The monthly Raw Steels MMI® registered a value of 55 in August, a decrease of 1.8% from 56 in July.
After Chinese steel prices slumped in July, they fell again in August but were at least more stable. Domestic prices remain low but seem to be stabilizing as well, resulting in our raw steels index dropping by less than 2%. That’s a moral victory for steel these days.
Paring the Decline
This was definitely a small decline compared to what we have seen from other industrial metals last month. Aluminum and copper hit 6-year lows. Not only was July a bad month for base metals, it was also bad for any commodity. Gold and oil prices fell 7% and 22%, respectively. With all these declines, the Thomson Reuters/Jefferies CRB Index hit new lows last month.
Apart from this macro commodity weakness, the fundamentals within the steel industry don’t look much better. Chinese demand seems to be getting worse. Construction data shows that demand from the sector has slowed during this first half. Also, the automotive sector is weakening with vehicle sales falling year-on-year for several months.
Weak Overseas Demand Creates More Imports
On top of the weak demand, a strong dollar has made exchange rates attractive for exporters. Export products raised almost 28% in the first half of 2015 compared to the same period in 2014. The increase in exports keeps hurting US producers who last week filed petitions with the Commerce Dept. and the US International Trade Commission against 8 countries the domestic industry believes are receiving illegal government subsidies and “dumping” flat cold-rolled coil products here.
It seems clear that there is little going on in the market that could push steel prices up this year. But this is not about what could make steel prices rise, the question is more like: When will the market think prices have fallen enough? So far, we haven’t seen a shift in market sentiment but that is something that steel buyers might want to pay attention to. Until that happens, it seems risky to buy forward when everything is falling.
Actual Raw Steels Prices
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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.