Our Raw Steels MMI jumped 8.5% to 53 points, after hitting a 5-month high. March was an interesting month for steel markets, with some important developments to consider:
New Anti-Dumping Determinations
March brought two new anti-dumping determinations for hot-rolled and cold-rolled coil steel products.
In the case of HRC, anti-dumping determinations will have less impact than in the case of CRC. Prohibitive duties were only imposed on the U.K., but the U.K. represents only 7% of HRC imported into the U.S. last year. Brazil (15% imports share) also had duties in excess of 37% imposed on its products. Meanwhile, South Korea — the biggest exporter with a 35% share) — only received between 4% and 7% duties. Similarly, the Netherlands and Turkey did not see significant duties at all.
On the other hand, CRC duties were much more prohibitive, which helps explain why domestic CRC prices gained much more than HRC over the past few weeks. U.S. regulators claimed their biggest victory in March as China (by far the largest exporter of CRC into the U.S), was imposed with a super-high dumping margin of 265%, which would effectively shut down imports from the country.
U.S. Imports Fall
Chinese steel exports to the U.S. have fallen steeply over the last few months. The downtrend in steel imports continued in February as U.S. steel imports fell 40% compared to the same period last year. February steel imports are the lowest since December 2011.
The decline in imports is a positive sign for the U.S. steel industry. However, as long as U.S. prices remain higher than international prices, we could see an increase in imports later this year as exports rotate from other countries. Particularly, South Korea has emerged as a top steel exporter to the U.S. Meanwhile, Korea is the biggest destination for Chinese steel products. This seems to suggest that Chinese steel is possibly being exported through Korea.
Tata Steel U.K. to Close/Sell Assets
Other countries are not enjoying the protection that U.S. companies are receiving. The U.K. is a case in point.
Recently, Tata Steel announced that it would close its giant Port Talbot steel plant if it cannot find a buyer, a move that would almost bring steelmaking in Great Britain to an end. With the crisis at Tata Steel U.K., protectionism demands have started to across the European Union.
However, a spokesperson for Prime Minister David Cameron recently said that although the U.K. could provide financial support for steelmakers, it remains opposed to allowing higher tariffs on Chinese steel as those decisions would have an adverse impact in other areas of the economy.
What This Means For Metal Buyers
Although U.S. imports declined, total Chinese steel exports continued to rise. In February China exported 8.1 million metric tons of steel products, a year-on-year increase of 4%, suggesting that demand might be contracting at a higher pace than supply is.
Despite much political talk from Beijing about supporting China’s flagging economic growth rate and removing excess steel capacity, there is no evidence of any turnaround yet in China’s steel demand.
The recent price rally in steel prices continues but it’s still not clear for how long. We saw that pattern in steel prices last year. It’s yet not clear how long this rally will last, but current macro conditions will need to improve to make us think the rally is finally the one ending this bear market.
Actual Raw Steel Prices
The Chinese slab price rose sharply to 383 CNY per mt up 18% from last month. US shredded scrap jumped 8% to finish the month at $204 a mt. Chinese HRC prices rose 18% to 375 CNY per mt from 317 CNY a month ago. The U.S. HRC futures contract rose 19% to $490 per mt.