Raw Steel MMI: Price Increases Drive Four-Point Boost

The Raw Steel MMI jumped up four points this month to 75, increasing by 5.6% and returning to 2015 levels, along with copper.

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Increasing Chinese steel prices have driven domestic steel prices this month. Both Chinese hot-rolled coil (HRC) and cold-rolled coil (CRC) prices have experienced an uptrend since the end of 2015. Chinese HRC prices increased 10.7% this month.

Source: MetalMiner data from MetalMiner index

Even though the degree of movement in U.S. steel prices as great as those seen in China, U.S. prices have continued to increase. While Chinese steel prices continue to increase, domestic prices may continue the same uptrend.

The Spread

Considering both U.S. domestic and Chinese HRC prices, the spread has continued to decrease this month. We would expect a drop in imports if the spread continues to decline. This would lend support to U.S. domestic HRC prices.

Source: MetalMiner data from MetalMiner index

Domestic Scrap

Meanwhile, U.S. shredded scrap prices declined 2.4% this month.
Falling  scrap prices could push domestic buyers toward scrap instead of other raw materials, and domestic steel prices could face downward price pressure.
However, the long-term trend in scrap signals rising, not falling, prices.

Source: MetalMiner data from MetalMiner index

Raw Materials

Both iron ore and coking coal prices have rallied during July.
Increasing raw material prices may create upward pressure in steel prices as production costs increase.

What This Means for Industrial Buyers

Steel momentum appears to have shifted upwards.
Buying organizations should watch commodities to analyze the signals for both the short- and long-term trends.
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Actual Raw Steel Prices and Trends

HRC steel prices in China increased by 10.7% in July, reaching $569.44/metric ton.
The U.S. Midwest HRC futures spot price dropped by 1%, reaching $624/short ton. U.S. shredded scrap fell 2.4% to $288/st.
Chinese steel billet increased by 9.8% to $527.81/mt, while Chinese slab prices increased by 6% to $523.35/mt.

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