Steel held its price for the first time in seven months, breaking a string of losses that most market observers expected would continue.
The monthly Raw Steels MMI® registered a value of 60 in April, on par with March’s value.
Continuing low prices for iron ore and a generally weak scrap market are causing a deflationary spiral for most grades of steel.
Low Prices, Lower Demand
Steel prices fell sharply during the first quarter and our steel index got a much-needed breather. Raw steels lack momentum on the upside and it seems that we will continue to see price weakness, for the following reasons:
- Lower production costs: as iron ore and oil prices continue to fall, steelmakers are under pressure from customers to cut prices. Both input costs are likely to remain depressed, weighing on overall steel prices.
- A strong dollar continues to widen the spread between domestic and oversees prices. China and Russia have been very active in exporting. Russia strongly benefited from a slump in the its currency while China has the advantage of receiving cheap iron ore. The increase in exports will continue to drive domestic prices down at least until US mills begin anti-dumping procedures against Chinese CRC and galvanized coil, which could add a boost of sentiment.
- The bearish commodity environment will continue to weigh on steel prices. Moreover, the performance of other base metals is suggesting anything but a turn around situation.
What This Means For Steel/Iron Ore Buyers
Steel prices might be able to stabilize after falling sharply in Q1. However, we expect prices to struggle on the upside as it is difficult to imagine anything other than a well-supplied steel market. Some might even say an oversupplied steel market. Prices are likely to keep taking the low road.
The US HRC futures contract 3-month price grew 1.9% to finish at $525.00 per short ton. At $399.81 per metric ton, the price of Chinese slab finished the month 0.8% higher. This was the second straight month of declines. US shredded scrap prices increased from $246.00 to $248.00 per short ton last month.
Following a 10.0% decline in price, Chinese billet finished the month at $333.71 per metric ton. A 5.6% drop left the US HRC futures contract spot price at $475.00 per short ton. The price of Korean steel scrap fell 3.5% to $125.33 per metric ton.
Last month was consistent for the 3-month price of steel billet on the LME, which did not move from $305.00 per metric ton. Hovering around $305.00 per metric ton on the LME for the month, the cash price of steel billet remained unchanged. Last month was consistent for Chinese coking coal, which did not move from $174.11 per metric ton. Korean pig iron experienced a flat month, staying around $477.86 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.