David is joined by Alba Benitez of BMG Latin America Inc. to discuss the steel market, before and during the COVID-19 pandemic.
About this segment of Blackbird TV
Recorded: January 7, 2021
Published: January 26, 2021
Joining me today is Alba Benitez. Alba’s the director of BMG Latin America and she’s a steel broker based in beautiful Tampa, Florida and Alba, your background is much nicer than mine. Where are you? This is my office. It’s real, by the way, it’s real. Alba, I really appreciate you joining us on Blackbird TV you and I were chatting, and the the whole steel market has had some really dynamic changes over the past 12 months, past nine months, really and I was I was wondering if you could elaborate on that and tell us what Covid did to the steel pricing and the steel markets. Well, like every market, it’s crazy out here. When the pandemic went, we crashed, I mean steel prices and back in August 2020 went to $417 per ton short ton. And right now the prices are jacked like crazy. It’s January 2021 when we’re recording this and what’s the price of that benchmark today The benchmark right now is $1010. $1010. Wow, So that’s a big change and you shared with me the commodity prices through 2020 chart and when you look at this chart right at March / April when Covid hit, everything tanked as you pointed out and the recovery has been astronomical. What do you attribute that to? well, it’s different factors, you know steel is a change of different events, if I must say. Go back to China everybody goes back to China because China is a biggest consumer of steel, consumer in the world and the biggest producer as well. So China is start consuming all this steel in 2020 like a summertime right? Because you know, they didn’t have Covid like we did. So the prices are still consuming a lot of raw materials and minerals and everything like that and all the metals and raw materials went up to, amazing rapidly increasing the prices because they’re consuming. Now the raw materials that are the main base of making steel, they are iron and scrap. And those are the factors that in make the prices, you know raise, of course, you know, if you don’t have raw material raw materials are expensive, you know result they are expensive making the material, you know the steel but then other factor is the auto in automobile industry shot down here, right? Welcome the pandemic happened three months no production. So the demand dropped incredibly. Yeah. Yeah, but that one is separate from the pandemic right? So, summertime come and they open and start producing all this massive, you know production automobile production. We had a residential residential construction. They just went to the roof as well and also factors who create this huge bubble of demand I’ve been asking a lot of economies. Why? Why residence? Why construction residence? Why automobiles? And get back to this and it’s making logic to this on the whole thing Millennials were focused on experience and traveling and going to restaurants and do all this, all the things. And now, with the pandemic they couldn’t do. They moved their jobs to their houses, like my house, and they decide that they’re going to put their money into bigger houses. And since they’re moving now, because they need a bigger space, that they don’t care too much and anymore to live in the city. So they require a car. Interesting perspectives, and I think you’re onto something there and my question next is so we’ve got this spike in steel prices. I don’t know as though it’s adequately reflected in the Consumer Price Index now, but do you believe that this core increase in steel prices is going to have an inflationary impact on the economies. I’m pretty sure it is going to, because you know, the price is just went up by, you know, double more than double. Somebody has to eat that. Very well stated. I would just want to also point out this other chart the GDP and on a global level. It seems to have almost tracked the steel prices. You said that it does that all the time can you elaborate on that? We will happen is, the steel isI the mother of the economy. You know, one of the biggest reason is why Trump focused so much, and do tariffs. I don’t know if it went, or people, you know, listen that Trump and 2018 put tariffs on all the steel coming in from China and Europe so he put tarriffs of thirty percent, 25 percent, and 10 percent, depends on the origin This was based on “National Security.” And if you think about it, he was protecting US steel-making Industries. So all the mills, the steel meals, are being protected by all these laws. Otherwise, they were gonna disappear and what will happen if we go to war, you know or put it another way 50% of all the steel that we make is going to infrastructure. Domestically is in the United States? Okay. In the United States. So imagine then if you have US steel mills here in the United States, what would happen? You would depend on somebody else. Depend on China, depend on… I don’t know, Russia, Brazil, all these countries. So it was it was a right move even if it affected me, because you know, I’m steel broker. It was the right move. And you are steel broker, pretty much anything below Florida is your marketplace. You indicated that most of your sales go to Mexico. How did the US Mexico Canada agreement, USMCA, impact your business? Well the USCM actually, you know, it was just a review of the NAFTA. So they were more… right now they’re more restricted. Now it’s 75% of the content of the whatever it being made in Mexico or Canada. It has to be from the region. Region means Canada, US, and Mexico So that was a huge thing. It would be a problem for the auto industry in Mexico, for example, if they’re bringing materials from China to put in their cars, listen, 55% of a car is a steel. Is that by weight or by cost? By materials. By materials, Alba Benitez is it fascinating to talk to you about such really specific things. and you’re a wealth of knowledge. We’re going to have your contact information up on the closing screen. I really appreciate your time today and thanks for joining us on Blackbird TV. Thank you for having me. Have a blessed day.