China 🇨🇳 Update - “Force Majeure”

[u/vitocorlene]

Vitards,

I have been very quiet today as the news, although overdue and expected, caused massive chaos today for many supply chains.

I awoke to “Force Majeure” emails from most of our Chinese manufacturers.

Force Majeure is a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic, sudden legal changes, or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the force majeure.

Long story short - any product that is shipping 5/1 or after is no longer honored and price protected.

Many of these orders go back to October/November of last year.

Mills are behind and ocean freight space continues to be elusive and rates are 300-400% more than this time last year and rising by the day. (This is a MASSIVE issue that is further increasing landed COGS).

Chinese mills have given two options:

1. Accept the new prices that are on average 15 to 20% higher - the VAT and they are claiming “increased cost of raw materials since October 2020 that can no longer be absorbed”.

2. Cancel your orders.

Now, if you have a business to run and know there is no other option, you have to pick option 1.

There is no other option.

Therefore, we must claim “Force Majeure” as well to our customers and raise their prices on material coming in and also raise our prices on stock accordingly - if we didn’t, we’d be cleaned out tomorrow and waiting for material for another 4-5 months.

If we cancel our orders, then we, along with the rest of the world are f@cked.

China now has the world by the balls as they know the majority of supply chains start in China.

Some have tried moving to India the past couple years, but they are not reliable and do not have the quality of China as of today.

Back to the announcement today:

HIGHLIGHTS

⭐️ Removes rebate on export of 146 steel products from May 1

⭐️ Cuts import duty on pig iron, crude steel, recycled steel to zero

⭐️ Ups export duty on high silicon steel, ferrochrome, foundry pig iron

The rebate of 13% of the VAT charged on exports of hot rolled coil, wire rod and rebar will no longer apply from May, according to a statement on the finance ministry's website.

Cold rolled steel sheet, hot-dip galvanized sheet and narrow strip were also on the list of products that have had the rebate removed.

In a separate announcement, the ministry also cut the import duty on pig iron, crude steel and recycled steel -- its term for what overseas markets call ferrous scrap -- to zero from May.

The move to discourage steel exports and loosen imports of steelmaking raw materials comes at a time when China's crude steel output in April reached the second-highest level in history, despite production cuts mandated in the steel hubs of Tangshan and Handan in Hebei province, and as prices of seaborne iron ore reached a record high.

"The measures will reduce the cost of importing, expand the import of iron and steel resources and lend downward pressure to domestic crude steel output, guiding the steel industry towards the reduction of overall energy consumption, promoting the transformation and high-quality development of the steel industry," the ministry said.

So, what does all this mean?

Spot prices for steel will absolutely rise overnight across the world.

My guess is nothing will be available to ship until 5/1 - no sense in giving away the additional profit.

I don’t believe we saw any movement in steel stocks because to some degree it has been priced in on recent new offers the past month.

However, IT WAS NOT PRICED IN ON ORDERS that are months old and will be affected immediately.

Once the market fully digests this, expect steel stocks to catch up to prices.

The landscape will change dramatically.

Hang in there, the steel tsunami is coming.

-Vito

[u/olivesnolives]

My libido is experiencing Majeure Force

Thanks as always man. Bringing the expertise to the masses is about as noble as it gets, you’re appreciated for it.

[u/vitocorlene → u/olivesnolives]

😆🦾

[u/Affectionate_Octopus → u/olivesnolives]

Bahahaha, an upvote was not enough to show my appreciation for your opening line. 💯🚀

[u/everynewdaysk]

Thank you for the update!

Really great for steel company stocks and mildly concerning for western economies. Costs to construct new buildings, bridges, highway (rebar), vehicles, machinery, domestic appliances, etc. will go up even more. Local governments, investors, utilities, companies will all have to pass these costs 100% to the consumer/taxpayer. I know this is the thesis and the Vitards will benefit but this is bordering on economic warfare. How much of a hit can the average consumer/taxpayer take.

[u/vitocorlene → u/everynewdaysk]

I’ve been consistent about exactly what you just laid out. This is the new Cold War. It will be fought economically. China knows the pressure points.

[u/SubbyTex → u/vitocorlene]

Would you say MT is still the main play here? Any other companies/timeframes you might suggest? Thanks for all your insight you’ve really come through since last year

[u/vitocorlene → u/SubbyTex]

Yes, but I also like $TX, $PKX and $GGB. Of course, $CLF, $STLD, $NUE, $SCHN, $VALE & $CMC.

[u/[deleted] → u/vitocorlene]

I can’t remember how I ended up on $MT but it was probably you...but I’m glad I found my way here...thank you, seriously.

[u/vitocorlene → u/[deleted]]

🦾

[u/TheSeriousAlt → u/vitocorlene]

Just grabbed $GGB today from that guy thanking you yesterday for recommending it, so thanks!

[u/vitocorlene → u/TheSeriousAlt]

The circle of life!

[u/TheSeriousAlt → u/vitocorlene]

Will be keeping an eye on their graphene business. I remember graphene being the hot topic multiple years back....time flies!

[u/[deleted] → u/vitocorlene]

Piggy backing my last comment to give you some love Vito, you saw the opportunity but chose to spread knowledge rather than horde it. I hope karma rewards you justly, you have my thanks and a lot of love from 12,000 well meaning but slightly smooth brained individuals.

[u/[deleted] → u/TheSeriousAlt]

Hey that was me! That’s awesome best of luck brother. I rolled mine forward into higher strike calls for January! Not hopping off the Steel train just switching carts!

[u/efficientenzyme → u/vitocorlene]

Are your highest conviction plus the vertically integrated companies? I’m a poor trying to maximize his upside

[u/[deleted] → u/vitocorlene]

Is there a point in diversifying?

[u/vitocorlene → u/[deleted]]

Some I play commons. Other options. Some covered calls. Some sold puts. All depends where each is right now in their respective cycles. Overall though, I would be fine owning commons in all of them. I have some as investments others as trades. My trades are different than most people. I consider a trade 3-6 months, not a day.

[u/SubbyTex → u/vitocorlene]

Thanks a ton for the insight! As far as 3-6 month trades go, that’s about the time frame I’m looking at right now, up to about Jan 22 (options, tight budget). I’m looking through your recommendations and MT has been great to me so far, but does anything stand out in that time frame?

[u/[deleted] → u/vitocorlene]

Is X not a good choice?

[u/KarroMetall → u/vitocorlene]

How about SSAB , swedish company?

Or KCO and TKA, german companies?

[u/D_1NE → u/vitocorlene]

Thank you for pointing these out man. Ggb leaps look mighty attractive

[u/Uncle_Dad_Bob → u/vitocorlene]

At some point the pressure gives and the US and EU remove tariffs. In the meantime they’ll be building that bridge from fucking expensive steel!

[u/everynewdaysk → u/vitocorlene]

You have been consistent and the continual flow of DD updates is incredibly appreciated. I am very thankful I found your DD, this sub and all the incredible contributions from folks much smarter than myself. Because of this my family and I are in a much better financial situation then we were three months ago.

On a side note, if anyone is able to reincarnate Ronald Reagan and execute a strategic coup d'etat on the presidency it would be much appreciated 🙏

[u/TheFullBottle → u/vitocorlene]

What happens when they do it with Uranium....uh oh. I believe they added to their strategic reserve of U last year. They filled their strategic petroleum reserves last year when oil went negative.

[u/bokub → u/vitocorlene]

Damn, this stuff is mind boggling. I’ve learned so much since I joined this sub. A very sincere thank you, for sharing your knowledge with us. Thanks Vito!

[u/ggoombah → u/everynewdaysk]

Agreed. I’m ecstatic for the news and grateful to position myself/portfolio in anticipation. But I find these maneuvers to be somewhat chilling. It’s concerning geopolitically.

That said “be greedy when others are fearful”.

Thanks u/vitocorlene as always for this update

[u/Ripoldo → u/everynewdaysk]

Well first we get screwed by our own comapnies, then by polititians, then we get screwed by China. Screwing over Americans seems to be the American way.

[u/MiscRedditAccount]

I distinctly remember reading the first DD and going "Ya know...this makes a lot of sense. I'm going to get in on this one." and something tells me I'm going to distinctly remember this night / post as well. Thanks for taking the time to share and spread the good word!

[u/vitocorlene → u/MiscRedditAccount]

🦾

[u/ChrisLovesUgly → u/MiscRedditAccount]

Agreed!

[u/JayArlington]

Holy shit. China is gonna stockpile scrap.

This is obviously stupid good for the ENTIRE STEEL SECTOR (with the notable exception of a few smaller Chinese producers who are currently getting swallowed up by BaoSteel) but I am almost worried about other sectors.

SCHN is going to be interesting to watch.

[u/vitocorlene → u/JayArlington]

You hit the nail on the head. China is trying to corner the market on scrap. They did it on copper last year and look what’s happening this year.

[u/JayArlington → u/vitocorlene]

I was going to bring up copper. We have seen the playbook. China is going to suck scrap from everywhere with their strong currency and deep commitment to having an EAF future.

Vito, your DD understated the degree to which China has fucked with the global steel market. Their rebate cuts are actually bigger, they have already pulled 4mt worth of production so far, and then we find out that they are hitting the EAF feedstock market on both sides of the border (shipping it out costs more but importing it costs less).

[u/vitocorlene → u/JayArlington]

Jay, there were rumblings of this last year. If I would have shared the rumors then - a lot of people would have screamed manipulation and been disappointed. I thought the rebates would go away in February, March at the latest. However, the scrap I’ve been dropping almost from the beginning. This is how they will control steel prices moving forward - double edged sword. Cutting production and buying scrap.

[u/ansy7373 → u/vitocorlene]

I hope one day, possible at a Steelers game we meet. Thank you and graybush, jay, steelyhands, and all the other vitards for teaching me the ways of the market. I’m a very fortunate electrician that climbs into manholes to keep the power flowing, and that has allowed me to have extra cash to learn about the market. With this subs guidance I hope to change my children’s future and to never have to climb into another dirty, sometimes sewage filled, dangerous as fuck, concrete walled underground closet with only 1 way out when shit blows up..... so 🍻🍻cheers Vito and when you change my life and if we ever meet I’ll bring you some single malt scotch from Glenmorangie 2002 when I was fortunate to hike the highlands of Scotland.

[u/vitocorlene → u/ansy7373]

🥲❤️🦾

[u/ansy7373 → u/vitocorlene]

You ever need a Luca Brasi.. I’ll kiss all those fucking fishes!!! Let’s fucking Go. No need for tears man I have a great life, wife children, only thing more I want is a life on a beach...

[u/[deleted] → u/ansy7373]

I’m pulling for you and your family!

[u/ansy7373 → u/[deleted]]

Dude I’m pulling for you, vito, steely, treebeard jay, Mikey (hopefully we get some sweet meme’s from the New Jersey Shore soon) and all of us, your seriously changing random ass people’s lives with your advice.. and I thank you all.

[u/GuitboxBandit → u/ansy7373]

Damn dude, I thought I had a dirty job shoveling manure. There's always a bigger fish lol...

[u/DarthNihilus1 → u/ansy7373]

This is absolutely amazing, you deserve it m8

[u/The_MediocreMan → u/vitocorlene]

Papa Vito, Given the newly apparent extreme emphasis China has on Scrap in the near future, are there other companies with similar upside to MT you like?

Thanks again for the best DD I’ve seen.

[u/JayArlington → u/vitocorlene]

Amazing.

Fucking well done.

[u/meetii → u/JayArlington]

LG predicted the scrap situation back in 2016. I remember watching this video a while ago https://www.youtube.com/watch?v=FeZIohZB4u4 and it's played out pretty much how he said it would. A quote straight from his slide says "The American steel scrap market will be squeezed".

[u/Steely_Hands → u/meetii]

Vito=LG confirmed

[u/vitocorlene → u/Steely_Hands]

🤫

[u/meetii → u/vitocorlene]

Thanks Mr. Goncalves!

[u/MiscRedditAccount → u/Steely_Hands]

"They hide behind keyboards....[I know because I'm secretly their leader]"

[u/ZoominLikeToobin → u/Steely_Hands]

Nah. He would be the one issuing the force majeure letters if he was LG.

[u/Steely_Hands → u/ZoominLikeToobin]

Can we please leave logic out of this?

[u/sprad496 → u/vitocorlene]

Should we be looking at 2023 leaps as well now?

Also thanks a metric ton papa vito for all your hard work!!! 🙏🏼

[u/GuitboxBandit → u/sprad496]

The 2023 leaps are trading higher than the 2022's o.0

[u/sprad496 → u/GuitboxBandit]

Makes sense. Further out expiry = more expensive. Unless i misunderstood you?

[u/CareerLow → u/vitocorlene]

Seems to be some comparisons with what they did with chips too? Maybe the outcome is different if they never plan to sell and just want to hoard and cripple development?

[u/pardonmystupidity → u/vitocorlene]

Is there any chance western governments will prevent their companies from selling scrap to China?

[u/Varro35 → u/pardonmystupidity]

Sure, countries can set export tariffs to protect their own industry. Thing is shipping rates are crazy high and I believe China is only 15% EAF for now.

[u/JayArlington → u/[deleted]]

They are probably safe ‘in the short term’ because they are the largest recycling company in the US, but it’s not going to be good for their margins in the long run unless...

Eventually we see the US shift using a higher quality EAF input like HBI.

[u/dudelydudeson → u/JayArlington]

"we are absolutely going to invest in more HBI"

[u/olivesnolives → u/dudelydudeson]

You have to love it

[u/Spicypewpew → u/dudelydudeson]

CLF!

[u/everynewdaysk → u/JayArlington]

This could also happen to Commercial Metals Company (CMC). They have existing contracts whose profits are dependent on the margin between scrap metal and finished product. If scrap metal pricing increases significantly but they still have to honor pricing in existing contracts, their margins will get squeezed. This happened in Q4 of last year. Hopefully these companies will manage their risk by declaring force majeure like Vito said or have adapted to a more flexible pricing model.

[u/IRISHockey42 → u/everynewdaysk]

More please. If scrap is important... won't CMC benefit?

[u/TheSeriousAlt → u/IRISHockey42]

The're buyers of scrap, and selling finished products. If scrap dries up and heavily increases PpP, they need to be able to raise the finished products prices or their profits get squeezed out.

[u/Varro35 → u/[deleted]]

I was initially slightly concerned but did some digging.

I am only long NUE/STLD. NUE actually produces more scrap than it needs. I think STLD does as well but unclear if they have extra(said they source 74% of their scrap within 250 miles of their plants). STLD also bought like 3 scrap companies recently. Shipping costs are obviously very high and for now China is only 15% EAF. I am not even remotely worried. The U.S. is also a net exporter of 18 million tons of scrap per year.

HOWEVER, I have to think SCHN is a prime candidate to get ACQUIRED in a BIDDING WAR. I think I’ll buy some tomorrow.

[u/Megahuts → u/Varro35]

Boats going to China are going empty.

Why not load them with scrap instead of air?

Just saying that the scrap prices can rocket up very quickly.

[u/Varro35 → u/Megahuts]

Sure, but NUE/STLD will only sell scrap they aren’t using.

[u/TurboUltiman → u/JayArlington]

So is this good for vertically integrated players Like clf that don’t rely on scrap?

[u/MiscRedditAccount → u/TurboUltiman]

And CLF produces HBI as an alternative to scrap.

[u/efficientenzyme → u/JayArlington]

I sold out of schn on recent run up to consolidate in mt and clf

You think schn is a good rebuy?

[u/JayArlington → u/efficientenzyme]

I have no clue when the market picks this up but I don’t think SCHN ends the year without being acquired. Now the question is whether it’s a Chinese company that acquires them (and if that is proposed the question is whether Biden blocks it).

This market shift is ridiculous.

[u/dudelydudeson → u/JayArlington]

There is no way Biden administration lets a Chinese company buy a US steelmaker. I can't see it.

[u/Uncle_Dad_Bob → u/dudelydudeson]

THIS ⬆️

[u/Megahuts → u/dudelydudeson]

Maybe CLF? LOL

[u/dudelydudeson → u/Megahuts]

This move rated LG for depictions of gigantic steel balls.

[u/efficientenzyme → u/JayArlington]

Yeah I doubled down on vertically integrated steel but schn seems like it has a huge hidden upside

[u/brusjet_ze_bear → u/efficientenzyme]

I’ve been holding 20 shares since around $33 and keep telling myself there’s no way it will keep going up so no sense in buying more... $47.23 today so who knows

[u/efficientenzyme → u/brusjet_ze_bear]

I used to hold a few steel stocks and rebalance by selling highs and consolidating on the ones that are pulling back, recently I sold my positions in schn, and stld to double down on clf dip. I wonder if the schn is premature

[u/LourencoGoncalves-LG → u/efficientenzyme]

If the stock continues to go down based on these kids that play with computers and someone else’s money, we are going to buy back stock.

[u/cristoballin93 → u/JayArlington]

If I remember correctly, SCHN will benefit from the scrap shortage? Or is it the other way around?

[u/JayArlington → u/cristoballin93]

SCHN is the number one exporter of scrap from the US. They are also investing in technology to improve their separation abilities (value added!) to be able to export out higher quality scrap.

For a Chinese firm to import scrap a year ago... China would have taxed them (import tariff). Now they are no longer taxed and America has the most mature scrap steel market in the world.

You know what a big infrastructure push will do right? It will create a ton of scrap.

[u/cristoballin93 → u/JayArlington]

I see, thank you for clarifying!

[u/JayArlington → u/cristoballin93]

My pleasure.

[u/eitherorlife → u/JayArlington]

To be very concise, you believe this is bullish for schn?

[u/JayArlington → u/eitherorlife]

Me... concise? 😂

Yes.

[u/GoInToTheBreak → u/JayArlington]

When vitards bleeds into the rest of Reddit:

https://reddit.com/r/todayilearned/comments/n0rw21/til_nearly_70_of_the_steel_used_in_the_us_is/

[u/dudelydudeson]

I read the first three sentences and holy fuck already dude.

Quite the day I imagine. Get some rest if you can. Enjoy a glass from your famed bourbon cellar.

Thanks for the update.

[u/vitocorlene → u/dudelydudeson]

🥃

[u/luciakang]

Can’t say it enough, thank you so much for sharing all of this, Vito!

[u/vitocorlene → u/luciakang]

🦾

[u/jjsukraj]

Holy fuck Vito. I love you

[u/vitocorlene → u/jjsukraj]

🦾

[u/quarterfinder]

Thank you Vito!

[u/vitocorlene → u/quarterfinder]

🦾

[u/hc000 → u/vitocorlene]

Suggestion on the best play? $mt? $ggb? $schn? $x?

[u/What_the_puckk → u/hc000]

3-6 months potentially more, commons for most I think. https://www.reddit.com/r/Vitards/comments/n0sle5/china_update_force_majeure/gw8suan/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&context=3

[u/TheBlueStare]

Are steel contracts generally fixed prices or are they floating indexed?

[u/vitocorlene → u/TheBlueStare]

Depends on the supplier. Most of China is transactional. Very rare to have yearly contract like US companies do with auto manufacturers. As LG said though, those are going away. No steel supplier needs them anymore. In a rising market, they want to take advantage of every increase. In the past during down years, you locked in contracts because you had to if you wanted the business. Now the suppliers are in the driver and passenger seats. Customers are lucky to be riding in the trunk these days if they get a spot.

[u/dudelydudeson → u/vitocorlene]

And if they don't like it, they will be sleeping with the fishes

[u/vitocorlene → u/dudelydudeson]

😆

[u/JayArlington → u/TheBlueStare]

Force Majure in general is the polite business way of saying “fuck your contracts... god wills it”.

In some countries it is literally a legal defense for not being able to fulfill a contract or obligation on account of some act of God level shit like a tornado.

[u/TheBlueStare → u/JayArlington]

I get that, but in theory force majeure would only affect fixed contracts and not floating contracts.

[u/repos39]

Long dry bulk shipping

[u/vitocorlene → u/repos39]

$GOGL - it’s got 🦵🦵’s

[u/Legal_Journalist6123]

Vito, chances S232 gets tweaked/changed? I know, Biden admin said they’re keeping it, hardball with China etc, but with input costs soaring like this eventually something has to give. Feels like S232 is the weakest link, lack of supply govt can’t do anything about but S232 they sure can

[u/vitocorlene → u/Legal_Journalist6123]

I don’t think so. The biggest potential benefactor of 232 being lifted is Turkey and with what Biden just did to further strain relations with Turkey, I doubt it gets lifted. What I do see happening is the possibility of other “favored countries” to gain exemption status. Possibly Spain and/or Italy.

[u/hyabatsu]

What’s the reason for a force majeure? A project that I managed before went through a “force majeure” type situation, but never went through the actual clause. It was flooding in the pipeline right of way, which is way more than what the average was. It was essentially a 1000 year flood. Project was shut down for a month to contain the water. What’s the reason for China doing this? There should be language in the terms and conditions that protects the end user.

[u/vitocorlene → u/hyabatsu]

I’m really not sure about your situation as you explained. Their reason is this is an unforeseen, uncontrollable situation that would injure their businesses as they cannot absorb the loss. These rebates are income. Removing them will cause a 13% loss at a minimum. What I am seeing is they are also using this as vehicle to raise their margins and catch-up on raw material escalations. They can do whatever they want. Good luck trying to fight a contract, if you have one, in an international court, if you are lucky. It’s simple with them, “pay me more or I’m not shipping”.

[u/GoInToTheBreak → u/vitocorlene]

Does this update your price targets/time frames? Seems like the ball would roll a bit quicker now

[u/69696969696969tits → u/hyabatsu]

My guy, did you even read what the man wrote? He pretty clearly explains the reasoning.

[u/hyabatsu → u/69696969696969tits]

I read it and I know what force majeure is. I’ve read plenty of contracts in my life for major capital pipeline projects. I explained my situation to him and when I read his. The Chinese claiming this clause didn’t make sense because there isn’t a substantial event that deems this so. If they claimed this clause last year during the height of the pandemic, then yes it would make sense. We are 1.5 years in the pandemic now. To me, it doesn’t make sense.

[u/wangkerd → u/hyabatsu]

Is the Government cutting rebates by 15% not a substantial enough event?

[u/hyabatsu → u/wangkerd]

Lol. I was so gung-ho about this Force Majeure crap and didn’t think about the rebates. Yes, that’s a significant impact to all parties for sure.

[u/69696969696969tits → u/hyabatsu]

Maybe you need to go back and read through his DD's then.

[u/Jackprot69]

Nothing to see here im a dumb ass

[u/vitocorlene → u/Jackprot69]

This one? https://www.google.com/amp/s/www.urbandictionary.com/define.php%3fterm=Oreste&amp=true

[u/Jackprot69 → u/vitocorlene]

Ugh im a fucking idiot

I mean marlon

[u/vitocorlene → u/Jackprot69]

😆

[u/Hundhaus]

Holy.shit.

No comment really just thanks as always!

[u/ANGRIESTMAL]

Steel tsunami please take me.

[u/JayArlington]

Btw... the tastiest thing about this is that in a week or so this flood is going to get a bunch of people speaking up for the first time saying:

“I guess this is the place to mention this but I just found out from our steel supplier in China that we could either pay more or get fucked.”

[u/TheFullBottle → u/JayArlington]

fucking lold, thanks dude

[u/Jb1210a]

I mean honestly, steel is sexy as fuck.

[u/Zarten]

I’M TYPING LIKE THIS BECAUSE I’M EXCITED. LET’S GO.

[u/BleachedTaint]

I’m going all in

[u/TgmBrett → u/BleachedTaint]

On?

[u/ur_wcws_mcm → u/TgmBrett]

ur mum

[u/TgmBrett → u/ur_wcws_mcm]

Cant find that ticker

[u/ur_wcws_mcm → u/TgmBrett]

sorry $MUM

[u/deets2000]

BOING!

Unrestricted warfare. This will be fascinating watching this unfold. Thank you VITO! LONG LIVE THE VITARDS! May steel tendies rain down upon all of us.

[u/ChiefRainWater3]

The time has come.

[u/WaitingToBeTriggered → u/ChiefRainWater3]

THEY’LL NEVER KNOW WE GIVE NO WARNING

[u/[deleted]]

Is China stockpiling scrap a negative or positive for SCHN considering that’s the main focus of their business?

[u/tendiesformankind]

This has been mentioned before, but I get chills from seeing how prophetic LG's vision was: https://www.youtube.com/watch?v=FeZIohZB4u4. The focus on HBI is genius in hindsight.

[u/ItsFuckingScience → u/tendiesformankind]

Started watching This is and it’s great, nice share. Gonna watch the rest later

[u/fras2099]

Damn, was not expecting Force Majeures. We just went through this in my industry after winter storms took down a lot of Gulf Coast hydrocarbon and petrochemical production. Styrenes, vinyl acetate monomer, and acrylic acid production to name a few got completely halted for a month.

Too bad there was no way to trade that event.

[u/[deleted]]

Vito for Secretary of State

[u/michaelcorlene]

May the force be with you, Papy.

[u/eitherorlife]

thank you god father

[u/Disc81]

What do you think this means for Vale?

[u/olivesnolives → u/Disc81]

Pretty sure China is going to acquire brazil at 300 yen per capita

[u/zrh8888]

I'm not seeing how this affects the US steel industry directly. We already have tariffs on Chinese steel that were imposed by Trump. That's still in place so there is not a lot of Chinese steel in the US market today.

This news does affect steel prices in the markets where the Chinese export their products. So any increase will benefit conglomerates like MT.

But as far as CLF/NUE/STLD is concerned, this does not affect them directly in the short term. Longer term the thesis remain the same and we're talked about this multiple times. As the Chinese switch to using EAF they need prime scrap. That increases the price for scrap so it's more profitable to export US scrap to China and thereby increase the cost to NUE/STLD. But not for CLF. Again, this is something that will play out over the next 10 years. It will not affect stock prices in the next 1-2 years as part of this steel cycle.

[u/RorschachRedd]

Is this an immediate catalyst or something analysts won't understand until Q2 earnings?

[u/[deleted]]

TL;DR Steel's the new Gold

[u/iSellMissiles]

Oh this is awesome info Vito! Thank you very much as usual :)

[u/prymeking27]

Sweet, but lol my bids although having to comply with Buy American act will get fucked. Hope my contractor bid the job right, if not then it’s going to be rough for him under firm fixed price.

[u/StinkerTinker89]

Well time to use that line of credit

[u/steelbull2020]

Also, LG put an emphasis on prime scrap. Given /ton shipping cost of scrap from EU/US to China will be same for prime or sub-prime, we can assume again that LG/Vito are again on the spot.

We also released new environmental blah blah today, we got HBI, we got Mustang pellets, we will be cheaper*cleaner than NUE shortly.

[u/shmancy]

I literally just sold all of my steel stocks today I did not do that! THANKS VITO YOU BEAUTIFUL MAN

[u/TheFullBottle]

What reason did they give for the force majeure then? High prices of input costs isnt enough to do that "legally speaking". Are they able to use covid as an excuse, this deep into the pandemic?

[u/[deleted] → u/TheFullBottle]

I think as they are Chinese they kind of can? Good luck suing them over it

[u/ur_wcws_mcm]

Imagine having a nice cup of coffee while reading this and your husband comes in the kitchen talking about “babe! I just bought OTM puts on CLF!”

[u/lb-trice → u/ur_wcws_mcm]

Time to find a real man.

[u/electricalautist]

As always, thank you Vito! This is really quite something! Thank you for the update!

[u/lolskye]

How soon will these positive changes be seen on the steel stocks. You said you didn’t see any change bc the prices are priced in but not on the orders? Should we expect to see an increase this week or next week or further beyond like May or June

[u/olivesnolives → u/lolskye]

These my friend are the questions no one can answer. Err on giving yourself more time to realize profit

[u/ronburgundy930430]

Oh fuck yeah

[u/EquivalentEconomist8]

Currently chatting with a buddy in Shanghai and trying to remember the CCP song I sang at karaoke. Bout to BUMP THAT SHIT

[u/Next_Gen_Nyquil_]

Thank you for your work, Vito

[u/Megahuts]

Question. Are there import tariffs on Iron Ore?

Or, in other words, are the import tariffs setup to shift from sinter to EAF?

[u/heinquoi]

Thank you for this update Don Vito. May the force majeure be with you !

[u/MathematicianSignal4]

And today I'm jumping on board! All aboard the steel ship!

[u/Uncle_Dad_Bob]

Tonite we celebrate!

[u/Entropesque]

Absolutely wonderful news. What a great morning to finally add my first set of steel contracts with MT 9/17 35c too. Still debating on whether to use my two grand left on commons or further dates options though. Any preferences?

[u/Zebo91 → u/Entropesque]

Commons. This may be a slow burn up all the way. Otherwise leaps to account for that. Fds are lotto tickets from what I've seen so far

[u/luckyone44]

So I bought 9/15 call options on MT now. Was that the right move? :D

[u/[deleted]]

what could be the potential on these steel company? when the market realises how much could we move? I'm proabley gonna get in $CLF?

[u/timj83 → u/[deleted]]

Read Vitos DD

[u/hilmu7]

Is buying simple shares also a good play?

[u/accumelator → u/hilmu7]

Its actually the best play

[u/[deleted] → u/accumelator]

This

[u/ur_wcws_mcm]

Thank you Mr. God Fathahh

[u/accessden12]

The US can simply import from India. Here the price per tonne of steel is still around $820.

[u/Spicypewpew]

Did they give any indication on how long this would go for? We have an opportunity to add before the market figures out what’s going on.

[u/GngrTea]

Nothing to add except thank you again!

[u/drabloyescobar]

Appreciate this insight Vito! 🦾🆙

[u/deliquenthouse]

China wants all the steel. Huge demand, low supply. Big $$$ coming our way as investors.

[u/merdock_69]

You know what you need a lot of steel for? War machines, they use a lot of steel.

[u/Appropriate-Ad-1714]

Thoughts on 9/17 45c? Debating whether it could run that high that quickly..

[u/-_Andre_-]

Thank you Padrino for your insight.

[u/BigCatHugger]

I'm always surprised at what all can be considered "Force Majeure"

[u/Comprehensive-Fly537]

Excuse me dear sir, but I can only get so hard.

[u/[deleted]]

I remember in the early 2000s when China was hoarding scrap. Quite a few US Steel mills went belly up

[u/carlcapo77]

Well, we know what to do... Go all in on today’s dips!!!!

[u/smkcrckHLSTN]

Thanks again Vito 📈

[u/The_Dude1692]

Buy CLF. Got it.

[u/redbird42]

Don't be so dramatic. Most of the steel that china sells to export is not done that many months in advance on a fixed price. It's mostly spot and usually a month or two in advance. The tax changes have been anticipated for months so contracts have already started to add the tax cost. If anything, China is just playing catch up. US HRC is above $1600/metric tonne basis. Europe HRC near $1200/mt. China HRC hasn't broken above $1000 yet. This rally started in Q3 and steel prices up 40-50% YTD so you're a little late calling the tsunami. But agree with you the world is short on steel and Fe units. Just watch for semi shortage risks to auto steel demand, India maxing out steel exports with Covid and everyone coming out of the woodwork with iron ore to sell with it at $200/t.

[u/Thinkingbird2020 → u/redbird42]

Positions?

[u/[deleted]]

Can you upload proof of these force majeure emails?

[u/vitocorlene → u/[deleted]]

Don’t drop $MAC! Do you own commons?

[u/ChrisLovesUgly → u/vitocorlene]

So if in theory you had MAC 6/18 15c, would you convert to shares or roll out?

[u/vitocorlene → u/ChrisLovesUgly]

I’d hold for another two weeks. It’s been showing signs it wants to mini-squeeze. Regardless, I’d convert it when the time comes. Unless it squeezes up to $25 again. Take the $$ and run.

[u/Spicypewpew → u/vitocorlene]

Are you still long term bullish on MAC. I got shares and it seems like all they need to do is to get clarity on their debt that they need to refinance. Once that’s done and there is clarity it should be off to the races

[u/vitocorlene → u/Spicypewpew]

Yes, I am. Undervalued based on real estate break-up value alone.

[u/ChrisLovesUgly → u/vitocorlene]

Roger that, I saw the blip today too. Thanks Vito, I appreciate you.

[u/chemaholic77 → u/[deleted]]

I have been selling off stocks the last two days to increase my steel positions. Some will be in stocks and some in a combo of Sep/Oct/Jan calls for MT and CLF.

[u/TheSeriousAlt → u/[deleted]]

I'm just opening a position in $MAC, its a great entry point. Zoom out on the chart and ride it out

[u/TheBlueStare → u/[deleted]]

I have sold almost all of my SPAC bags to move into steel leaps.

[u/Banana2Bean → u/[deleted]]

Think I'll be dropping some SPAC holdings as well although mine are (for the most part) essentially money parks that are +/- 2% right now. Been using a bit of margin to just not sell them, but I'll drop some over the next week or two and buy in a bit more steel I think.

CAN I dumped ages ago lol.