The Raw Steel MMI jumped 6.5%, reaching 82 in December. This MMI sub-index remains one point above September’s reading, when steel prices were slightly higher.
Raw material prices increased this month together with Chinese steel prices and Midwest premiums, which drove the increase in this month’s Raw Steels MMI.
Early December prices suggest a drop in HRC, CRC and plate. Only HDG appears to have increased from November’s closing price. Steel prices have failed to move into bullish mode, similar to both industrial metals and commodities.
Chinese Prices Started December Strong
Despite U.S. steel prices falling at the beginning of this month, Chinese steel prices increased this week. Increases range between 1.5% for hot-rolled coil and 3.5% for cold-rolled coil.
The China Metallurgical Industry Planning and Research Institute (MPI) reported that Chinese steel output will increase in 2017 despite capacity curtailments. Output in 2017 will have increased by approximately 3% up to 832 million tons, while 2018 will result in an additional 0.7% output increase driven by the restart of mill operations.
Chinese steel demand will likely increase in 2018 up to 726 million tons from 722 million tons in 2017 due to domestic economic growth. An increasing Chinese steel demand could create upward movements in iron ore demand, which is expected to rise by 1.3% this year.
Raw Materials and Domestic Scrap
Iron ore prices increased this month after trading sideways for a couple of months. Steel prices and raw material prices are generally correlated. Raw material price increases generally support steel prices.
The latest price rise for iron ore appears sharp. Buying organizations may expect additional upward movements in iron ore prices. This fact may also result in increasing steel prices (despite the drop earlier this month).
What This Means for Industrial Buyers
Steel price dynamics showed some upward momentum this month. Although U.S. steel prices have risen (yet appear to lack strength), Chinese steel prices increased at the beginning of December together with raw material prices. Buying organizations will want to pay close attention to Chinese price trends, lead times and whether domestic mill price hikes stick. To understand how to adapt your buying strategy this season, take a free trial now to our Monthly Buying Outlook for a short-term analysis.
Actual Raw Steel Prices and Trends