The monthly Construction MMI® registered a value of 87 in August, a decrease of 4.4 percent from 91 in July.
Like several of the other MMIs from this month, the Construction MMI® also fell on the back of weak domestic demand for rebar and H-beam materials within the Chinese market, and shredded scrap prices in the US market.
Surprisingly, aluminum semi-finished prices within Europe dropped only slightly. Pricing for 62% iron ore fines also dropped from July’s reading.
“We can interpret the data in a number of ways; however, falling prices within the steel market generally tell us that either demand remains weak or a glut of material exists,” said Lisa Reisman, executive editor of MetalMiner.
“In this case, we believe both have occurred — domestic steel demand within China remains weak and too much material has flooded the market, bolstered by production ramp-ups and new investment in Chinese steel mills,” she continued.
At the same time, profits for Chinese steel mills have plummeted, as we have previously reported.
Meanwhile, industrial construction within the US market appears comparatively better (by comparatively, we mean ‘by year’) — see Figure 1 in this week’s Gerdau Market Update report, but falling commodity prices generally indicate weak demand. Construction indicators suggest a mixed bag going forward.
Drivers of the Construction Index Decline
The Chinese low price of 62% Australian iron ore fines closed the month by dropping 9 percent. The price of US shredded scrap closed the month after dropping 9.7 percent. An 8 percent decline for Chinese H-beam steel left the price between $550 and $600 metric ton. Chinese rebar experienced a 7.5 percent drop over the past month.
After dropping the previous month, the weekly US Gulf Coast bar fuel surcharge prices rose 11.6 percent. The weekly US Midwest bar fuel surcharge rose 8.5 percent. The weekly US Rocky Mountain bar fuel surcharge rose one percent.
The price of Chinese aluminum bar dropped 0.4 percent over the past month. After dropping the previous month, the price of European 1050 aluminum prices slipped 0.6 percent.
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.