steel price

While domestic prices remained stable in June, Chinese steel prices plunged with its stock market. Also, the non-liquid London Metal Exchange steel billet contract fell sharply, weighing on our index.

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The monthly Raw Steels MMI® registered a value of 56 in July, a decrease of 5.1% from 59 in June.

Raw-Steels_Chart_July-2015_FNL

Chinese Market Reeling

Chinese steel prices are at their lowest level in more than 20 years. Chinese demand seems to be getting worse and industry analysts point out that the fall might not even be close to an end. This threatens the survival of smaller Chinese steelmakers, who are still reluctant to cut production in order to maintain cash flow and bank credit, while other small mills have already shut down.

Construction data shows that demand from the sector has slowed during this first half. Moreover, China's demand for steel could take a further hit as construction eases over the summer.

Finally, China's recent stock market turmoil is adding more doubts about its economy. This is definitely not good for steel prices and other industrial metals which we've seen falling sharply this month.

What This Means For Metal Buyers

Domestic prices have sort of stabilized over the past couple of months. However, the sharp decline of Chinese steel prices could keep putting pressure on US prices, especially under the bearish commodity environment we are in.

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The Raw Steels MMI® collects and weights 13 global steel and raw material price points to provide a unique view into global steel price trends over a 30-day period. For more information on the Raw Steels MMI®, how it's calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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Through half of 2015, US auto sales are on track to hit record levels not seen in 15 years. After climbing more than 4% through July annual sales could approach the previous annual record of 17.4 million if they stay on this pace.

Yet, none of that demand seems to be helping automotive metal prices.

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As robust as the US automotive market is, it can't entirely make up for sluggish sales elsewhere that are depressing demand for metals such as steel, aluminum and copper and pushing our index further down. Even the exhaust system metals, platinum and palladium, saw a deep dive this month.

Chinese New Car Sales Barely Growing

New car sales grew just 1.2% in China this May. Further complicating matters, is the fact that the nation of 1.37 billion is starting to develop a used car market and it's looking very much like Chinese consumers like paying less for a used car, rather than paying more for a new one. What a shock?

This is, of course, bad news for raw materials suppliers as the massive Chinese auto market only recently transitioned to automobiles being the main form of transportation. Less-metals intensive bicycles and motorbikes had filled that role until recently.

Chinese steel and aluminum manufacturers had been counting on more robust growth from the domestic new car market and a strong used market could stunt the advances many were planning to reap from new car sales.

Bearish Market Hits Home

The monthly Automotive MMI® registered a value of 82 in July, a decrease of 3.5% from 85 in June.

Automotive_Chart_July-2015_FNL

As we have documented liberally, the strong US dollar has created a bearish environment for all metals and automotive inputs are no exception. The steep fall observed this month in palladium, a metal that had previously held our automotive index up, was an example of just how much the bearish market is affecting even metals with strong demand. Palladium hit a two-year low this month and the bottom, subsequently, fell out of an already listing price index.

Copper, zinc and lead also fell significantly.

What This Means for Automotive Metal Buyers

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The drama surrounding Greece's debt is compounding the bear market and, while it hasn't yet caused strong currencies such as the dollar to see significant gains, its potential to do so threatens all commodities.
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The Automotive MMI® collects and weights 7 metal price points used in automotive production to provide a unique view into automotive metal trends over a 30-day period. For more information on the Automotive MMI® constituent metals and their exact price movements, log in or register below!

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Our construction metals index fell slightly this month despite strong US housing demand and generally good employment numbers.

The monthly Construction MMI® registered a value of 74 in July, a decrease of 1.3% from 75 in June.

Construction_Chart_July_2015_FNL

The drop was mainly driven by hefty price hits to Chinese rebar and H-beam steel – yet the dip was spared from going lower by a more than 10% spike in the US shredded scrap price.

The construction sector neither lost nor gained jobs in June, according to the Bureau of Labor Statistics, and the Commerce Department said permits to build new homes surged 12% in April to an annual rate of 1.275 million, the highest since August 2007. Permits for apartment construction were the breakout leader, while permits for single-family homes, a much broader segment, still rose modestly.

Homebuilders Bullish

Confidence among US homebuilders, as measured by the National Association of Home Builders’ index, rose to its highest level in 9 months in June, so all signs point to a strong building season domestically.

Meanwhile, the developing world isn't exactly holding its part of the construction spending deal up. A recent World Bank report detailed how China's state-run banking sector is creating debt while not delivering on the construction stimulus promises Beijing has made. With Brazil still mired in recession and Russian construction limited to heavy pipeline work, the BRICS countries are not developing at the rates they earlier envisioned.

Oil & Gas Demand Up

Demand for oil and gas products such as steel tubes has rebounded domestically as the US passed Russia this month as the world's top natural gas producer. Baker Hughes reported that the rig count for US oil producers increased for the first time this year, despite massive output by Saudi Arabia and other OPEC countries trying to undercut US producers' prices. It was the first weekly increase in 30 weeks.

Actual Construction Material Prices

Construction purchasing remains on the cusp of what could be a breakout, but both lending and a shortage of skilled labor remain major concerns.

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The price of Chinese rebar fell 7.4% to $341.39 per metric ton. At $368.77 per metric ton, Chinese H-beam steel was down 6.9% for the month. Weekly US Midwest bar fuel surcharge prices fell 4.6% to $0.30 per mile after rising the previous month. After rising the previous month, weekly US Gulf Coast bar fuel surcharge prices dropped 4.3% to $0.30 per mile. A 3.8% drop over the past month left Chinese aluminum bar at $2,134 per metric ton. Weekly US Rocky Mountain bar fuel surcharge prices fell 3.6% to $0.31 per mile after rising the previous month. After rising the previous month, European 1050 aluminum prices dropped 0.4% to $2,907 per metric ton.

The price of US shredded scrap rose 10.2% over the past month to $280.00 per short ton.

Last month was consistent for the Chinese low price of 62% Australian iron ore fines, which did not move from $77.30 per dry metric ton.

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The Construction MMI® collects and weights 9 metal price points used within the construction industry to provide a unique view into construction industry price trends over a 30-day period. For more information on the Construction MMI®, how it's calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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MetalMiner's basket of industrial metals used by the auto industry, the monthly Automotive MMI®, registered a value of 85 in June, a decrease of 2.3% from 87 in May.

Automotive_Chart_June-2015_FNLAs the chart shows, this move basically undoes May's gains and puts the automotive metals index back where it was in April. The loss nearly erased the 2.4% gain last month as palladium and platinum prices either fell or traded sideways and the other metals tracked in the index weren't really responsible for the recent movement, anyway.

Robust Car/Truck/SUV Sales

While automotive sales remain strong in the US and abroad, those sales are not creating the necessary demand for automotive materials to move the needle this year – even as companies such as Alcoa, Novelis, ArcelorMittal and others invest heavily in automotive aluminum and steel facilities worldwide.

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US car buyers bought new cars and trucks at the fastest pace in nearly a decade in May, US auto sales data released by the automakers showed. General Motors, Fiat Chrysler and Honda reported increases. Toyota, Nissan and Ford saw declines.

Americans bought about 1.63 million new vehicles in May, up 1.6% from about 1.61 million in the same month last year, according to automotive statistics provider Motor Intelligence. Industry forecasts had expected a 1% decline in sales, to 1.59 million, in part because May was one sales-day shorter than it was last year.

May’s seasonally adjusted annualized rate came in at 17.8 million, well past analysts expected 17.3 million.

Steel Inventories Still High

The big drag on the index continues to be the price of steel, which reached another new low this month. Cheap imports and high inventories are to blame in that market, and those high inventories will continue to make the road just as hard to ride for automotive.

Domestic steel producers have filed anti-dumping and countervailing duty petitions against five countries related to corrosion-resistant steel, the type used in automotive applications.

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The petitions charge that unfairly traded imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan are causing material injury to the domestic steel industry. The petitions further charge that significant subsidies have been provided to the foreign producers by the governments of those countries.

It will take months to know if this action produces significant relief of the cheap imports and, even then, the anti-dumping and CVD determinations might not be high enough to have an effect. The end-use automotive market and its much of its material supply chain is intrinsically tied to the steel market.

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The price forecast for US steel markets, much like me after contracting salmonella poisoning last week, has been quite lethargic lately.

An imminent pullout from the doldrums doesn't look all too likely due to several major factors, which we'll dive into shortly, and is supported by MetalMiner's monthly Raw Steels MMI® clocking in with a value of 59 in June, a 1.7% drop from 60 in May.

steel price index chart june 2015

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The monthly Raw Steels MMI® – a price sub-index tracking a basket of finished steel and raw material prices from all corners of the globe – has been unhealthy for quite a while, and (after undergoing a slight recalibration at the end of 2014) has hit a new all-time low this month. Why?

Today's Steel Market: Some Factoids to Consider

Here are a few elements to take into account:

  • Imports are a huge issue for the US domestic market. According to the American Iron and Steel Institute (AISI), for the first 5 months of 2015 (including May Steel Import Monitoring and Analysis and April preliminary data), total and finished steel imports were 18,636,000 net tons and 15,365,000 net tons, respectively, up 7% and 20% from the same period in 2014. China plays an outsize role in this: according to data compiled by James May of Steel-Insight.com, Chinese supply of CRC was 6% of the US market in 2014 while Chinese and Indian supply of HDG was a combined 8%. Construction markets in China have stagnated, and rather than shutter mill capacity, the Chinese just ship it out to foreign shores. Ministry of Commerce spokesman Shen Danyang has been quoted as taking a defensive line, saying the rise in steel exports is due to higher global demand and is a result of Chinese steel products having strong "export competitiveness" – but we have our doubts.
  • Therefore, capacity has been dinged. According to AISI, adjusted year-to-date steel production through May 16, 2015 was 33,210,000 net tons, at a capability utilization rate of 72.3%. That is down 7.2%from the same period last year, when the capacity utilization rate was 77%.
  • Distributors are well-stocked with inventory. Until inventories (which are nicely loaded with that imported steel we mentioned) are drawn down, it will be hard to make price increases stick in the near term.

[caption id="attachment_69511" align="alignnone" width="550"]Steel_Insight_051515_550 Carbon flat-rolled inventories. Values in millions of tons (add 000 to the end of each number on the chart). Source: MSCI, Steel-Insight. Chart courtesy of Steel-Insight.[/caption]

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Tomorrow's Steel Prices: Wild Cards to Watch

  • Anti-dumping filings may help steel prices – but "may" being the operative word, and if so, only in the short term. Filings against imported Chinese coil products may succeed in removing some of that low-priced steel from the US inventory pool, thereby helping US mill volumes, but again, from what we're hearing, that's simply a temporary "Band-Aid" solution.
  • What will happen with scrap pricing? As part of this month's Raw Steels MMI®, our shredded scrap price rose 1.6% over last month, and is in a 3-month uptrend. According to industry sources, scrap is expected to rise anywhere from $10 to as much as $30 per gross ton, depending on the region and product. We'll have to wait and see where prices end up by the end of June, as that may clue us further into where finished steel pricing is headed.
  • And a last longer-term bit of news from China...An announcement made at the recent Singapore Iron Ore Week, hailed by some as a gamechanger, indicated that steps are being taken toward international trader/broker access to Dalian iron ore. If this indeed goes down, it would signal a big move toward internationalization of China's futures markets.

Steel Price Outlook: HRC, CRC, HDG, Plate

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The US price of hot-rolled steel coil (HRC) has recently bumped up near the end of May on our IndX, which indicates more broadly that HRC, as well as CRC and HDG steel, seem to be stabilizing after falling for over a year. However, it seems early to call for a bottom. While commodity markets remain bearish and the dollar holds, we don’t expect HRC, CRC or HDG prices to make significant upside moves.

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We here at MetalMiner have very cautiously been pointing out the underlying strength of the US construction market and have been dutifully chalking up falling and flat Construction MMI® numbers to low oil prices and cautious banks for nearly a year now.

Construction_Chart_June_2015_FNL

The monthly Construction MMI® registered a value of 75 in June, an increase of 1.4% from 74 in May, not gangbusters construction activity by any stretch of the imagination but perhaps the beginning of a break in the down-to-flat trend the market has been mired in since last year.

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There are several good reasons to believe this is a turning point in the price of construction materials such as H-beams, steel rebar and shredded scrap. Reasons that go far beyond our belief that a bad weather, higher break-even points for energy projects and a lack of willingness from lenders are what has held them back thus far.

First, in April construction spending jumped 2.2% to an annual rate of $1 trillion, the highest level since November 2008, the Commerce Department said on Monday. The percentage increase was the largest since May 2012. March’s outlays were revised to show a 0.5% increase instead of the previously reported 0.6% fall. Economists polled by Reuters had forecast construction spending rising 0.7% in April.

Oil as Fuel and as Project Breaker

With spending on construction up and beating expectations, it's reasonable to expect prices to follow, but that's not the only indicator of a strong summer building season. My colleague, Stuart Burns, wrote this week that, at least in the US, oil prices are actually going up and inventories are falling.

"For the first time in six months," Burns wrote, "the US oil market is flirting with backwardation, where the spot price is higher than one- or three-month dated delivery – a sign of a tightening market and, potentially, a shortage."

According to another report, prompt-month July contract for West Texas Intermediate (WTI) crude was 27 cents lower than second-month August this week. That was the narrowest spread since Dec. 19 and compares to a month ago when it was at a $1.50 discount. While prices at the pump are still reasonable, the

Beyond that, the oil and gas industry has come out of this mini-slump leaner and meaner. A Goldman Sachs report said that US oil production will grow by 155,000 barrels per day in the fourth quarter of 2015 compared with the same period in 2014 as cheap money and more efficient drilling technology allows tight oil producers to continue drilling in spite of OPEC’s best efforts to close them down.

According to the American Petroleum Institute, investments in updating US energy infrastructure alone could generate an estimated $1.14 trillion in capital investments by 2025.

Construction Materials

The cost of construction materials, overall, is poised for an increase. This includes wood and other non-metal construction inputs.

According to the 2015 Q2 Non-Residential Construction Index (NRCI) Report recently released by FMI Corporation, the construction industry is improving despite lukewarm economic conditions. FMI surveys executives at construction companies for their forecasts and, according to the responses, the index component for the cost of construction materials dropped one point to 21.4. The component drops as prices increase. The cost of labor components dropped sharply by 5.2 points to 12.5. Both labor and material cost increases reduced the overall NRCI score. Despite this, the overall score STILL gained, jumping to 64.9 for the quarter.

That score reflects 18 months of improving activity.

"It was a little bit surprising, I would expect them (construction materials) to go up faster," said Phil Warner, research consultant at FMI. "One of my explanations (for the first half of the year) has been substitution. Copper and other materials, where they can be replaced, have been substituted. We are at a point now where prices are so low that I would expect substitution to end and construction-grade materials (metals) to go up faster. We certainly don't expect them to go down as construction will continue rising. Materials are coming around. They will remain at a lower-cost as construction, overall, improves but we likely won't see them falling further."

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Seems that somebody forgot to tell the automotive metals that the bear market was still going on this month. Strong aluminum and high-strength steel demand, and end-user purchases, have again made auto the standout in a field of mostly down markets.

After flattening in April, the monthly automotive MMI® registered a value of 87 in May, an increase of 2.4% from 85 in April. A big factor was the performance of aluminum coil on the index, as its index broke resistance and soared as well.

Pool 4 Tool's Automotive SRM Summit

China removed export taxes on aluminum, opening more markets up to the automotive-grade sheet and coil prices that automakers in the West have been experimenting with for a decade now. Prices of palladium, lead and even copper also notched strong LME growth filling strong demand from domestic and foreign automakers.

Consumer Sales Rising

In the US market, April new car sales rose by 5% from a year ago, to more than 1.463 million units as predicted in a J.D. Power and LMC Automotive's mid-month auto sales forecast update. April's totals are anticipated to be the highest since April 2005.

SUVs and smaller "crossover utility vehicles" were the main leaders in the sales surge. While not all US automakers posted strong Q1 results, profits were generally up even if they were up lower than some analysts expected. General Motors' results were better than in the same period a year ago, when costs associated with safety recalls limited quarterly profit to $125 million.

Fiat Chrysler Automobiles reported a profit of $101.2 million (€92 million) d​uring the first quarter compared with a loss of $173 million (€190 million) during the same period last year.

What This Means for Automotive Buyers

Consumer demand for automobiles traditionally picks up in the summer months, so this could be the beginning of a big turnaround for our Automotive MMI®. Fundamentals continue to look strong as the index had better supply and demand numbers than other metals even when it was losing price ground. Stay tuned.

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Steel prices remain at their lowest levels. Almost every industrial metal price rose in April as a weaker dollar gave a boost to commodity markets. However, steel prices remained quiet, hanging at record lows.

The monthly raw steels MMI® registered a value of 60 in May, on par with April's value.

Raw Materials Undercutting Scrap

Scrap prices are at their lowest levels and we don't really see anything that could give prices significant momentum on the upside, at least until a bigger supply response is seen.

Why Manufacturers Need to Ditch Purchase Price Variance

Unless we start seeing the dollar depreciate against other currencies, European scrap exports will keep gaining market share, leaving a supply excess for US steelmakers.

Cheaper to Produce

Moreover, although prices seem low, it's still cheaper to make steel still using iron ore than scrap. Pig iron or billet could substitute some scrap as primary raw material in which case, US exporters would sell more in the domestic market, causing US scrap prices to keep falling lower.

Meanwhile, steel imports keep arriving. Since US prices are no longer inflated compared to the rest of the world ,we would imagine steel imports to start slowing down through the remainder of the year. However, Chinese exports could actually increase due to the recent removal of export tariffs.

Either way, steel demand remains weak, particularly in oil and gas tubular markets while the market remains oversupplied. It doesn't seem likely that steel prices will rise significantly higher this year.

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Outlays for US construction projects fell 0.6% in March to a seasonally adjusted annual rate of $967 billion, the US Commerce Department said last week. Commerce also revised February’s result to show almost no change.

Why Manufacturers Need to Ditch Purchase Price Variance

Despite the lower spending, the monthly Construction MMI® registered a value of 74 in May, on par with April's value. Flat is, apparently, the new up until construction starts and spending pick up some steam. The low prices have not yet incentivized developers enough, it would seem, to sign off on new projects or increase purchasing for anything but stockpiling, as credit is still hard to obtain and consumer demand for commercial and residential space remain tepid.

Energy Loans Called In

In fact, banks in the US are cutting credit lines to energy companies and forcing the firms to cough up more collateral to guard against fallout from the fall in oil prices.

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The US International Trade Commission upheld tariffs against both rebar and, more recently, oil country tubular goods (OCTG) from China, but the flood of imports has already done its damage when it comes to both traditional construction and the steel pipes used for oil and gas drilling. Supply is high and demand is simply not high enough to push prices upward.

It's a testament to the resilience of the US construction market that our MMI was even able to hold steady this month. For complete prices, read the complete story – log in or sign up for MetalMiner membership!

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The American Institute of Architects‘ Architecture Billings Index came in positive, again, in March, but its relatively low increase again reflected the weak recovery in both design and construction. The March ABI score was 51.7, up from a mark of 50.4 in February.

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“Business conditions at architecture firms generally are quite healthy across the country. However, billings at firms in the Northeast were set back with the severe weather conditions, and this weakness is apparent in the March figures,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “The multi-family residential market has seen its first occurrence of back-to-back negative months for the first time since 2011, while the institutional and commercial sectors are both on solid footing.”

Multi-Family Weakness

We have reported on the general weakness in multi-family residential and its effect on prices of construction materials such as structural steel and copper for much of the first quarter of 2015.

AIA prepared a video featuring Baker, recorded in a swanky Architect Magazine studio overlooking our nation’s capital, describing the macroeconomic issues facing the construction market, which include the strong dollar and the continuing shortage of skilled construction labor, in Q2 and the rest of the year.