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