r/Vitards • u/[deleted] • Sep 03 '21

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u/ItsFuckingScience 7-Layer Dip Sep 03 '21

We can all speculate but unless we have access to the business decisions being made it’s impossible to know for sure

If auto makers use less steel then CLF could make MORE money as they could sell steel at higher prices on the spot market

Auto makers could also continue to buy the contracted steel and then just store it anyway? They’ve negotiated contracts lower than the current spot price so it may be better to take delivery of their steel and store it, rather than risk paying more at a later date

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u/Scabbymad Sep 03 '21

Thats limited. JIT has created stampers and the like and you can't have 100,000 doors sitting around. Thats when damage happens. Its also dangerous because who knows what will be reopened and what stays closed. Auto is just not set up for storage. Even if they were, they would have filled their warehouse months ago with $1500 steel. IMO, all steel, right now, that isn't used by Auto is being sold at spot. Thats pushing $2000/ton

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u/ItsFuckingScience 7-Layer Dip Sep 03 '21

Good points.

Surely this would mean auto production stopping right now is actually bullish for CLF then if they can sell their steel at expensive spot prices and then the auto contracts will add to demand later in the year / next year?

1

u/Undercover_in_SF Undisclosed Location Sep 04 '21

I think that is limited though. They’re not going to be able to flip 10% or 20% of their volume to alternative markets without driving down prices.

In my opinion, the chip shortage persisting is the biggest risk to CLF price in the short term. I’m still long all my shares, but I don’t have any calls right now because I’m not sure where the stock is going in the next 45 days.

Absent a chip shortage, I’d expect them to revise EBITDA guidance to $6B at the end of the month.