The monthly GOES MMI® registered a value of 195 in January, a decrease of 18.4 percent from 239 in December.
This is the second straight monthly fall for our grain-oriented electrical steel index — the November-December delta being even more precipitous than the month before.
What can explain this? From a macro perspective, the outlook for power construction in 2013 is not looking too rosy.
If energy companies such as Exelon will be adding less power generating capacity, that could mean demand for GOES may decline, and may keep prices depressed. Reports claim that wind-farm developers, trying to beat the wind energy tax credit expiration date, rushed to complete projects in 2012 and laid down a significant portion of the pipeline for future projects — which also may not bode well for 2013 demand and activity.
Another broader issue, reported earlier this month by the WSJ, centers on US electricity use dropping in general. According to the Energy Information Administration, electricity use will rise on average only 0.7% for homes and 0.6% for industrial users through 2040. This outlook is also causing Exelon Corp. and others to cut power spending and investment — Exelon is reported to be cutting $1.3 billion in renewable energy projects from now through 2015.
The latest figure for US power construction spending also decreased, by 0.65 percent in November 2012, according to the Census Bureau.
Looking at the fundamentals: according to MetalMiner data, GOES coil import prices decreased worldwide almost 21 percent from November to December, and 22.4 percent from October to December. US GOES surcharges have actually increased over the past two months, although not all too substantially. Interestingly HRC prices, although having consistently declined in Korea over the last quarter, have been steadily rising in China, according to our MetalMiner IndX. The US HRC price, having dropped to just above $600/ton on average in October and November, also increased in December.
But these increases could not stanch the decline of the index, nor of coil prices. At $3,235 per short ton, the US grain-oriented electrical steel (GOES) coil price finished the month 2 percent lower — the second straight month of declines.
Looks as though the drastic price falls expected by some buyers back in Q4 2012 may be coming to fruition.
The GOES MMI® collects and weights 1 global grain-oriented electrical steel price point to provide a unique view into price trends over a 30-day period. For more information on the GOES MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.