Last month we reported that in March, U.S. domestic steel prices generally rose while the GOES M3 price fell. This month, we can safely report the exact opposite price change. U.S. domestic steel prices fell while GOES prices rose in April.
In our April update, MetalMiner indicated that GOES prices might find a price floor on the back of a large 20,000/mt tender from Bharat Heavy Electricals. That indeed appears to have happened. Moreover, according to a recent TEX Report, GOES prices have continued to climb in China as Baoshan Iron & Steel needs to service the domestic market due to anti-dumping cases preventing Japanese and Korean imports to that market.
The TEX Report also suggests that global inventories remain low and that many countries have come into the market all at the same time, requiring material. This could lead to higher prices, particularly from the Japanese mills for contracts awarded during the second half of the year.
The Gorilla in the Room
The real challenge for domestic GOES prices, however, rests on the results of the Section 232 steel product investigation launched by the Trump administration in late April. The results will likely not come much before January 22, 2018, assuming the Secretary of Commerce takes the allowable 270 days to present findings to the President. At its core, the investigation seeks to address the issue of excess global steel production and capacity.
The security concern centers on whether or not imports “threaten to impair” U.S. national security and, more specifically, harm America’s ability to produce its own steel. Arguments against the investigation center on several tenets, namely that U.S. moves could harm the integrity of the World Trade Organization (WTO); that any action could spark a trade war; and that, perhaps most significantly, if U.S. producers only operate at 71.1% capacity utilization rates, plenty of available additional capacity exists to meet security needs.
We will not comment on the efficacy of the arguments or counter arguments. Rather we will suggest that the investigation has injected uncertainty for GOES buying organizations within the U.S., particularly because large power equipment manufacturers rely upon imported material to make products that meet stringent Department of Energy efficiency standards. In other words, not all of the steel from the one domestic producer can satisfy market demand.
Exact GOES Coil Price This Month
The U.S. grain-oriented electrical steel (GOES) coil price dropped jumped back up to $2,776/mt from $2,554/mt last month.
The GOES MMI® collects and weights 1 global grain-oriented electrical steel price point to provide a unique view into price trends over a 30-day period. For more information on the GOES MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.