Articles in Category: Ferrous Metals

The Raw Steel MMI jumped 6.5%, reaching 82 in December. This MMI sub-index remains one point above September’s reading, when steel prices were slightly higher.

Raw material prices increased this month together with Chinese steel prices and Midwest premiums, which drove the increase in this month’s Raw Steels MMI.

U.S. HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

Early December prices suggest a drop in HRC, CRC and plate. Only HDG appears to have increased from November’s closing price. Steel prices have failed to move into bullish mode, similar to both industrial metals and commodities.

Chinese Prices Started December Strong 

Despite U.S. steel prices falling at the beginning of this month, Chinese steel prices increased this week. Increases range between 1.5% for hot-rolled coil and 3.5% for cold-rolled coil.

China HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

The China Metallurgical Industry Planning and Research Institute (MPI) reported that Chinese steel output will increase in 2017 despite capacity curtailments. Output in 2017 will have increased by approximately 3% up to 832 million tons, while 2018 will result in an additional 0.7% output increase driven by the restart of mill operations.

Chinese steel demand will likely increase in 2018 up to 726 million tons from 722 million tons in 2017 due to domestic economic growth. An increasing Chinese steel demand could create upward movements in iron ore demand, which is expected to rise by 1.3% this year.

Raw Materials and Domestic Scrap

Iron ore prices increased this month after trading sideways for a couple of months. Steel prices and raw material prices are generally correlated. Raw material price increases generally support steel prices.

Source: MetalMiner analysis of Trading Economics

The latest price rise for iron ore appears sharp. Buying organizations may expect additional upward movements in iron ore prices. This fact may also result in increasing steel prices (despite the drop earlier this month).

What This Means for Industrial Buyers

Steel price dynamics showed some upward momentum this month. Although U.S. steel prices have risen (yet appear to lack strength), Chinese steel prices increased at the beginning of December together with raw material prices. Buying organizations will want to pay close attention to Chinese price trends, lead times and whether domestic mill price hikes stick. To understand how to adapt your buying strategy this season, take a free trial now to our Monthly Buying Outlook for a short-term analysis. 

Actual Raw Steel Prices and Trends

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The Construction MMI, tracking metals and raw materials used within the construction industry, surged 5.5% to a value of 95 for December.

Here’s What Happened

  • Every single price point comprising the Construction MMI — including ferrous, non-ferrous and scrap components from the U.S., Europe and China — rose as of Dec. 1, with the exception of U.S. steel bar fuel surcharges.
  • The biggest mover appeared to be the Chinese rebar price, spiking 17.7% from November to December.
  • We’ve breached new territory with this month’s reading. Not since May of 2012 has the Construction MMI performed this strongly.

What’s Going On in the Background?

  • Here’s what we wrote back in May: “We’re in the salad days for the U.S. construction sector, at least as far as 2017 is concerned.” According to the Associated General Contractors’ analysis, construction spending was at record levels for the second straight month in March,” as quoted by forconstructionpros.com. Well, after a bit of a summer slowdown, it’s looking even better this month to round out 2017 as a pretty great year for the sector.
  • The Commerce Department said last week “that construction spending increased 1.4 percent to a record high $1.24 trillion, the swiftest advance in five months,” according to Reuters, exceeding analysts’ expectations and driven by state, local and especially federal government spending.
  • To boot, the AIA announced mid-last month that “the monthly Architecture Billings Index (ABI) came in at a score of 51.7 in October, up 2.6 points from September’s score of 49.1.” The ABI is a leading economic indicator of U.S. construction activity, and “reflects a nine- to 12-month lead time between architecture billings and construction spending nationally, and regionally, as well as by project type,” according to the article linked above.

What Metal Buyers Should Look Out For

  • Interestingly, a longer-term ABI uptrend appears to be firmly in place — since 2012, the index looks to be achieving “higher highs” each time it peaks.
  • “As we enter the fourth quarter, there is enough design activity occurring that construction conditions should remain healthy moving through 2018,” said AIA chief economist Kermit Baker, Hon. AIA, in a press release, according to Architect Magazine.
  • MetalMiner analysts are generally bullish on both the industrial (especially base) metals complex and commodities overall, which can be seen directly in this month’s surges of our MMI sub-indexes such as Construction and Automotive.
  • Although prime contracting season usually starts in the November period and steel prices historically tend to rise this time of year, steel prices’ behavior has not shown enough strength to spur bullishness. Get more insight on that in our latest Monthly Outlook Report. (Free two-month trial here.)

Key Movers and Shakers: Exact Prices

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Media coverage of the Section 232 investigations — which could potentially curb imports of steel, stainless steel and aluminum into the U.S. — have spooked importers, consumer groups and some manufacturing industries.

These fears are misplaced, according to Barry Zekelman, executive chairman and chief executive officer of Zekelman Industries. “Steel has been the most abused product on the planet,” he says.

What makes Zekelman’s point of view on trade so fascinating?

The fact that he is not a steel producer! (That, and his ever-colorful examples…our headline above is a case in point.) Take a listen to our conversation:

The Rise of Zekelman Industries

His story sounds like the American dream – a tale of how Zekelman and his brothers were thrust into their father’s fledgling business after their father’s sudden passing. He left college as a freshman to help save the pipe manufacturer.

Read more


MetalMiner’s Monthly Buying Outlook
report for December is now available!

Sharpen your sourcing strategies for buying aluminum, copper, nickel, lead, zinc, tin and multiple forms of steel, complete with our coverage of drivers, market commentary, polished charts and more.

If you’re a metals buyer in North America, this is the ideal report for you.

The report provides short- and medium-term industrial buying strategies for the rest of the metals that you buy, helping you avoid unnecessary spending.

This month, you’ll also learn:

  • Repercussions of the Tax Cuts and Jobs Act. The House of Representatives passed the bill in November, and the Senate followed suit on December 2. The legislation could have a big effect on the steel and manufacturing industries.
  • What was behind the recent skid of the DBB industrial metals index
  • Why the U.S. dollar’s downtrend remains stronger than the recent two-month uptrend, and why buying organizations should expect even more movement
  • Why steel prices failed to breach resistance levels in November

Individuals, small- and mid-sized manufacturers are encouraged to subscribe to our annual buying outlook. You can sign up at any time and receive the next 12 monthly reports emailed directly to you. Learn more and subscribe today!

Besides bringing back some cheer to the sector, the latest report by industry monitoring body World Steel Association (WSA) on crude steel production reveals an interesting story.

World crude steel production soared in October, thanks to higher output in China, the U.S., India and Japan.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

While production in the U.S. zoomed by 12% year-over-year in October, China manufactured 72.4 million tons (MT) in the same month, a 6.1% year-over-year increase and 10 times more than the U.S. did that month.

India, on the other hand, produced 8.6 MT of crude steel in October, up by 5.3% to 8.6 MT.

Clearly, the October cheer is positive news, in the sense that the steel sector is making a comeback. The WSA tracks steelmakers in 66 countries globally, representing about 85% of total steel production, and has said in this report that world steel production increased 5.9% year-over-year to 145.3 MT in October.

The China steel story, incidentally, produced nearly half of the world’s steel in October, which indicates a revival of sorts in the growth story there, too.

According to Moneycontrol.com, the downside was reported from Japan, the world’s second largest crude steel producing country. It registered a 1% contraction in output at 8.971 MT in October 2017, compared to 9.060 MT during the same month last year.

During the first 10 months of 2017, Japan’s steel output dropped from 87.442 MT to 87.239 MT, a 0.2% dip compared to the same period last year.

There’s a keen tussle on between the four steel giants (the U.S., China, Japan and India), with the latter already the world leader in stainless steel production and the third largest crude steel producer.

For example, India had overtaken Japan to become the second-largest steel producer in the world after China in 2016, according to the International Stainless Steel Forum. The country’s stainless steel production had gone up to 3.32 MT for 2016, approximately 9% more than the 3.0 MT achieved in 2015. Read more

Imports have slowed down compared to levels earlier this year, but are still up by nearly one-fifth through the first 10 months of the year.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

According to an American Iron and Steel Institute (AISI) report earlier this week, quoting preliminary U.S. Census Bureau data, steel imports through October are up 19.4% compared with the same time frame last year.

The U.S. imported a total of 3,119,000 net tons (NT) of steel in October 2017, relatively unchanged from the previous month. In addition, about 2,493,000 (NT) of finished steel came in, down about 0.4% from final September data.

In the year-to-date (YTD), however, through 10 months of 2017, total and finished steel imports were 32,850,000 NT and 25,449,000 NT — up 19.4% and 15.4% respectively, compared with the first 10 months of 2016.

Market Share Holds Steady

The steel import market share for October held at around 27%, relatively unchanged from the previous month.

Source: AISI

Import market share for the YTD is 28%, according to the report.

The import market share for the year peaked in June when it crested the 30% mark before dipping down to 26% in August.

Imports by Product

Several products posted significant import increases in October.

In October, products posting percentage increases from the previous month included: wire rods (up 32%), cut lengths plates (up 27%), plates in coils (up 23%) and standard pipe (up 10%).

In the YTD, oil country goods (up 231%), line pipe (up 68%), standard pipe (up 44%), mechanical tubing (up 34%), cold rolled (up 26%), sheets and strip all other metallic coatings (up 25%), hot rolled bars (up 21%) and sheets and strip hot dipped galvanized (up 17%) have all posted sizable increases.

South Korea Leads the Way

By country, South Korea once again led the way in terms of steel exports to the U.S.

South Korea sent 372,000 NT to the U.S. in October, up 14% from its September total. Behind South Korea in export volume were: Germany (156,000 NT, up 2%), Taiwan (122,000 NT, up 2%), Turkey (112,000 NT, down 7%) and Brazil (89,000 NT, down 19%).

As for the YTD, Taiwan has posted the largest percentage increase, with its 1,148,000 NT representing a 35% surge from last year’s total through 10 months.

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Other YTD totals include: South Korea (3,328,000 NT, up 2% versus the same period in 2016), Turkey (2,065,000 NT, down 1%), Japan (1,307,000 NT, down 17%) and Germany (1,160,000 NT, up 14%). 

We have written before about the principal of unintended consequences. Governments, companies and people do things often for the best reasons, but do not foresee occasionally tragic — but more often unfortunate — consequences.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Well, India’s recent amendments to the Insolvency and Bankruptcy Code (IBC) have not only practically debarred promoters from reacquiring their own assets – the intended action, but have also put the world’s largest steelmaker ArcelorMittal’s prospective bid for stressed steel assets (namely Bhushan Steel, Bhushan Power & Steel, and Essar Steel), in jeopardy, the Indian Business Standard reports last week.

Firstly, the act — as the paper explains, a new Section 29A of the IBC rules that a person and therefore company in which they are involved shall not be eligible to submit a bid for a distressed company if they are an undischarged insolvent. This prohibits promoters or sister concerns of companies with non-performing assets (NPAs) of more than a year from bidding for these companies. This quite rightly stops the practice of putting an asset into insolvency to lose its debts only to pick it up for a song from the administrators and start again without the debt.

The problem for ArcelorMittal is that in 2009 the firm picked up a stake in Uttam Galva Steels. The idea was to pave the way for the global major’s entry into India. The glitch is that last September, according to the report, Uttam Galva Steels was classified as an NPA, which means that it’s been more than a year since the account became an NPA and bars ArcelorMittal from participation in the auction.

Of the 12 companies that the Reserve Bank of India mandated India’s commercial banks to refer to bankruptcy courts the first batch include Essar Steel, Monnet Ispat, Bhushan Power & Steel, Bhushan Steel, Electrosteel Steels, Alok Industries, Amtek Auto, Jaypee Infratech, Lanco Infratech, Jyoti Structures, ABG Shipyard, and Era Infra, the Economic Times reports.

Steelmakers are likely only interested in the three steel producers: Bhushan Steel, Bhushan Power & Steel, and Essar Steel.

With steel demand rising rapidly, Indian assets should have potential, and with ArcelorMittal’s experience, deep pockets and technology, the firm makes a natural buyer, significantly better to have a trade buyer than private equity or a conglomerate – of which India has many – without the deep subject matter experience in turning around steel plants.

Free Sample Report: Our Annual Metal Buying Outlook

The authorities no doubt realize this and will be working behind the scenes to find a solution.

One option suggested is that a resolution is found to the bankrupt firm Uttam Galva Steels that is the cause of the firm’s debarring.

Ironically, Uttam Galva Steels is on the list for the second round of forced auction. However, some are asking if Arcelor couldn’t, or wouldn’t, turn around Uttam Galva Steels, then why should they be given the chance to bid to do the same for this new batch of assets?

A fair question, indeed.

gui yong nian/Adobe Stock

This morning in metals news, U.S. Steel issued a press release in response to Chicago Mayor Rahm Emanuel’s comments regarding the company’s dumping of toxic materials into Lake Michigan, Japanese steel output was down in October and Glencore‘s head of copper stepped down after an internal review.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

U.S. Steel Responds to Mayor Emanuel

Following Chicago Mayor Rahm Emanuel’s comments Sunday regarding U.S. Steel’s dumping of toxic chromium into Lake Michigan — including plans to sue the company — the company issued a response.

“U. S. Steel is committed to complying with all environmental standards, to ensuring the safety of our employees and our neighbors in the communities in which we live and operate, and to safeguarding our shared environment.  We take that responsibility very seriously and recognize this as a critical aspect of our role as a member of each community in which we operate.  We also take every incident seriously.  We have worked with appropriate government agencies in the past as effectively as possible and continue those efforts as part of our work to continuously improve our environmental compliance processes.”

“With regard to the October 26 operating excursion at our Midwest Plant, we want to reiterate the event did not pose any danger to water supply or human health, and we promptly communicated the issue to the Indiana Department of Environmental Management (IDEM).”

The City of Chicago plans to sue to company after the latest dumping incident in October. According to the Chicago Sun-Times, city attorneys began proceedings required by the Clean Water Act in order to file suit against U.S. Steel.

The company also had a chemical spill at its Portage, Indiana facility in April. Hexavalent chromium was released into a waterway about 100 yards from Lake Michigan.

Japanese Steel Output Down

According to Reuters, Japan’s crude steel output fell 1% in October from a year earlier to 8.97 million tons.

Temporary halting of production at some facilities contributed to the drop, according to the report.

Glencore Copper Head Steps Down

Glencore’s head of copper has stepped down on the heels of an internal review, Bloomberg reported.

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Aristotelis Mistakidis, the copper head, and executives Liam Gallagher and Tim Henderson offered to step down after an internal review found “material weaknesses” in financial reporting controls at the firm’s Katanga Mining Ltd. operation in the Democratic Republic of Congo.

The internal review found that the com,any overstated copper output in 2014 by about 7,900 metric tons and failed to disclose additional compensation paid to named executive officers, according to the report.

The contract season has already started and steel prices have yet to react. Although domestic steel prices increased during the last week of October and the first of November, prices fell again last week.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Source: MetalMiner data from MetalMiner IndX(™)

Steel prices have traded flat for most of 2017. Prices, however, started to weaken during Q3. We still want to see more upward price movements before changing the steel outlook.

Chinese Steel Industry

Of course, Chinese steel prices and production serve as the primary drivers of the world steel industry.

According to data released by the National Bureau of Statistics, Chinese daily steel output decreased by 2.5% in October. Capacity curtailment in the steel industry has finally resulted in less steel output from that market.

Some regions, such as Hebei province, plan to continue the steel capacity cuts until 2020, further reducing production by up to 20 million tons.

Source: MetalMiner data from MetalMiner IndX(™)

The spread between U.S. HRC prices and Chinese HRC prices has fallen again this month.

In addition, all forms of steel in China except CRC saw price declines. Even if the decrease in Chinese prices appears less steep than the U.S. decline, we want to see more price movements to the upside before drawing any conclusions.

What This Means for Industrial Buyers

Steel price dynamics may recover at some point this month. Therefore, buying organizations will want to pay close attention to Chinese price trends and domestic lead times.

To read more about our longer-term steel price trends, download our free Annual Outlook.

To understand how to adapt your buying strategy this season, take a free trial now or subscribe to  the Monthly Outlook for a short-term analysis.

Before we head into the weekend, let’s take a look back at the week that was:

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Free Download: The November 2017 MMI Report