Raw Steels MMI® Still in Freefall, Now Down to 52… Another All-Time Low

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The monthly Raw Steels MMI® registered a value of 52 in September, a decrease of 5.4% from 55 in August.

Raw-Steels__September-2015In July, it seemed like steel prices were stabilizing for awhile, but prices fell again last month. The decline wasn’t as bad as it could have been, considering that last month China’s stock market sell-off continued and some industrial metals took serious hits.

The bearish commodity environment makes it hard to pick a bottom, proving once again that buying on weakness hasn’t been the best strategy for metal buyers during this market cycle.

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The Real Steel Story

Fundamentally, the steel story is similar to other base metals and can be summarized as: a glut of raw materials everywhere and weak demand unable to keep the market in balance, with China being the main driver on both sides of the equation.

With imports into the US still high, it’s no wonder that US steelmakers keep fighting against the flood of imports. In August, new anti-dumping petitions were filled for HRC and CRC products. The petitioners are the usual group of US producers that have long said that foreign steel imports are subsidized by overseas governments in complete violation of US anti-dumping law. When it comes to price direction, we don’t see these anti-dumping petitions having that much impact.

Demand Side Drivers… Of Cars

The demand picture is mixed and not encouraging:

The car industry seems strong in the US with August numbers showing that it is on track to record one of its best sales years since 2000. On the other hand, the latest Chinese automotive numbers turned out to be even weaker than expected. Chinese auto sales fell by 7.10% in July 2015 compared to July 2014, the largest fall since February 2013.

Free Download: Compare With the August MMI Report

While construction activity is strong in the US and Europe, emerging markets and China continue to drag down prices and overproduction of materials for export is actually exacerbating oversupply.

Crude oil fell again in August, with prices sliding as low as $38/barrel. Low energy prices will continue to hurt the energy industry, therefore lowering demand for steel.

What This Means For Metal Buyers

Prices remain weak and it seems clear that there is little going on in the market that could push steel prices up this year. Placing long-term purchases while markets keep falling is not a good strategy. With prices declining at a fast pace, it’s very important for steel buyers to keep an eye on the market and be ready when market sentiment shifts.

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