Monthly Raw Steels MMI® Falls 3.4% to 84

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The monthly Raw Steels MMI® registered a value of 84 in May, a decrease of 3.4 percent from 87 in April.

Our steel and raw material price index fell 3 points this month on the back of lower scrap prices, Chinese coking coal, LME billet and US midwest HRC prices. The fall in the market index coincides with a drop in the May Automotive MMI®.

“We have a situation in which the world has too much steel, primarily driven by China over-production,” said Lisa Reisman, managing editor of MetalMiner. “Although US steel production fell from 5.9% in 2012 to a 5.5% rate thus far in 2013, China steel production rose from 46.9% in 2012 to 49% in 2013, according to Gerdau Market Update‘s latest weekly report.”

Like aluminum, steel faces a mixed demand bag, with monthly auto sales coming off highs recorded during Q4 and Q1 (2012 and 2013 respectively), and three-month durable goods orders down slightly, but construction holding up fairly well. In addition, though scrap prices have proven a bit volatile these past couple of months, prices remain supported.

In other steel-related news, American Metal Market reported that the world’s largest steel producer, ArcelorMittal, will no longer honor CRU + discounted contracts, claiming the practice has led to reduced profits and market manipulation. We wonder if the distinction between CRU + discounts carries over to how companies use CRU from a long-term contracting perspective.

On the face of it, our own analysis suggests CRU pricing remains an accurate indicator of actual prices paid in the market, but the notion of discounting to CRU seems out of place with the exception of large volume buyers.

Primary Price Drivers

A 40.5 percent drop on the LME left the cash price of steel billet at $110.00 per metric ton. After falling 36.6 percent, the 3-month price of steel billet finished the month on the LME at $130.00 per metric ton. A 8.0 percent decline for Chinese coking coal left the price at CNY 1,490 ($241.59) per metric ton. The price of Korean steel scrap closed the month at $313.32 per metric ton after dropping 8.0 percent. A 5.2 percent drop over the past month left US shredded scrap at $382.00 per short ton. Chinese billet prices fell 3.6 percent to $523.72 per metric ton. The US HRC futures contract spot price decreased by 1.8 percent this month, ending at $598.00 per short ton. At $607.00 per short ton, the US HRC futures contract 3-month price was down 1.8 percent. The value of Chinese slab weakened by 1.3 percent this month, settling at $611.28 per metric ton.

Korean pig iron held pat last month at $576.68 per metric ton.

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.