steel price

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.

For actual prices of the automotive metals this month, read the full article by logging in or signing up to become a MM member.

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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.

With April's reading, MetalMiner's monthly price index tracking metals used in the automotive industry has stanched its general downward slide – the index dipped below the baseline of 100 in February 2014 and has been trending down since. The monthly Automotive MMI® registered a value of 85 in April, on par with March's value (check out last month's report). But with most base metals markets in a bearish mode, this index may have further to fall.

The downward slide had particularly begun accelerating in Q4 of last year and has continued through Q1 2015, a sign that the auto index's basket of metals has seen the same bearish treatment as the Raw Steels, Stainless and Aluminum MMIs.

US Auto Sales 'n Oil Prices–March 2015

Of the US Big Three, GM and Ford's March sales both dropped this year compared to March 2014, while Chrysler gained nearly 2% in its monthly sales over last year. However, both GM and Chrysler's year-to-date sales so far in 2015 are quite robust over the same amount of time in 2014 (5.3% and 6.5%, respectively), while Ford's YTD sales are also in the green.

Bargain-basement oil prices have helped consumers at the gas pump, which in turn has spurred sales. Light truck sales, for example, have been outpacing car sales for the past 15 months, and have spiked to their highest level in several years in March 2015. Primary metal producers are on the bullish demand bandwagon as well – Alcoa recently received the promise of government cash for lightweight auto-grade aluminum production.

Essentially, the automotive OEMs and their suppliers should be paying close attention to our Automotive MMI® trend – with finished steel, aluminum, platinum and palladium at multi-month lows, while consumer vehicle demand appears to be high, some spot buying could be in order...but we can't say for sure how much further this index has to fall. MetalMiner will, however, be offering an exclusive automotive metal market outlook...

SRM Automotive Summit

If you happen to be in Southeast Michigan in May – and chances are, if you work for an auto OEM or many of their suppliers, you already will be – join MetalMiner Executive Editor Lisa Reisman at the POOL4TOOL SRM Automotive Summit, to be held at the Townsend Hotel in Birmingham on Friday, May 22.

Lisa will present "Sourcing Strategies for the Automotive Metals: H2 2015." Don't miss out this analysis and a great overall event – register here.

This Month's Actual Metal Prices: Automotive MMI®

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Steel held its price for the first time in seven months, breaking a string of losses that most market observers expected would continue.

The monthly Raw Steels MMI® registered a value of 60 in April, on par with March's value.

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Continuing low prices for iron ore and a generally weak scrap market are causing a deflationary spiral for most grades of steel.

Low Prices, Lower Demand

Steel prices fell sharply during the first quarter and our steel index got a much-needed breather.

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The once-robust global construction market fell further this month as, here in the US, price-cutting by OPEC has caused large oil and gas projects to fall below their breakeven payback points.

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Heavy energy construction as fallen and the fragile single-family home market is not strong enough to pick up the slack.
The monthly Construction MMI® registered a value of 74 in April, a decrease of 1.3% from 75 in March.

Oil is Now Too Cheap to Pull Out of the Ground

The effects of oil and gas drilling suspensions have been felt by producers of steel pipe used in the field (oil country tubular goods) and that lack of production showed up the past two months in the form of canceled or postponed exploration projects.

Without the robust growth in civil drilling projects here in the US, construction spending fell in February as the numbers were also pulled down by a drop in single-family home building. Private spending on construction of single-family homes declined 1.4%.

The pullback in exploration is, however, not just a US problem. A key “supply-based” response to low oil prices has been a sharp decline in rig counts and reductions in 2015 capital expenditure budgets from major oil companies, including ConocoPhillips, Chevron, Hess, and BP. These multinationals spend much of their exploration budgets 0n projects in the US but Brazil and other energy-rich nations could see projects canceled as well

The “power” category of the US Census Bureau — which includes oil and gas facilities — is down by 17.2% year-on-year and 4.5% for the month. That sector of the construction industry is simply going to have to wait until energy prices rise again.

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LME copper prices, Chinese lead prices, and Korean aluminum premium prices rose this week, while US HDG steel prices and US palladium prices dropped. For exact price points of all of these and more, click below!

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After its first negative score in 10 months, the Architecture Billings Index (ABI) showed a small increase in design activity in February, and has been positive 10 out of the past 12 months.

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As an economic indicator of construction activity, the ABI reflects a 9-to-12-month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 50.4, up slightly from a mark of 49.9 in January. This score reflects a minor increase in design services (any score above 50 indicates an increase in billings).

Questions about the uneven recovery in both residential and commercial construction are keeping the US architectural design market from growing more than the slight increases and small decrease of recent months.

Health of Major US Construction Sectors

“The health of the institutional market has been the key factor for positive business conditions for the design and construction industry in recent months, and it is encouraging to see that sector remain on solid footing,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “However, we’re seeing some slowing in the other major construction sectors. Design billings for residential projects had its first negative month in more than three years, and commercial design billings have seen only modest growth in recent years.”

A sector that's not covered by the ABI, infrastructure spending, is experiencing growing pains, as well. Many economists are projecting that the Federal Reserve will raise interest rates this summer, which could increase borrowing costs and potentially affect infrastructure construction, according to US News and World Report. Several economists say that infrastructure spending is badly needed and that Congress should look at alternative ways to fund construction, including raising the gas tax and increasing public-private partnerships.

Residential and commercial construction could see a lack of available credit, as well, if the Fed signals that interest rates could rise sooner rather than later.

Key February ABI Highlights

  • Regional averages: South (52.5), Midwest (50.2), Northeast (48.0), West (46.7)
  • Sector index breakdown: institutional (52.2), commercial / industrial (51.4), multifamily residential (48.9), mixed practice (45.3)
  • Design contracts index: 50.0

For exact week-over-week price trends in metals used in the construction industry, click below!

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U.S. Steel on Thursday announced more layoffs as it continues to fight lower-priced, surging imports and declining demand in the energy sector, saying it will temporarily idle one of its iron-ore operations in Minnesota, affecting 412 workers.

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The idling of the plant in Keewatin, Minn., which ships to U.S. Steel mills, will take place on May 13 and affects six million tons of iron-ore production capacity, or 27% of U.S. Steel’s overall iron-ore output last year. U.S. Steel said the move is temporary in a statement.

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