steel price

This week, most exchange-traded metal prices came down to Earth as the Federal Reserve hinted it may finally increase interest rates. The hardest hit was copper, which hit a two-month London Metal Exchange low. Weaker Chinese imports over the past few months and the bearish calls of some major banks have exacerbated copper’s recent price fall.

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When construction is strong in, China copper imports surge… but with them falling? It doesn’t look like demand in the world’s largest consumer is keeping up. Copper is just one of many metals that would be affected by interest rate increases and more hawkish behavior from the Fed, in general, but unlike other non-ferrous metals whose prices have increased on the LME this year — such as zinc and tin — copper has not shown strong demand and generally falling supply. Copper never was fundamentally strong even when its price jumped in Q2.

Trump Trumpets Trade

Politics met metals this week as Republican Presidential Nominee Donald Trump became the first candidate for President to promise to label China a currency manipulator and take action at the World Trade Organization accordingly.  He also promised to instruct the office of the U.S. Trade Representative to bring more trade cases against China. You’d think he’d be nicer to the country that used to make his ties.

Let’s Exchange, No Spoofs!

The London Metal Exchange and CME Group made headlines this week as the former cut fees in half this month as an apology for moving its live “ring” (where traders make deals using hand gestures on big red couches) trading to a backup location after structural problems were discovered at its brand new London office. As for CME Group, it cracked down on a rogue trader, suspending him for at least 60 days, for “spoofing.” Spoofing is the practice of setting up electronic trades to create demand only to pull out of them at the last minute.

India Hates Steel Dumping, Too

India joined the U.S. and E.U. this week in placing tariffs on cheap imports of hot-rolled and cold-rolled flat steel. Although six countries saw their imports to the world’s largest democracy tariffed, China was, again, the main dumping culprit.

Aluminum Association: Let’s Make a Deal

Speaking of China, not only does the Aluminum Association — North America’s largest trade association of primary smelters — still want a bilateral trade deal with China to set up rules for imports from the People’s Republic, but it signaled this week that it would pursue tariffs similar to those steel has won against Chinese importers if it can’t get the deal it wants for its producer members.

Free Download: The August 2016 MMI Report

The AA may even ask the International Trade Commission to reclassify some imports of “semi-finished” product to make them subject to existing taxes.

The month of August has seen the Indian government slap anti-dumping duties on the import of a variety of steel products from six countries including China, South Korea, Brazil and Indonesia.

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In the first week, the import duty was imposed on hot-rolled steel products, while a few days ago, the duty was enforced on certain cold-rolled flat steel products from different countries to protect the domestic industry from cheap imports.

In the first case, anti-dumping duties $474-557 per metric ton were imposed on hot-rolled flat products of alloy or non-alloy steel from China, Japan, South Korea, Russia, Brazil and Indonesia, according to a government notification.

Coiledsteel_585

Imports of coiled steel will be heavily tariffed in India, too. Source: iStock.

The duty will be in force for six months until February 7.

Hot-Rolled Duties

An anti-dumping duty of $474 per ton was imposed on import of hot-rolled flat products of alloy or non-alloy steel of a width up to 2,100 millimeter with a width up to 25 mm from Korea and Japan.

According to an Indian Express report Korean firms affected by this were Hyundai Steel Co. and POSCO. Three Japanese companies — JFE Steel Corp., Nippon Steel and Sumitomo Metal Corp. are also on the list. A similar anti-dumping duty was slapped on imports of similar products from China. Exporters Angang Steel Company Ltd. and Zhangjiagang were among the hardest hit. Imports of the same from Indonesia, Russia and Brazil attracted the $474 per mt duty. Read more

U.S. Flat-rolled steel prices have dropped $20-40/ton so far in August, bringing hot-rolled coil down to $580-600/ton ex-works Midwest.

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There are two schools of thought. First, the current dip reflects a typical holiday slowdown and prices will hold or come back in September. In that scenario, buyers need to secure Q4 requirements and will return to ordering in September. On the supply side, mills are taking downtime in October and Q4 for maintenance, there is still some idled capacity (U.S. Steel and AK Steel) while higher-than-expected final HRC duties and tariffs will keep out imports. The steel market will, therefore, tighten and prices will hold at the current high levels.

U.S. HRC, CRC, HDG Imports (000 tons)

Steel_insight_us_hrc_crc_HDG_imports_082316

Source: AISI, Steel-Insight.

Steel-Insight could not disagree more. While we don’t expect freefall just yet, we do expect HRC prices to be back in the high $300s/ton at some point next year. Read more

Construction has been one of the few pockets of strength in the U.S. economy – until recently. Construction payrolls have declined since March and spending in May rose less than 3% from a year earlier, the lowest rate since 2011.

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Coming after strong growth of 10% last year, the question now is whether the sputtering is just a blip or something more lasting that portends a significant drag on the economy.

The Associated Builders & Contractors, American Institute of Architects and National Association of Home Builders‘ chief economists recently gathered in Washington, D.C., for a mid-year market forecast, outlining stable to strong residential and commercial project activity through 2017.

Each economist discussed present and future indicators for sector performance, including ABC’s Construction Backlog Indicator (8.6, 1Q2016); AIA’s Architecture Billings Index (52.6 in June) and the Construction Consensus Forecast (5.6% growth in 2017); and, the NAHB/Wells Fargo Housing Market Index (60, August 2016).

While all of the economists predicted growth in 2017, they had varying degrees of optimism.

Anirban Basu, ABC Chief Economist: “Nonresidential construction spending growth will continue into the next year with an estimated increase in the range of 3 to 4%. Growth will continue to be led by privately financed projects, with commercial construction continuing to lead the way. Energy-related construction will become less of a drag in 2017, while public spending will continue to be lackluster.”

Robert Dietz, NAHB Chief Economist: “Our forecast shows single-family production expanding by more than 10% in 2016, and the robust multifamily sector leveling off. Historically low mortgage interest rates and favorable demographics should keep the housing market moving forward at a gradual pace, but residential construction growth will be constrained by shortages of labor and lots and rising regulatory costs.”

Free Download: The August 2016 MMI Report

Kermit Baker, AIA Chief Economist: “Revenue at architecture firms continues to grow, so prospects for the construction industry remain solid over the next 12 to 18 months. Given current demographic trends, the single-family residential and the institutional building sectors have the greatest potential for further expansion at present.”

We rarely see such positive growth in metal prices as we did in the August MMI Price Trends Report.

MM-IndX_TRENDS_Chart_August2016_FNL-TOPVALUE100

All the metals we track were up save for Aluminum, which fell only 1.3%, and renewables and rare earths, which held flat. The Stainless Steel MMI increased 9% amid uncertainty about Chinese nickel ore supply after mining crackdowns in top supplier, the Philippines.

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Meanwhile, the most bullish of bull runs continued for our Global Precious MMI which added a 7.2% increase to its jump last month to knock on the door of the top 10% of the IndX. The platinum group metals had strong increases along with gold and silver this month.

Wall Street Bull

“Hey metal buyers, remember me?” Wall Street bull courtesy of iStock.

Palladium, particularly, made higher highs and stumbled to lower lows in classic bull market fashion.

So buy quickly before prices increase more, right? Wrong. Our Raw Steels MMI posted a healthy 4% increase, but it’s still heavily dependent on China’s stimulus programs to keep demand up in the largest global consumer of steel products. If there is a pullback in stimulus, prices could fall dramatically. The same is true for copper.

Unlike diamonds, bullish trends in commodities and industrial metals don’t last forever. Continue to make informed buying decisions in this thriving market — watch China’s stimulus program and the strength of the U.S. dollar post- Brexit — and remember that today’s price strength might be tomorrow’s carpet getting pulled out from under your feet.

China cut 13 million metric tons of excess crude steel capacity in the first half of the year, less than a third of its annual target.

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China’s vice industry minister said in July that the country will step up efforts in the second half. The minister pointed out that the focus of his organization’s work in the first half was mission planning and, in the second half, it will step up the implementation and enter a new stage. The Ministry will go from allocating targets and drawing policies, to actually pushing capacity cuts.

China's steel exports remain at elevated levels. Source: MarketRealist

China’s steel exports remain at elevated levels. Source: MarketRealist.

However, China’s steel exports were high again in July. China exported 10.3 million metric tons of steel, up 5.8% compared to July last year. For the first seven months of this year, China’s exports have risen 8.7% year-over-year. Read more

The battle has intensified between the European Union and low-cost steel suppliers to the region. Specifically, the E.U. is taking action against China and Russia by imposing more anti-dumping duties on steel products from those regions, and for the first time applied them retroactively, according to the Financial Times.

Duties on Foreign Steel

The FT said the duties on cold-rolled steel range up to 22.1% for Chinese imports and up to 36.1% for Russian imports. The rates are a little higher than the provisional penalties in place since February.

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Using a different calculation method, the U.S. imposed tariffs in excess of 500% on similar cold-rolled steel materials from China earlier this year and the E.U. Commission is said to be planning further measures that would allow it to impose U.S.-style tariffs against steel that is believed to be dumped at particularly low prices or is subsidized. Read more

Source: Thomson Reuters Datastream/China Customs 8/9/2016

Source: Thomson Reuters Datastream/China Customs 8/9/2016

Chinese steel exports rose in the first half of 2016, despite promises of production cutbacks.

The Department of Commerce announced its final determinations in the anti-dumping duty investigations of imports of hot-rolled steel flat products from Australia, Brazil, Japan, Korea, the Netherlands, Turkey, and the U.K., and the countervailing duty investigations of imports of hot-rolled steel from Brazil, Korea, and Turkey.

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The big loser in this latest round of tariffs was South Korean steel giant POSCO (formerly the Pohang Iron & Steel Company) which received a total of 60.93% anti-dumping (57.04%) and countervailing duty (3.89%) tariffs on its hot-rolled imports. Read more

While demand for iron ore is up in China, the Philippines has shut down its only producer.

Chinese Iron Ore Imports Increase

On July 19th, the iron ore benchmark for immediate delivery to China’s Tianjin port fell by 2% to $55.10 per metric ton, the lowest since July 1st. Chinese iron ore imports rose 8.3% in July from the previous month to hit its second-highest on record, customs data showed on Monday.

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The move followed a significant drop in the most traded benchmark for construction material rebar on the Shanghai Futures Exchange. Demand for the key steel-making ingredient has increased as Chinese steel mills fired up furnaces on the back of higher prices.

Philippines Shuts Down Lone Iron Ore Miner

The Philippines has suspended the operations of the country’s only iron ore miner due to environmental infractions, officials said on Monday, bringing to eight the number of mineral producers halted in a government crackdown.

Free Download: The July 2016 MMI Report

The Southeast Asian nation, the world’s top nickel ore supplier, began an audit of all its metallic mines on July 8, shaking global nickel markets as seven nickel miners were suspended for causing environmental harm.