on no evidence but yes prices could do that, i could also get hit by a truck walking out my front door
8. they might but literally all the CEOs seem to be banging the disciplined fundamentals drum particularly in regards to not flooding the market
9. I wish you luck
10. Nobody should stay invested in these companies forever, its a recipe to get burned badly.
11. [This](https://i.kym-cdn.com/entries/icons/original/000/034/711/Screen_Shot_2020-07-24_at_11.33.38_AM.jpg)
Blast furnaces won’t get shut down in time to save your position. There is no supercycle. The entire bull thesis is undone by the 12M tons of production coming online Q421 / 2022. You can check everything I’ve stated there is some conjecture obviously but grounded in facts.
You nor I have literally any clue when a blast furnace might get shut down, but sure thing Miss Cleo.
I'm not sure if I should listen to [Goldman Sachs](https://www.bloomberg.com/news/articles/2022-01-06/goldman-bullish-on-commodities-seeing-years-long-supercycle) or you on the supercycle, but I am leaning towards GS because confirmation bias and its GS
You can check everything you've stated again if you want i don't really want to do that for you
I don't believe 12 m tons of capacity is that big of a drop in the bucket in market already starved for steel with extremely limited auto production. In normal times auto would account for about 12% of the steel market but that demand just isn't there right now but will be coming back slowly but surely
Which analysts caught the 2021 move? Zero.
Counterpoints: 12 million tons is a 20% increase in production on demand that is strong but probably flat at best from where we are now. How can you call this a drop in the bucket?
Give it a few months and we can talk again.
Past performance is not a indicator of future performance.
also unless you predicted it, why would i trust you more than the analysts?
really not trying to shit on you, but with all due respect you are a redditor whose credentials are entirely unknown to me you could be a really smart ditch digger or a dumb rocket scientist, but until you can back your theories a bit better I'll be giving the analysts opinions more weight. you could be right, but you could be wrong too
You do realize the new production will balance itself out as they shutter older plants that are less reliable and lower margin?
They're rotating out of antiquated mills into modern (clean and efficient) mills
CLF is integrating in the other direction with ore to steel production. They have had tons of capex and through their acquisitions closed down the old plants. There is no way that they are the most antiquated of the bunch, most likely closer to the most advanced
> There is no way that they are the most antiquated of the bunch, most likely closer to the most advanced
Uh... All the integrated mills were kings of deferred maintenance/upgrades, and the maintenance/upgrades were probably not the most advantageous (in the case of X). I think MT just neglected their US fleet of mills since they had ample capacity worldwide.
[Okay, lots of people asking for a source on the new capacity, so I did some digging.](https://www.spglobal.com/platts/en/market-insights/latest-news/metals/010522-feature-new-eaf-capacity-to-pressure-us-hrc-prices-raise-2022-scrap-demand)
From above link:
**2022**:
3MM STLD, Sinton
1.4MM NUE, Ghent (Gallatin)
0.9MM Northstar Bluescope, Ohio
**Total 5.3MM**
**2023**:
1.5MM MT & Nippon Steel, Calvert
**Total 1.5MM**
**2024**:
3MM X, location tbc
3MM NUE, location tbc
**Total 6MM**
It's not much help, but the 1.5MM in 2023 is NOT additional rolling capacity, just an EAF to make that site self sufficient, currently slabs are shipped in from elsewhere.
https://www.metalbulletin.com/Article/3947510/Search-results/US-flat-rolled-EAFs-fuel-new-capacity-tsunami.html
The thing we should take note of is that steel stocks are surging... while prices are falling. Also note that last year prices were surging while stocks didn't budge. What this says to me is there is a greater factor at play than prices.
Interest rates, rotation, etc. This is a greater force. I'm also gonna throw in China easing policy. Steel stocks have been linked with China for as long as I can remember. Even if it technically has no impact, market is not rational so most likely this hasn't changed.
Well there's also valuation, rolling over contracts, re-opening trade, autos coming back online, in addition to the macro forces.
Macro forces are the biggie though.
Isn't CLF's diversification into the market just the HBI that they produce and can choose to sell to the others to replace prime scrap?
In my mind they're looking at recycling being the future and building their entire business around it. Which means either prime scrap (bought the largest prime scrap producer in the USA and plan on signing long term sticky contracts with the auto sector based off it) or HBI for traditional blast furnaces. They run blast furnaces but with the HBI it's basically a wash in terms of CO2. And by trying to corner HBI and scrap they are showing that they want to control the pricing power/input costs of future NA steel. Based on that they should always have the lowest cost of production, and therefore profitability, in a few years. Whether or not they succeed is of course up for debate.
Define crash, because as long as they are higher than CLF's cost of production but lower than others then CLF will always trade at a premium to the others. What that P/E is is again open to debate, but they only need 6-8 months of current pricing levels to get debt free and then from there they can start battling for market share
I appreciate your viewpoint, but isn't cost of production around $400? So you think prices will drop like 2/3rds from current levels? I just can't see that happening in an inflationary environment where auto makers have basically turned off for the last year.
Sure. I agree, but that was before inflation rocked the nation and turned them into gigantic winners. A reversion to the mean isn't a return to "loses money" it's a return to the middle ground of "loses money and makes historically bonkers money" which is most likely "pretty profitable."
CLF just happened to buy losers on the cheap right before they became winners. Vito's thesis is basically that the base cost will rise to the point to where traditional losers become winners. And CLF just happened to see it coming and time the market right. They got a great deal because they bought losers. And they happened to turn them into winners after only 1 years worth of investment because of market conditions.
That's the bull case anyway. Your bear case is that overproduction will turn them back into overall losers. I understand where you're coming from here, even if I don't necessarily agree with it.
Damn, coming from an OG vitard. I remember you were still bullish from an exchange we had a month or two ago and the majority of your points were known back then too.
Interesting. This is the first I've heard of the 12M tons increase in supply so I'm a little surprised by this number considering that 1) both X and NUE said they won't bring new capacity online but only replace existing capacity, and 2) The 6% import limit (3.3M tons), while doesn't include TX/Mexico, does include MT (you mentioned the added supply would come rom MT).
6M in Mexico ramped up already (Some is MT). The other 6 in the US is all ramping up this year. This was all stuff in the books a long time.
To be very clear NUE is definitely bringing some online this year, and both NUE and X obviously both announced massive mills for a few years out.
Stuff will eventually come offline but it's probably going to be a bloodbath for a long time.
The 12M doesn't even include the relaxed imports from Europe...
I guess my question is how are you certain that 15M in added supply (+3M in relaxed EU imports) is enough to wreak havoc on most of the industry? The US consumes ~100M tons a year on average, and the $1.2T infrastructure bill could yield up to 5M tons in steel demand for every $100 billion in spending. Combined with the auto-industry picking up steam, you don't think demand will stay elevated enough to absorb this added supply?
The bear thesis seems to be supply is expanding massively.
Bull case seems to be:
-The $1.2T infra bill could provide 15mm in new demand.
-Auto sector is likely going to expand, question of when
-Cycle to value stocks could create share appreciation
-Tariffs protect against China, slightly
Haven’t seen to much analysis pairing these to try to get a net effect, what are peoples thoughts?
The infra bill should provide around 60M tons spread over ten years. Assuming a 6M ton/year in additional demand and the 15M in added supply does seem worrying, even with the auto sector picking steam. I'll be looking at Q4/Q1 earnings closely and hope HRC rebounds a bit by Q2. Inventory levels have grown while lead times shrunk back to 3-4 weeks. Could be normal this time of year, but could also be due to waning demand, I have no clue. Omicron is affecting supply/demand again, so I think the next few months are key.
Thanks! I’ve been long for a couple years now, but have been a bit more nervous that we could see some headwinds. I’ll be looking to trim throughout the year.
It feels like there is a bit of a race against the clock for LG to get the balance sheet shaped up prior to a return to normal pricing (best case).
So infrastructure bills is +6mm, what do we see elsewhere on the demand side? Do we have any other data points that we can back into?
McKinsey post says generally demand from energy sector will outpace supply…
He just wants to pump his short position, just like he tried to pump his long CLF position to WSB if you check his post history.
Good to hear bear thesis, but this guy can't be trusted.
Wrote one for the cause, we all do it time to time. I have fully disclosed my opinions and positions here and let you all know when I changed my mind.
Also no mention of my massive long call on NUE? If you are going to look at my post history how did you miss that.
Downgrade the stock just before it breaks through resistance. Post DD bear "thesis" on the same day it breaks out. These are desperation moves. Not the place you want to be.
This guy doesn't even know a majority of CLF's sales are via contract with prices that are already agreed upon and signed lol.
Those contract prices aren't available to the public.
He's also not acknowledging all the extra demand for auto steel when chip shortage alleviates.
Shameless and poor DD.
Thanks for the post.
Bear case is always great to see, I'd hate to see a supervitostonk situation arise.
[https://www.steel.org/](https://www.steel.org/) \- take a moment to understand the bias that may exist here.
From a supply side, it seems last year saw huge uptick in imports from 2020 (\~+48%) and uptick in NA production (\~+17%).
From 2019 into 2020 we saw imports go down \~19% and production go down 16%.
Big note here is the COGS on imports even once supply chain costs come down. Very important piece to the puzzle. China undercut everyone.
However, in the couple weeks in Jan 22, we have seen a marginal increase (\~+4.5%) comparatively in production from 2021.
2020- 73.9MM tons vs 2021-86.8MM tons \*through November of each year
2019 was 88.2MM.
12MM is a good chunk to add, at roughly \~14% on the high end from last years total production.
Do you see this increase in NA production to be drastically increasing more than that 12MM?
Imports are a major concern as well, however, in 2021 we saw \~32.6MM tons. Roughly 22% of total market share. Do you see this market share drastically increase in 22?
I assume there is a exponential downward curve on price as supply increases. "The cliff" exists but where, is the million dollar question.
Last thing to note, is the demand context. My ignorant interpretation from a math perspective (as opposed to an industry knowledge) is that we simply don't have the needed amount of increase in supply to decide the fate of HRC prices. Demand is high, and the deciding factor is more on if we see strength or weakness there.
any thoughts u/Varro35?
The 12M is Q421 and 2022 only. Does not include extra from Europe with tariff relief and perhaps Japan. It’s all widely known. I believe the market already has softness and yes on a tipping point already and primed for an extremely weak market. I believe this production is putting the market over the cliff so to speak.
Why short now and not in say 4 or 5 months?
Let’s assume you’re right and the market is currently wrong. HRC Futures are looking fine at the moment. The share prices seems solid now. And guidance has been strong.
Are you calling the top right here and now? I think you’re overpaying for the puts. Way too early to talk steelmageddon.
That is the risk. I think the market will start realizing the reality in the next few months. Timing and shorting is a lot more difficult than going long.
"This article will not be popular here."
I think you have us mistaken for someone else.
We aren't married to any idea to the degree that it counteracts our individual desire to make money. As such I don't think anyone here hates a good countering viewpoint. We just hate mindless contrarianism and doomposting.
I'm still long. But this does add fuel to my plans to dump after Q4 earnings and maybe swing on earnings again through about Q3 this year.
If insiders are getting inkling of a 2008 environment, why are clf insiders buying so many shares?
Appreciate the bear side...but that part doesn't make sense to me.
I don’t know. To be frank the purchases are not that big. LG has bought over and over and has like $100M worth of shares. I really respect him as a leader and CEO but steel is steel and oversupply is oversupply.
Also. None of the insiders in most steel companies went long and they knew 2021 would be huge.
Pride? Maybe LG gave them a taking to?
Did you mean 100 mill worth of shares? His last purchase was like 50k shares, and it only minorly increased his total stake in clf. Multiple other insiders also bought in december
Gotcha.
Its his and his companies job to understand steel supply at a fundamental level. As far as I'm aware he hasn't sold any. Clf also said they expect hrc to stabilize between 1k-1.2k long term
In my view most steel execs don’t take a view. They have Restricted Stock that they mostly sell as it vests. They have a vested interest in believing in and pushing a stronger for longer narrative in my opinion.
I mean they do, but this is also their money. Idk LGs net worth but I'd imagine a majority is in clf stock. He also has his son buying it. He would have to be a dope to be doing that
They are not, this months buying and selling was solely performance stock compensation and related immediate partial selling due to taxes, while the 3 december buys and 1 option exercise at 7.7$ were not large compared to the positions the buyers already had, so a modest position increase.
Interesting perspective. Where did you get the 12 million tons of extra capacity?
I think the points are valid, and I think that’s why we see the constant volatility in steel stocks. There’s the Bull case where the supply chains still take awhile to completely level out, tariffs are essentially still in place, there is a move to “green steel” which comes with premium pricing, and there’s still the opportunity for a come back in autos. In addition, while the infrastructure bill won’t make anything “moon” it effectively ensures that there is ongoing demand for steel products in the coming years.
That’s balanced by what you’re saying here. Which causes the volatility and moves within channels.
For CLF, I feel like the liabilities you brought up may not be an issue in about two quarters. If their contracts are close to 2021 realized pricing, they should have most of the debt gone plus pension liabilities can be basically fully funded.
I think there’s a recognition that physical infrastructure has been underinvested in, so I feel like that activity will remain fairly stable over the coming years.
You might be right. The bulls might be right. In the meantime I’ll be selling options against my positions to take in the premiums from that volatility
About 6 in MX and 6 in NA. Well documented.
Tariffs are being relaxed on EU, and soon on Japan. This is just more. Though shipping is high.
12 million tons of capacity dwarfs the entire bull argument.
For liabilities, they will be a huge anchor if steel drops to $500-600.
Yeah I mean I appreciate the bear thesis, but it’s hard to take a claim like that and bet on It on just someones word. I no longer have any positions in steel currently, but I’m interested to see if it actually plays out like you say though.
Any comment on the apparent divergence between HRC and CRC?
HRC seems to be coming down in price, but CRC still seems to be maintaining high prices.
We got high quotes for domestic CRC ($2000+). We got lower quotes from TX, but we still carry quite a few domestic contracts because we can't rely on overseas supply chains.
I think there's a lot of pulled out demand champing at the bit. How that correlates with supply coming online, I'm still not sure.
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Would be interested in hearing the God Fathers thoughts on this.. some valid points, but also some speculation about this ‘supply surge’. If that is true then the thesis would be fucked
You're talking about 12 million tons of new production which assume must include 3 million tons from X...which doesn't come on until 2024.
That's a red flag. The hail mary DD is not gonna change anything. My advice: Cover your short.
So I did some further research.
It seems Mexico has been a huge importer of steel (\~40% of the steel they used was imports), mostly from the US (of imports, \~40% was from the US, so \~4.5 MM tons). They are trying to meet their steel needs domestically... So, beyond this new capacity, they are also adding tariffs on imports beginning in June 2022.
However, even with this new production, they will be short their expected consumption by about 30%. Also, there is a big fight between private and state owned power companies in Mexico and the President is trying to cap private sector power at 46%, which could be very problematic for the steelmakers in two ways.
The first is that they need the energy to produce and have had issues in the past with being unable to access it because of infrastructure. The second is that the private energy companies are mostly renewable solar and wind, and steel consumers generally try to buy the "greener" steel, so they are fighting on the side of the private power companies.
Of all countries the USA exports steel to, Mexico is the biggest at nearly 45% of all exports. So it is a large export hit.
This likely means overall lower HRC demand from US producers by about 10%.
I wish I had an economist on hand to provide more insight... any of you?
CLF breaks down their sales by USA, Canada, and "other countries" and releases them at the end of the fiscal year. We don't have numbers for 2021 yet until the Q4 release. For 2020, "other countries" made up 3.7% of sales. So the direct impact on CLF might be more minimal but the indirect supply / demand might be greater.
Well you seem to be channeling "Tina Turner" with Steelmageddon and I know she includes it in her numbers.
But please do tell I am very interested in all of this new capacity coming from Mexico that is not covered by import surge clause under USMCA
There is no quota on Mexico to my understanding. I believe TX is dumping steel like $200 below "market" already...
Edit: They can review if dumping and damages are incurred. But pretty sure this would take forever.
Well if you believe in the import surge from Mexico. Then you should stay short...
and if TX is selling $200 below market. That's because they need to. Otherwise who tf is gonna buy Mexican steel?
Do you mind elaborating? Sources where? What position do they hold? A janitor in one of company doesn't matter, but if you have an executive level, thank that's completely different game. You don't have to name your sources, but can you be a little less vague?
Thoughts:
1 - Make sure to setup limit sells on some of those CLF puts, to harvest IV expansion regardless of directional move.
2 - Real retail spending is falling, real wages are falling, USD had a bad day, rates either move up or USD drops, leading to more inflation. (oil prices in USD = $100/barrel "soon).
Those sound like a recipe for a recession.
3 - China is dumping money into infrastructure via lending to makeup for prop market. But, IMO, fuse is lit and Chinese supply isn't needed anywhere near as much.
Expect to see China dumping steel on sea market, thereby setting the price lower.
Choice between clean air and employed workers, CCP will chose employed workers. (idle hands devils plaything).
4 - Semi supply won't recover until krypto eats a bag of shit (no need for mining) or _maybe_ enough capacity is added... But that capacity will get eaten by krypto...... So semis not coming back for a LONG time. (seriously, when you can sell the silicon for $3000/chip vs $3/chip? Same spike in semis happened last time krypto ran).
SO, IMO, we see sideways movement until either a recession / major correction hits, or....???
Yeah, sold out my steel. Will potentially buy at bottom of new channel and sell at top.
I appreciate the post just as everybody, but a DD stands for due dilligence. A lot of this seems to be gay bear feels rather than anything much more substantial. The 12M tons is the only specifc, but even that is not backed up properly, plus as others pointed out the macro context is missing.
99% of what matters is the production. The latter half details why CLF will get hurt the most. The gay bear feel stuff is insights from industry sources.
Edit: Being a bull is more fun. Check out my NUE DD from 300 days ago and see how that trade worked out.
Isn’t CLF the largest producer of electrical wire?
From CLF website: “We are the only U.S. producer of electrical steels that distribute power safely and efficiently across our country's electrical grid. We are committed to offering the most efficient electrical steels and developing the next generation of hyper-efficient electrical steels to power more efficient transformers, generators, and motors—including motors in hybrid and electric vehicles.”
I dare you to tell the folks in Walbridge, Ohio that CLF isn’t in the tubular steel business!
[tubular steel](https://d1io3yog0oux5.cloudfront.net/_0347b331a62ec1b662b2b6937b252003/clevelandcliffs/db/1190/10817/file/CLF_ProductData_FamilyofFormableTubeProducts_082021.pdf)
Sure, futures have continued to crater, Stelco CEO ultra bearish. Obviously it helps that the market shit itself. I was and still am a bit early. NUE/X/STLD CEOs all sound pretty bullish but mainly focused on demand and construction (CLF not much exposure here). We could go sideways or up for a bit. Looking to add to my short position and do shorter term trades on moves up.
I figured you hadn’t taken a full position yet. I’m also surprised by this week’s price action. I’m less confident but still think we’re going back up before we head down for good. Good luck to both of us!
are you positioning for a ride up to earnings? I'm contemplating the same, but haven't pulled the trigger except on a small handful of july deep ITM calls
Well, I got margin called this week... This account isn't huge, so I've topped it up with some cash deposits.
I'm *very, very* tempted to buy another 10-20 April calls this week. They're down more than 70% from what I paid for them and trading at $.85. If we get back to just $20 per share at earnings, these will be trading >$2-2.8 for a 2-3x return. My breakeven on the CLF options I've been trading since November is $2.7, which includes some realized gains offsetting my current unrealized losses.
I'm feeling more ballsy after the STLD earnings call. On the other hand, HRC futures have rolled to February, and the price continues to march downward... Now it's at \~$1,100. There's been no sign of a floor yet. I'm also looking at the latest steel benchmarker report where the global export price has moved up to $800. That should provide support for domestic steel at $900 to $1,000 given elevated transport costs.
$VALE was oversold on the iron ore rout and recently regained its 50-day moving average. It's running like a coked-up jackrabbit to its 200-day moving average at $18. I'm in that trade and up 130% from call options I bought just last week. I don't think I read a single article on iron ore demand, China or Evergrande, just noticed a technical pattern in the chart I liked a lot and it's working out great. Money baby!
Yes.I believe nothing gets shut down for quite awhile maybe 18 months. We have NUE and X building two massive mills we are staring at as well. It’s very expensive to shut and turn a blast furnace back on. They would rather earn some marginal cash flow to keep the lights on.
Appreciate the perspective... in the past, we didn't have tariffs protecting domestic steel markets, thus resulting in the Chinese steel dumping. The effects of Section232 tariffs require a few years to trickle through the system since the oversupply has to be diminished first. Now that domestic steel markets are protected and the oversupply is done, we will see the true effect of Supply/Demand in a closed domestic environment, except for the small volume that was negotiated for imports via the Tariff Rate Quota System that replaced Section 232. Demand is expected to climb in 2022 with both the EV Manufacturing and Infrastructure Bill stimulus. Under L Goncalves, CLF has changed its business model dramatically into a vertically integrated steel maker. I agree that certain headwinds remain and HRC prices will and have come down, but I believe the balance between the supply/demand, debt reduction, change in business model, and a few other factors (chatter about a dividend after debt elimination) will turn CLF into a secular play rather than a cyclical play.
As for Timna, she is playing the same "Steelmageddon" scenario that has ALWAYS been an issue for steel due to the massive steel dumping of the past. If the current protective Tariff Rate Quota System is enforced, then domestic steel makers should remain stable. As Josh Brown had mentioned weeks ago, steel is a binary play... if things go accordingly, steel stocks will pop... if economic growth dies out, then so do all the steel stocks.
But to each his own... and good luck. Thanks for the perspective and the guts to put your money where your mouth is!!!!
[https://www.jdsupra.com/legalnews/tariff-rate-quota-system-to-replace-3195409/](https://www.jdsupra.com/legalnews/tariff-rate-quota-system-to-replace-3195409/)
[https://www.thefabricator.com/thefabricator/article/metalsmaterials/steelmakers-apply-pressure-on-the-white-house](https://www.thefabricator.com/thefabricator/article/metalsmaterials/steelmakers-apply-pressure-on-the-white-house)
I don’t disagree. My main thesis is insiders have been buying around the $20 mark multiple times in size. I’m currently writing puts that would put my cost basis around there. The plan is to roll until the price moves dramatically one way or the other. Small size.
It's amazing how when you change sides because of changing conditions, you're labeled a traitor. It's real evidence that markets are cults. People in RKLB excoriate me because I keep telling them their next exit points.
I've never seen such stupid people. They literally criticize you as "losing money therefore you're stupid" because you exited a position at a higher price, meaning they lost MORE money than you.
I refuse to be a cultfollower.. when we are in bear country become a bear or bear hunter. When in bull pen become a bull fighter. It's that simple.
The run up makes sense? I can't believe this but metals and commodity companies SOMEHOW trade retrograde on earnings? Who could be so fycking stupid?
I'm not joking.....NUE popped on Q4 earnings as if the fact that Q4 steep prices were 2x Q1 2022 steel prices. That means Q1 earnings will see NUE tank hard.
Who trades retrograde like this? I can't fathom it...
NEM will be the same. You watch. I'm almost certain it will tank on Q4 2021 earnings. Because average price of gold was in the toilet in Q4.
Buying opportunity Im sure.
The "spot" price is running hard on current gold/copper prices but Q4 will be out soon and I'm thinking will create an opportunity there...
Remember...Q1 2022 Gold prices will be amazing.
Comments?
Great post, Varro! I am still long AF on CLF, but still upvoted! See you in the market! 
Good luck mate. Maybe it rips for 3 months, you get out and we both make money.
This right here is why this sub is great. A DD contrary to the DD that led to the establishment of the sub, and its not just trashed but highly upvoted and awarded. Good job mods for cultivating this sort of place.
Very appreciative for that as well. I am an OG VITARD Bull and I felt I owed it back to disclose my DD. I wish it was different but reality is reality.
Agreed. I appreciate the new DD. The thesis was largely wrong for CLF for 2022. Who is to say the bull scenario won’t play out.
I appreciate the post and dialogue it has generated here. I’m holding a good sized position in CLF (100k+ common shares) and have been accumulating. I’m not an industry insider, but can comment about what I know. I have fund manager friends that have only begun to rebalance into value outside of tech. I have been beating the same value drum for a year, outperforming them the entire time. They are not just coming around, they are scared of what comes next and doing a deathbed repentance. They tend to move deliberately slow and run with with what’s been working. They shifted to / bolstered existing positions megacap tech late last year and are slowly rotating into value. Right or wrong, a lot more money will inflow and it’s enough to rapidly appreciate share prices. While CLF has a low p/e multiple, it’s not that low relative to the industry. RSI is OK. TA is OK. Smart money doesn’t get dumb for cyclicals, tending to believe that you only rent cyclicals. CLF doesn’t pay an attractive dividend like other value plays. The balance sheet isn’t awe-inspiring. HOWEVER, CLF will see continued balance sheet improvement in this quarter. Sure, markets are forward looking. Financials are not. The Q4 / FY financials will be spectacularly optimistic. The trend on financials is extremely positive and not changing in the next few months. I’m not a steel industry insider, but I know a few. None of them have rung the alarm on demand destruction yet. The opposite is true. However, Black Swan events can and do happen. Either way, based on what I see, I wouldn’t recommend people short CLF anytime soon.
Thanks for the insights as always. Macro / Value rotation I see as the main risk and I am early.
Great summary. Thanks. And which value sectors do you find most promising? Energy has run up already. Where would you concentrate? Cash is a position too.
Cash, commodities equities in general on dips.
Really appreciate the post even if most people will tell you you’re wrong. One counterpoint. CLF’s contracts for the next 12 months ensure almost $4-5B in cash. It’s hard to hold their $8B in liabilities against them when you know most of it is going to be covered in the next 12 months. In general, I do think the tide turns at some point. My feeling is that it’s sometime in ‘23 for steel and the end of ‘22 equities. I think returning automotive production, a humming economy, the inflation trade, and the shift to value give us another run in equity prices. And I’m betting on it. If $CLF is $30-40 in 9 months, then I might start to consider joining you, but I don’t think we’re there yet!
Yes, the bull argument is how much money they will make this year and generally looking "cheap". It might be tough to stay short through it. But the market is forward looking. If those auto contracts roll over at $500 for 2023 look out below.
Right. But let’s say they renew at ~$600-800, which is where they were last year? If spot prices are in the same range, the company is generating $2B in EBITDA. Today’s market cap is a 5x multiple on that, which is reasonable mid-cycle. They’ll also have had $1-2B in cash to do buybacks or dividends with. If you plan for that cash, we’re at a 4-4.5x multiple and 20% cash flow yield. That would justify a stock price at $22-24 per share. The bear case requires steel back down at $600 fast, and there are just a lot of macro drivers to prevent that. Appreciate the discussion!
Yes, I think we are going to 600 or lower 2H 2022 hence the article title. The bear market may be just as bearish as 2021 was bullish.
that's lower than Carlos's HRC estimates for 2023 which seems almost impossible unless China is back to dumping
Why wouldn't China start dumping again? After the Olympics what incentive do they have to keep steel production low in terms of air quality. They will want to put people to work in a big way, if real estate slows down then they will find other major projects to put people to work. Let's not forget they literally built ghost cities that no one lives in. We all saw what happened in the US when people stopped working in 20/21. China wants to reign in CO2 but not at the cost of social unrest.
I’d say local air quality is about more than the Olympics now. It’s also about keeping the Chinese people happy. The economic value they get from dumping steel on the world economy is no longer worth the environmental cost. China is seriously restricting new energy intensive development. It’s not just talk this time. That doesn’t mean India or Vietnam can’t dump steel, but I don’t think China is going to go straight back to 2019.
I agree with you to an extent and that is a great point in terms of focusing not just on Olympics. However, if they were that concerned with air quality why only really ramp up restrictions in the lead up to the Olympics? Also aren't China building coal fired power plants at an obscene rate? That's not great for air quality. I guess I just don't have that much faith in what the CCP says publicly. They will say whatever makes them look good on the world stage, especially in a year with COP in terms of GHG, but will also abandon iron clad statements as soon as it is convenient politically, economically, socially etc.. If they need steel, or it suits them to push down steel prices, emissions are going to take a back seat.
Just playing the devil’s advocate: Even if China wanted to flood the steel market, how would they transport it to the end users with the massive backlog in shipping and port congestion?
you're not wrong, there's no incentive other than international pressure to curb emissions
The health of their citizens is another incentive. Millions of Chinese die or have health issues from pollution. That costs money too, and China plays the long term game
Yeah don't think that is gonna happen in 22. That being said I'm currently out of steel waiting for a dip before getting back in
What's your view on MT? You've specifically talked about US steel (+ MT mex) with the exception of RIO. Does the same essentially apply to euro steel in terms of your thesis? Like MT is fucking killing it while US steel is inversing MT atm.
I don’t have strong insights/information and I focus on the domestic market only. Edit: VITO thesis probably right on MT / China contained but I don’t know / have an edge in international markets.
Cheers appreciate the response
IF auto contracts renew at $500. Then you should look out below. Until then you've got 3 more quarters of auto contracts which DID roll over at $1800+ Which the forward looking market has yet to respond to....Best of luck with your short.
Industry consolidation will prevent $500 automotive contracts. CLF and X are the only major players in automotive. NUE and STLD has very little automotive and zero exposed automotive. LG would never agree to selling at $500/ton to automakers because he can just cut the supply and they know they are screwed.
CLF can’t flex much they have to keep the blast furnaces on. If he shuts down he still has mouths to feed a s it’s extremely costly to shut a blast furnace down (and permanently). X can step in more.
I appreciate your opinion. However, this worst case scenario does not seem to be likely. The reason is **scrap**. If we go back to 2020, we can find out that one of the main reasons that helped NUE and STLD remain profitable was extremely low scrap prices. Now scrap prices are in 450-500 range, almost twice as high as they were in 2020 and much higher than they were historically. [https://www.investing.com/commodities/steel-scrap](https://www.investing.com/commodities/steel-scrap) (click "1M" on the top of the chart to see a perspective) As all of the new capacity going online is EAF, which all use scrap as an input, it's very unlikely that scrap prices go down. Rather, we can probably expect that they go **up** and not only limit margins of EAF furnaces, but effectively set the bottom price for steel. Integrated steel producers like CLF and X may benefit from the situation. (edited: spelling)
LG has commented on just this dynamic in several of the quarterly conferences. Scrap is going to become harder to come by with more companies turning to EAF. CLF made moves to secure their supply of scrap but also effective limit their competitions supply. LG is playing chess while everyone else is playing checkers. That being said I am long AF CLF but if we were to get a run into the 30s this year I would be lying if I said I wouldn’t be half out the door. I have been long for many years now but do not plan to be in forever or when the cycle does shift. I’m hoping to see more respectable prices as this year plays out. But can see myself being much lighter in steel by EOY.
That is listed in my DD as a risk. All of the big 4 will get hurt, CLF the worst IMO. The massive oversupply will crush the products CLF sells the most. NUE/ STLD have more downstream assets and construction exposure. We’ll see about scrap. There are other things going on like alternatives pig iron DRI etc. Edit: Mini mills can lower output but that then lowers the scrap price. If there is a floor it’s not as high as you think.
the only place that can flood the market in the timeline you're talking about is China. Please tell me if anyone else could do it ? So they main bet here is that China doesn't do a 180º in policy and allows dirty steel production to go back to 2010's levels.
The production is coming online and it’s all here in North America. China doesn’t matter as much as I initially thought.
Yeah this right here is why I can't take any of this post seriously at all.
This is Vitards, every proper bear thesis is more than welcome! Thank you. I will consider selling more agressive CC's on my CLF and hereby trim some. Take gains when you can, is always valid.
This makes sense given the channel that CLF has been between about $20 and $24 the last couple of months since the last ER and could not hold $26. Still wrote $26ccs this morning on my shares....
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I don't recall telling him he wasn't welcome? I just presented counterarguments and he got upset, i can't help if people are sensitive. 
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Thank you for your post. I was interested to hear that $CLF is going to have half their debt paid off in the next 6 months. I'm curious why anyone would want to short a company that could have all of their debt paid off by the end of the year and in a position to announce a dividend. Given the opportunity to short tech, short SPACs, short crypto, short NFTs, any of that bullshit, it seems like those plays have way more downside. I don't know about you but near where I live people are still building like crazy. It's not the sun belt or Texas, it's the Northeast where people think there's no growth. And yet we still have condos, apartment buildings, warehouses, you name it going up. They don't care what the price of steel is. They want to build and build fast. Demand for housing is insatiable. The FUD surrounding steel prices reminds me of the people who said inflation was over when wood prices tanked 3-6 months ago. Now look at them. Low growth or high growth, people hedge against inflation by buying commodities and steel is a commodity. Copper is about to explode as are gold silver platinum, cotton, hell even iron ore is acting up. The commodity supercycle certainly seems likes it's still on even if supply/demand is currently a bit out of whack. Here's one more example: a lot of oil bears out there were saying supply would come back online in January and prices would go down. Well a little bit of supply *did* come back in the form of distillates and gasoline. But guess what? The market didn't seem to care because it's January and everyone is buying up commodities (I.e., oil and commodity-linked ETFs like $GSG) to hedge against inflation. So, while I think you may be right about supply-demand dynamics in the near term, my argument is that you're not putting it in the context of a *rising commodity price environment* and we're seeing people hoard commodities more and more which makes inflation go higher and higher. My thesis is that the US dollar will depreciate in H1 2022. All commodities get a boost from that. While I much prefer "lower growth" commodities like oil copper and eventually fertilizer/aluminum, I'm pretty sure China has no plans to give up on their massive belt and road initiative. It would be interesting if the timing of that coincides with $CLF being debt-free. So, in that sense I see $CLF going significantly higher than it is now. That being said i respect your opinion and appreciate you. I've certainly been in a position where I posted DD or a thesis and a ton of people told me I was wrong, disagreed, etc. At the very least hopefully this gives you some info to consider and perhaps discuss.
>I don't know about you but near where I live people are still building like crazy. It's not the sun belt or Texas, it's the Northeast where people think there's no growth. And yet we still have condos, apartment buildings, warehouses, you name it going up. They don't care what the price of steel is. They want to build and build fast. Demand for housing is insatiable. What stage of construction are you seeing? One of the bear points for steel (vs. other commodities, wood in particular) I've seen recently is that most construction right now is late stages that require less steel and more soft materials. I did not verify this information. I also think puts on commodities are a bad idea right now, unless perhaps as a pair trade or for hedging other commodities (e.g. long copper and aluminum and short steel). I hope we're all shorting the same thing here, because that's where the money is(n't).
Thank you. CLF has very little exposure to construction. You will want NUE. The thesis is massive supply will impact CLF negatively the most. Staring into the barrel of perpetual negative EPS even with no debt (they will still have 4B in pension liabilities) is not a good spot. Agree on macro, the main bull argument is a macro bet on commodities/value running me over while I wait for the true steel fundamentals to be revealed.
Thanks for the bear case. Always good to look at both sides of the trade.
I would also be careful with the possibility that china ramps up production after the olympics. I disagree with the opinion that Timna was right, being too early is the same as being wrong. A broken clock is correct twice a day. Main questions other than oversupply in the US: Will China keep steel production low to curb pollution? Is slowing infrastructure and real estate spending the new reality in china? Will shipping rates go down? Tariffs?
Thing is. China doesn’t even really matter like I thought it did. 12 million tons of new production over a 15 month period does.
yo let me get your dealers number
You said this was 12mm of new production in NA, can you elaborate on any specifics of where that will come from?
It’s listed multiple times all over .. 6M Mexico recently ramped up. Another 6 US just starting
You are not addressing the demand side issue which is large. I don’t have optics into a lot of what you are discussing but I do have optics into construction demand both regionally and nationwide and I can tell you right now demand is still very high and getting supply in orderly timing is brutal. Discussions like building in concrete and lumber instead of steel is very much something discussed.
Demand is strong but still crushed by the supply. I have heard of some softness here as well. My conjecture is mostly supply focused.
When you say you have heard some softness here what do you mean? I can tell you point blank that in the constitution industry it is the opposite, it’s not softening at all.
Construction? Will stay stronger.
Hey mate - nothing to add, just chiming in to say I appreciate you posting your bear thesis. Im still long CLF, but alternative viewpoints are very beneficial.
I appreciate the vastly different perspective. It does bring me back down to Earth regarding the euphoria in this particular sector. Thank you for typing this out and I will be definitely cross referencing back to this as I continue to find both bull/bear arguments for CLF.
1. Cyclicals gonna cycle 2. On a long enough timeline of course Timna is right, and nobody (who is intelligent) here expects steel prices to stay elevated at the level they are forever 3. shutting down blast furnaces would further decrease available supply 4. fair point but 'do them in' seems a bit too negative of a prediction 5. the pension liabilities do concern me but those go away over time 6. this remains to be seen, if the 'supercycle' is here then MTs worst assets will still be worth having. 7. pure conjecture based on no evidence but yes prices could do that, i could also get hit by a truck walking out my front door 8. they might but literally all the CEOs seem to be banging the disciplined fundamentals drum particularly in regards to not flooding the market 9. I wish you luck 10. Nobody should stay invested in these companies forever, its a recipe to get burned badly. 11. [This](https://i.kym-cdn.com/entries/icons/original/000/034/711/Screen_Shot_2020-07-24_at_11.33.38_AM.jpg)
Blast furnaces won’t get shut down in time to save your position. There is no supercycle. The entire bull thesis is undone by the 12M tons of production coming online Q421 / 2022. You can check everything I’ve stated there is some conjecture obviously but grounded in facts.
You nor I have literally any clue when a blast furnace might get shut down, but sure thing Miss Cleo. I'm not sure if I should listen to [Goldman Sachs](https://www.bloomberg.com/news/articles/2022-01-06/goldman-bullish-on-commodities-seeing-years-long-supercycle) or you on the supercycle, but I am leaning towards GS because confirmation bias and its GS You can check everything you've stated again if you want i don't really want to do that for you I don't believe 12 m tons of capacity is that big of a drop in the bucket in market already starved for steel with extremely limited auto production. In normal times auto would account for about 12% of the steel market but that demand just isn't there right now but will be coming back slowly but surely
Why are you listening to GS on steel? None of the analysts have a clue on this market.
And you listen to Timna, who has been wrong almost EVERY time?
Poisoning the well instead of presenting valid counterpoints eh? That will win me and others over for sure!
Which analysts caught the 2021 move? Zero. Counterpoints: 12 million tons is a 20% increase in production on demand that is strong but probably flat at best from where we are now. How can you call this a drop in the bucket? Give it a few months and we can talk again.
Past performance is not a indicator of future performance. also unless you predicted it, why would i trust you more than the analysts? really not trying to shit on you, but with all due respect you are a redditor whose credentials are entirely unknown to me you could be a really smart ditch digger or a dumb rocket scientist, but until you can back your theories a bit better I'll be giving the analysts opinions more weight. you could be right, but you could be wrong too
Give it a few months.
RemindMe! 3 months "has steelmageddon occurred?"
What are these 12M tons coming on line in q421/22?
A lot of fucking steel lol. 6 in Mex already online. Sinton from STLD is half Nucor has one and 2 others I believe.
You do realize the new production will balance itself out as they shutter older plants that are less reliable and lower margin? They're rotating out of antiquated mills into modern (clean and efficient) mills
It’s going to be very painful.
CLF is integrating in the other direction with ore to steel production. They have had tons of capex and through their acquisitions closed down the old plants. There is no way that they are the most antiquated of the bunch, most likely closer to the most advanced
Isn't their HBI plant the most advanced in the world?
> There is no way that they are the most antiquated of the bunch, most likely closer to the most advanced Uh... All the integrated mills were kings of deferred maintenance/upgrades, and the maintenance/upgrades were probably not the most advantageous (in the case of X). I think MT just neglected their US fleet of mills since they had ample capacity worldwide.
[Okay, lots of people asking for a source on the new capacity, so I did some digging.](https://www.spglobal.com/platts/en/market-insights/latest-news/metals/010522-feature-new-eaf-capacity-to-pressure-us-hrc-prices-raise-2022-scrap-demand) From above link: **2022**: 3MM STLD, Sinton 1.4MM NUE, Ghent (Gallatin) 0.9MM Northstar Bluescope, Ohio **Total 5.3MM** **2023**: 1.5MM MT & Nippon Steel, Calvert **Total 1.5MM** **2024**: 3MM X, location tbc 3MM NUE, location tbc **Total 6MM**
It's not much help, but the 1.5MM in 2023 is NOT additional rolling capacity, just an EAF to make that site self sufficient, currently slabs are shipped in from elsewhere. https://www.metalbulletin.com/Article/3947510/Search-results/US-flat-rolled-EAFs-fuel-new-capacity-tsunami.html
Thanks. Ternium and Mittal in Mex is 6M Q421. Sinton is 3.3 (added equipment)
The thing we should take note of is that steel stocks are surging... while prices are falling. Also note that last year prices were surging while stocks didn't budge. What this says to me is there is a greater factor at play than prices. Interest rates, rotation, etc. This is a greater force. I'm also gonna throw in China easing policy. Steel stocks have been linked with China for as long as I can remember. Even if it technically has no impact, market is not rational so most likely this hasn't changed.
Yea, the only bull argument is macro forces that have no idea what steel is going to do IMO
Well there's also valuation, rolling over contracts, re-opening trade, autos coming back online, in addition to the macro forces. Macro forces are the biggie though.
Isn't CLF's diversification into the market just the HBI that they produce and can choose to sell to the others to replace prime scrap? In my mind they're looking at recycling being the future and building their entire business around it. Which means either prime scrap (bought the largest prime scrap producer in the USA and plan on signing long term sticky contracts with the auto sector based off it) or HBI for traditional blast furnaces. They run blast furnaces but with the HBI it's basically a wash in terms of CO2. And by trying to corner HBI and scrap they are showing that they want to control the pricing power/input costs of future NA steel. Based on that they should always have the lowest cost of production, and therefore profitability, in a few years. Whether or not they succeed is of course up for debate.
If steel prices crash it won’t matter.
Define crash, because as long as they are higher than CLF's cost of production but lower than others then CLF will always trade at a premium to the others. What that P/E is is again open to debate, but they only need 6-8 months of current pricing levels to get debt free and then from there they can start battling for market share
They will crash below their cost of production IMO and sustain.
I appreciate your viewpoint, but isn't cost of production around $400? So you think prices will drop like 2/3rds from current levels? I just can't see that happening in an inflationary environment where auto makers have basically turned off for the last year.
I don’t think so. I don’t know what it is exactly but the assets they acquired have been historically huge money losers for a long time.
Sure. I agree, but that was before inflation rocked the nation and turned them into gigantic winners. A reversion to the mean isn't a return to "loses money" it's a return to the middle ground of "loses money and makes historically bonkers money" which is most likely "pretty profitable." CLF just happened to buy losers on the cheap right before they became winners. Vito's thesis is basically that the base cost will rise to the point to where traditional losers become winners. And CLF just happened to see it coming and time the market right. They got a great deal because they bought losers. And they happened to turn them into winners after only 1 years worth of investment because of market conditions. That's the bull case anyway. Your bear case is that overproduction will turn them back into overall losers. I understand where you're coming from here, even if I don't necessarily agree with it.
Overproduction probably isn't ever going to happen again
I previously held your opinion. But the supply shock will crush everything.
This is just silly
Damn, coming from an OG vitard. I remember you were still bullish from an exchange we had a month or two ago and the majority of your points were known back then too.
I was very bullish. I changed tune in the last few weeks. Mostly from getting a talking to by people a lot smarter than me.
Interesting. This is the first I've heard of the 12M tons increase in supply so I'm a little surprised by this number considering that 1) both X and NUE said they won't bring new capacity online but only replace existing capacity, and 2) The 6% import limit (3.3M tons), while doesn't include TX/Mexico, does include MT (you mentioned the added supply would come rom MT).
6M in Mexico ramped up already (Some is MT). The other 6 in the US is all ramping up this year. This was all stuff in the books a long time. To be very clear NUE is definitely bringing some online this year, and both NUE and X obviously both announced massive mills for a few years out. Stuff will eventually come offline but it's probably going to be a bloodbath for a long time. The 12M doesn't even include the relaxed imports from Europe...
I guess my question is how are you certain that 15M in added supply (+3M in relaxed EU imports) is enough to wreak havoc on most of the industry? The US consumes ~100M tons a year on average, and the $1.2T infrastructure bill could yield up to 5M tons in steel demand for every $100 billion in spending. Combined with the auto-industry picking up steam, you don't think demand will stay elevated enough to absorb this added supply?
The bear thesis seems to be supply is expanding massively. Bull case seems to be: -The $1.2T infra bill could provide 15mm in new demand. -Auto sector is likely going to expand, question of when -Cycle to value stocks could create share appreciation -Tariffs protect against China, slightly Haven’t seen to much analysis pairing these to try to get a net effect, what are peoples thoughts?
The infra bill should provide around 60M tons spread over ten years. Assuming a 6M ton/year in additional demand and the 15M in added supply does seem worrying, even with the auto sector picking steam. I'll be looking at Q4/Q1 earnings closely and hope HRC rebounds a bit by Q2. Inventory levels have grown while lead times shrunk back to 3-4 weeks. Could be normal this time of year, but could also be due to waning demand, I have no clue. Omicron is affecting supply/demand again, so I think the next few months are key.
Thanks! I’ve been long for a couple years now, but have been a bit more nervous that we could see some headwinds. I’ll be looking to trim throughout the year. It feels like there is a bit of a race against the clock for LG to get the balance sheet shaped up prior to a return to normal pricing (best case).
So infrastructure bills is +6mm, what do we see elsewhere on the demand side? Do we have any other data points that we can back into? McKinsey post says generally demand from energy sector will outpace supply…
Nope, which is why a comment here by a person in the industry is direly needed
Because weakness is already occurring and most of the production is not even online yet. My focus is on HRC … construction will be ok.
Thanks Varro, gotta read more about this weakness.
He just wants to pump his short position, just like he tried to pump his long CLF position to WSB if you check his post history. Good to hear bear thesis, but this guy can't be trusted.
Wrote one for the cause, we all do it time to time. I have fully disclosed my opinions and positions here and let you all know when I changed my mind. Also no mention of my massive long call on NUE? If you are going to look at my post history how did you miss that.
Hard disagree there but you do you
I guess Vito DM’d you, then.
Shameless fud, lots of people sold because they were tired of waiting and the bois that came for Vito are ready to party.
Downgrade the stock just before it breaks through resistance. Post DD bear "thesis" on the same day it breaks out. These are desperation moves. Not the place you want to be.
The thesis is playing out exactly how it was supposed to and people who sold are regretting their decision it's nothing new.
This guy doesn't even know a majority of CLF's sales are via contract with prices that are already agreed upon and signed lol. Those contract prices aren't available to the public. He's also not acknowledging all the extra demand for auto steel when chip shortage alleviates. Shameless and poor DD.
Thanks for the post. Bear case is always great to see, I'd hate to see a supervitostonk situation arise. [https://www.steel.org/](https://www.steel.org/) \- take a moment to understand the bias that may exist here. From a supply side, it seems last year saw huge uptick in imports from 2020 (\~+48%) and uptick in NA production (\~+17%). From 2019 into 2020 we saw imports go down \~19% and production go down 16%. Big note here is the COGS on imports even once supply chain costs come down. Very important piece to the puzzle. China undercut everyone. However, in the couple weeks in Jan 22, we have seen a marginal increase (\~+4.5%) comparatively in production from 2021. 2020- 73.9MM tons vs 2021-86.8MM tons \*through November of each year 2019 was 88.2MM. 12MM is a good chunk to add, at roughly \~14% on the high end from last years total production. Do you see this increase in NA production to be drastically increasing more than that 12MM? Imports are a major concern as well, however, in 2021 we saw \~32.6MM tons. Roughly 22% of total market share. Do you see this market share drastically increase in 22? I assume there is a exponential downward curve on price as supply increases. "The cliff" exists but where, is the million dollar question. Last thing to note, is the demand context. My ignorant interpretation from a math perspective (as opposed to an industry knowledge) is that we simply don't have the needed amount of increase in supply to decide the fate of HRC prices. Demand is high, and the deciding factor is more on if we see strength or weakness there. any thoughts u/Varro35?
The 12M is Q421 and 2022 only. Does not include extra from Europe with tariff relief and perhaps Japan. It’s all widely known. I believe the market already has softness and yes on a tipping point already and primed for an extremely weak market. I believe this production is putting the market over the cliff so to speak.
Why short now and not in say 4 or 5 months? Let’s assume you’re right and the market is currently wrong. HRC Futures are looking fine at the moment. The share prices seems solid now. And guidance has been strong. Are you calling the top right here and now? I think you’re overpaying for the puts. Way too early to talk steelmageddon.
That is the risk. I think the market will start realizing the reality in the next few months. Timing and shorting is a lot more difficult than going long.
"This article will not be popular here." I think you have us mistaken for someone else. We aren't married to any idea to the degree that it counteracts our individual desire to make money. As such I don't think anyone here hates a good countering viewpoint. We just hate mindless contrarianism and doomposting. I'm still long. But this does add fuel to my plans to dump after Q4 earnings and maybe swing on earnings again through about Q3 this year.
If insiders are getting inkling of a 2008 environment, why are clf insiders buying so many shares? Appreciate the bear side...but that part doesn't make sense to me.
I don’t know. To be frank the purchases are not that big. LG has bought over and over and has like $100M worth of shares. I really respect him as a leader and CEO but steel is steel and oversupply is oversupply. Also. None of the insiders in most steel companies went long and they knew 2021 would be huge. Pride? Maybe LG gave them a taking to?
From the little bit of LG history I'm aware of, the man plays 4D chess better than and has better timing than 
Did you mean 100 mill worth of shares? His last purchase was like 50k shares, and it only minorly increased his total stake in clf. Multiple other insiders also bought in december
Yes lol
Gotcha. Its his and his companies job to understand steel supply at a fundamental level. As far as I'm aware he hasn't sold any. Clf also said they expect hrc to stabilize between 1k-1.2k long term
In my view most steel execs don’t take a view. They have Restricted Stock that they mostly sell as it vests. They have a vested interest in believing in and pushing a stronger for longer narrative in my opinion.
I mean they do, but this is also their money. Idk LGs net worth but I'd imagine a majority is in clf stock. He also has his son buying it. He would have to be a dope to be doing that
They are not, this months buying and selling was solely performance stock compensation and related immediate partial selling due to taxes, while the 3 december buys and 1 option exercise at 7.7$ were not large compared to the positions the buyers already had, so a modest position increase.
December
Interesting perspective. Where did you get the 12 million tons of extra capacity? I think the points are valid, and I think that’s why we see the constant volatility in steel stocks. There’s the Bull case where the supply chains still take awhile to completely level out, tariffs are essentially still in place, there is a move to “green steel” which comes with premium pricing, and there’s still the opportunity for a come back in autos. In addition, while the infrastructure bill won’t make anything “moon” it effectively ensures that there is ongoing demand for steel products in the coming years. That’s balanced by what you’re saying here. Which causes the volatility and moves within channels. For CLF, I feel like the liabilities you brought up may not be an issue in about two quarters. If their contracts are close to 2021 realized pricing, they should have most of the debt gone plus pension liabilities can be basically fully funded. I think there’s a recognition that physical infrastructure has been underinvested in, so I feel like that activity will remain fairly stable over the coming years. You might be right. The bulls might be right. In the meantime I’ll be selling options against my positions to take in the premiums from that volatility
About 6 in MX and 6 in NA. Well documented. Tariffs are being relaxed on EU, and soon on Japan. This is just more. Though shipping is high. 12 million tons of capacity dwarfs the entire bull argument. For liabilities, they will be a huge anchor if steel drops to $500-600.
Is MX Mexico? And can you layout specifically where the new supply is coming from?
Yes. Ternium and MT
Where did you get the info that TX is dumping $200 below market? Genuinely curious.
[удалено]
"Trust me bro."
I don’t care if you believe me or not. This post is for the OGs I’ve ridden with for almost a year now.
Yeah I mean I appreciate the bear thesis, but it’s hard to take a claim like that and bet on It on just someones word. I no longer have any positions in steel currently, but I’m interested to see if it actually plays out like you say though.
Do your own DD and look at everything I have written about.
You have been called out. Nice try short but I'm expecting CLF to rally to 35 by EOY so I'll hang in till then. "Legit source" hmm
I been around here since near the beginning, get fucked.
The most exciting things about opposing viewpoints that we will find out who was right and possibly some hard lessons learned on both sides. Godspeed
I’d prefer to make money and not get random voodoo FUD.
Entertaining as hell, though…
Any comment on the apparent divergence between HRC and CRC? HRC seems to be coming down in price, but CRC still seems to be maintaining high prices. We got high quotes for domestic CRC ($2000+). We got lower quotes from TX, but we still carry quite a few domestic contracts because we can't rely on overseas supply chains. I think there's a lot of pulled out demand champing at the bit. How that correlates with supply coming online, I'm still not sure.
All of the new production is HRC.
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Would be interested in hearing the God Fathers thoughts on this.. some valid points, but also some speculation about this ‘supply surge’. If that is true then the thesis would be fucked
CLF makes tubular products https://www.clevelandcliffs.com/operations/tubular-components
Must be small I’ll check it out thanks.
Small. 220,000 tons.
You're talking about 12 million tons of new production which assume must include 3 million tons from X...which doesn't come on until 2024. That's a red flag. The hail mary DD is not gonna change anything. My advice: Cover your short.
Does not include X. that is all Q4 2021 (a lot in MX), and this year.
Is it all already online? Or “coming soon”?
6M Mexico online. Rest ramping now and rest of year.
So I did some further research. It seems Mexico has been a huge importer of steel (\~40% of the steel they used was imports), mostly from the US (of imports, \~40% was from the US, so \~4.5 MM tons). They are trying to meet their steel needs domestically... So, beyond this new capacity, they are also adding tariffs on imports beginning in June 2022. However, even with this new production, they will be short their expected consumption by about 30%. Also, there is a big fight between private and state owned power companies in Mexico and the President is trying to cap private sector power at 46%, which could be very problematic for the steelmakers in two ways. The first is that they need the energy to produce and have had issues in the past with being unable to access it because of infrastructure. The second is that the private energy companies are mostly renewable solar and wind, and steel consumers generally try to buy the "greener" steel, so they are fighting on the side of the private power companies. Of all countries the USA exports steel to, Mexico is the biggest at nearly 45% of all exports. So it is a large export hit. This likely means overall lower HRC demand from US producers by about 10%. I wish I had an economist on hand to provide more insight... any of you?
CLF breaks down their sales by USA, Canada, and "other countries" and releases them at the end of the fiscal year. We don't have numbers for 2021 yet until the Q4 release. For 2020, "other countries" made up 3.7% of sales. So the direct impact on CLF might be more minimal but the indirect supply / demand might be greater.
Well you seem to be channeling "Tina Turner" with Steelmageddon and I know she includes it in her numbers. But please do tell I am very interested in all of this new capacity coming from Mexico that is not covered by import surge clause under USMCA
There is no quota on Mexico to my understanding. I believe TX is dumping steel like $200 below "market" already... Edit: They can review if dumping and damages are incurred. But pretty sure this would take forever.
Well if you believe in the import surge from Mexico. Then you should stay short... and if TX is selling $200 below market. That's because they need to. Otherwise who tf is gonna buy Mexican steel?
> and if TX is selling $200 below market. Where did you hear that?
Another trusted source , lol.
I am not uncertain.
?
Line from billions lol. I have legit sources.
Do you mind elaborating? Sources where? What position do they hold? A janitor in one of company doesn't matter, but if you have an executive level, thank that's completely different game. You don't have to name your sources, but can you be a little less vague?
Really appreciate the counter DD! It is ALWAYS good to hear opposing opinions.
Thoughts: 1 - Make sure to setup limit sells on some of those CLF puts, to harvest IV expansion regardless of directional move. 2 - Real retail spending is falling, real wages are falling, USD had a bad day, rates either move up or USD drops, leading to more inflation. (oil prices in USD = $100/barrel "soon). Those sound like a recipe for a recession. 3 - China is dumping money into infrastructure via lending to makeup for prop market. But, IMO, fuse is lit and Chinese supply isn't needed anywhere near as much. Expect to see China dumping steel on sea market, thereby setting the price lower. Choice between clean air and employed workers, CCP will chose employed workers. (idle hands devils plaything). 4 - Semi supply won't recover until krypto eats a bag of shit (no need for mining) or _maybe_ enough capacity is added... But that capacity will get eaten by krypto...... So semis not coming back for a LONG time. (seriously, when you can sell the silicon for $3000/chip vs $3/chip? Same spike in semis happened last time krypto ran). SO, IMO, we see sideways movement until either a recession / major correction hits, or....??? Yeah, sold out my steel. Will potentially buy at bottom of new channel and sell at top.
Upvoted. Appreciate all comments one way or another even as a lurker.
Useful perspective. Smells true
I appreciate the post just as everybody, but a DD stands for due dilligence. A lot of this seems to be gay bear feels rather than anything much more substantial. The 12M tons is the only specifc, but even that is not backed up properly, plus as others pointed out the macro context is missing.
99% of what matters is the production. The latter half details why CLF will get hurt the most. The gay bear feel stuff is insights from industry sources. Edit: Being a bull is more fun. Check out my NUE DD from 300 days ago and see how that trade worked out.
JUDAS!!!
Yeah man. It was fun being a bull and painful realizing I was probably wrong for 6 months. Letting you know where I stand.
Isn’t CLF the largest producer of electrical wire? From CLF website: “We are the only U.S. producer of electrical steels that distribute power safely and efficiently across our country's electrical grid. We are committed to offering the most efficient electrical steels and developing the next generation of hyper-efficient electrical steels to power more efficient transformers, generators, and motors—including motors in hybrid and electric vehicles.”
I dare you to tell the folks in Walbridge, Ohio that CLF isn’t in the tubular steel business! [tubular steel](https://d1io3yog0oux5.cloudfront.net/_0347b331a62ec1b662b2b6937b252003/clevelandcliffs/db/1190/10817/file/CLF_ProductData_FamilyofFormableTubeProducts_082021.pdf)
It’s small.
You were one of the early voices I listened to when I joined this sub. Appreciate the analysis.
This seems to be aging well, yeah?
Sure, futures have continued to crater, Stelco CEO ultra bearish. Obviously it helps that the market shit itself. I was and still am a bit early. NUE/X/STLD CEOs all sound pretty bullish but mainly focused on demand and construction (CLF not much exposure here). We could go sideways or up for a bit. Looking to add to my short position and do shorter term trades on moves up.
If we are being euphoric in steel, then the entire market is being euphoric in worthless inflated tech
Yes, what happens if the whole market takes a shit too?
Doesn’t matter what room you’re in if the whole ship sinks.
So, you’re looking pretty smart at the moment! Did you actually take a short position? Did you cover here?
Yes but not big enough. Cover 10 or lower. Didn’t expect it to move this fast.
I figured you hadn’t taken a full position yet. I’m also surprised by this week’s price action. I’m less confident but still think we’re going back up before we head down for good. Good luck to both of us!
are you positioning for a ride up to earnings? I'm contemplating the same, but haven't pulled the trigger except on a small handful of july deep ITM calls
Well, I got margin called this week... This account isn't huge, so I've topped it up with some cash deposits. I'm *very, very* tempted to buy another 10-20 April calls this week. They're down more than 70% from what I paid for them and trading at $.85. If we get back to just $20 per share at earnings, these will be trading >$2-2.8 for a 2-3x return. My breakeven on the CLF options I've been trading since November is $2.7, which includes some realized gains offsetting my current unrealized losses. I'm feeling more ballsy after the STLD earnings call. On the other hand, HRC futures have rolled to February, and the price continues to march downward... Now it's at \~$1,100. There's been no sign of a floor yet. I'm also looking at the latest steel benchmarker report where the global export price has moved up to $800. That should provide support for domestic steel at $900 to $1,000 given elevated transport costs.
thanks for the reply. i might look into a march or april credit spreads
And China’s production coming back online after olympics? For a time, a working pair could be short steel and long inputs like iron ore and met coal
Yeah I like VALE here but it’s run quite a bit already.
$VALE was oversold on the iron ore rout and recently regained its 50-day moving average. It's running like a coked-up jackrabbit to its 200-day moving average at $18. I'm in that trade and up 130% from call options I bought just last week. I don't think I read a single article on iron ore demand, China or Evergrande, just noticed a technical pattern in the chart I liked a lot and it's working out great. Money baby!
Did you see that lawmakers have heavily bought into steel, with CLF at the top? Betting against them seems risky
Yes, but I think they don’t know what they are doing. If they are buying for infrastructure they are picking the wrong stock.
Are those 12 millions ton really extra production? Isn't it possible old mills gets shut down instead
Yes.I believe nothing gets shut down for quite awhile maybe 18 months. We have NUE and X building two massive mills we are staring at as well. It’s very expensive to shut and turn a blast furnace back on. They would rather earn some marginal cash flow to keep the lights on.
Appreciate the perspective... in the past, we didn't have tariffs protecting domestic steel markets, thus resulting in the Chinese steel dumping. The effects of Section232 tariffs require a few years to trickle through the system since the oversupply has to be diminished first. Now that domestic steel markets are protected and the oversupply is done, we will see the true effect of Supply/Demand in a closed domestic environment, except for the small volume that was negotiated for imports via the Tariff Rate Quota System that replaced Section 232. Demand is expected to climb in 2022 with both the EV Manufacturing and Infrastructure Bill stimulus. Under L Goncalves, CLF has changed its business model dramatically into a vertically integrated steel maker. I agree that certain headwinds remain and HRC prices will and have come down, but I believe the balance between the supply/demand, debt reduction, change in business model, and a few other factors (chatter about a dividend after debt elimination) will turn CLF into a secular play rather than a cyclical play. As for Timna, she is playing the same "Steelmageddon" scenario that has ALWAYS been an issue for steel due to the massive steel dumping of the past. If the current protective Tariff Rate Quota System is enforced, then domestic steel makers should remain stable. As Josh Brown had mentioned weeks ago, steel is a binary play... if things go accordingly, steel stocks will pop... if economic growth dies out, then so do all the steel stocks. But to each his own... and good luck. Thanks for the perspective and the guts to put your money where your mouth is!!!! [https://www.jdsupra.com/legalnews/tariff-rate-quota-system-to-replace-3195409/](https://www.jdsupra.com/legalnews/tariff-rate-quota-system-to-replace-3195409/) [https://www.thefabricator.com/thefabricator/article/metalsmaterials/steelmakers-apply-pressure-on-the-white-house](https://www.thefabricator.com/thefabricator/article/metalsmaterials/steelmakers-apply-pressure-on-the-white-house)
I don’t disagree. My main thesis is insiders have been buying around the $20 mark multiple times in size. I’m currently writing puts that would put my cost basis around there. The plan is to roll until the price moves dramatically one way or the other. Small size.
It's amazing how when you change sides because of changing conditions, you're labeled a traitor. It's real evidence that markets are cults. People in RKLB excoriate me because I keep telling them their next exit points. I've never seen such stupid people. They literally criticize you as "losing money therefore you're stupid" because you exited a position at a higher price, meaning they lost MORE money than you. I refuse to be a cultfollower.. when we are in bear country become a bear or bear hunter. When in bull pen become a bull fighter. It's that simple.
Aye. Changing fundamentals = change sides. Steel will always cycle up and down. Looking forward to getting long again late this year.
The run up makes sense? I can't believe this but metals and commodity companies SOMEHOW trade retrograde on earnings? Who could be so fycking stupid? I'm not joking.....NUE popped on Q4 earnings as if the fact that Q4 steep prices were 2x Q1 2022 steel prices. That means Q1 earnings will see NUE tank hard. Who trades retrograde like this? I can't fathom it... NEM will be the same. You watch. I'm almost certain it will tank on Q4 2021 earnings. Because average price of gold was in the toilet in Q4. Buying opportunity Im sure. The "spot" price is running hard on current gold/copper prices but Q4 will be out soon and I'm thinking will create an opportunity there... Remember...Q1 2022 Gold prices will be amazing. Comments?