Monthly Raw Steels MMI® Increases 3.7% to 85

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Commodities, Metal Prices, Premium

Raw-Steels_Chart_December-2013_FNL

MetalMiner’s monthly Raw Steels MMI® – tracking finished steel and raw material prices across global markets – rose to a reading of 85 in December, an increase of 3.7 percent from November.

But let’s make sure we see the forest through the trees.

Steel prices, like most of the base metals, remain in a long-term downtrend. Since prices reached a top in May 2011, they have continued to fall. However, since June of this year, prices have been rising, drawing a new middle-term uptrend that has overcome some of the previous tops.

Even though prices have moved up during November, the uptrend has been losing momentum – that is to say, the uptrend is still in force, but losing buying pressure, which might signal a top if momentum keeps decreasing:

MetalMiner-steel-price-analysis

Source: MetalMiner IndX℠; MetalMiner analysis

Many traders use momentum lines to generate buy and sell signals. A move above the zero line is interpreted as a buy signal, whereas crossing below the zero line is a sell signal. In the case of a steel buyer, the same can be applied.

A Look Ahead for Steel Buyers

The black vertical lines in our graph above suggest placing a forward buy while the orange lines suggest waiting until prices go down. As we can see in the graph, that strategy would have been very successful over the past years, with the blue line representing US CRC prices and the red line a momentum of 10 weeks.

From a supply/demand perspective, we still see domestic and global oversupply in the steel industry. A sustainable increase in steel prices will depend on an increase in real demand. The improvement in domestic construction and manufacturing sectors and the growth in emerging economies will be the major drivers of demand in the long term.

With losing momentum in the uptrend, the supply/demand outlook doesn’t appear very favorable right now and despite the last increase in steel prices, we don’t expect prices to rise drastically in the medium term.

Key Price Drivers of the Steel Index

The price of Korean steel scrap rose 16.7 percent to $335.38 per metric ton after falling the previous month. The price of US shredded scrap closed the month up 7.5 percent at $385.00 per short ton. At $666.00 per short ton, the US HRC futures contract spot price increased 2.3 percent. Chinese coking coal gained 1.5 percent to finish the month at $228.08 per metric ton. Last month was better for Korean pig iron as well, which rose 1.2 percent to $599.91 per metric ton. After dropping the previous month, the price of Chinese slab prices rose 1.1 percent to $577.58 per metric ton.

With a 2.0 percent decline on the LME, the steel billet 3-month price closed the month at $240.00 per metric ton. Last month, the US HRC futures contract 3-month price dropped 0.5 percent to $652.00 per short ton.

Last month was consistent for the cash price of steel billet on the LME, which did not move from $240.00 per metric ton. The price of Chinese billet held steady around $510.31 per metric ton last month.

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.

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