Raw Steel MMI: Chinese Prices Up as World Awaits Section 232 Verdict

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The Raw Steel MMI inched three points higher in June, increasing by 4.4%. The index hit 70-plus for just the second time this year (the first coming with March’s 70).

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The Chinese steel industry generally drives steel prices. Steel prices in China have increased during June, caused by the 23.3% jump in coking coal prices. However, this month’s uptrend counters the short-term downtrend that coal has experienced since February, which has largely driven steel prices down.

Source: MetalMiner analysis of TradingEconomics data

This downtrend in raw materials applies to both coal and iron ore. Although iron ore prices increased a bit this month, iron ore remains in a downtrend. Therefore, steel prices are at risk of following that downtrend.

Source: MetalMiner analysis of TradingEconomics data

The spread

The spread between Chinese hot-rolled coil (HRC) and domestic HRC prices has also narrowed this month.

The spread has continued to drop despite rising domestic HRC prices because Chinese HRC prices have also increased. A rising Chinese HRC price would lower U.S. steel imports, although imports have reached their highest levels since 2014.

If Chinese HRC prices increase, U.S. steel imports will decrease and lend support to domestic HRC prices.

Source: MetalMiner analysis of MetalMiner IndX data

Political uncertainty, the Trump administration’s Section 232 investigation recommendations and the recent G20 summit have only fueled price uncertainty. The outcome of these events will possibly have an effect on steel prices.

MetalMiner believes the delay in the release of the 232 recommendations — which were previously expected to be announced by the end of June — could cause U.S. steel prices to reverse this last month’s upward trend.

What This Means for Industrial Buyers

Though the Raw Steels MMI inched up this past month, scrap prices may be trading flat to slightly up from last month. However, the underlying trends do not suggest rising prices. The Section 232 investigations will yield additional clues.

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Actual Raw Steel Prices, Trends

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