This Morning in Metals: Shanghai Metals Prices Drop on Weaker Manufacturing Growth

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This morning in metals news, Shanghai steel prices are down, Shanghai zinc and copper prices are also down, and U.S. steel prices are up by double-digit percentages this year.

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Shanghai Steel Falls

Prices of Shanghai steel have dropped Wednesday for a third session in a row, Reuters reported.

The drop comes as manufacturing growth slows in the country, according to the report.

Copper, Zinc Also Down

The impact of a drop in manufacturing growth — and burgeoning trade tensions, in general — has not just been limited to steel in China.

According to Reuters, Shanghai copper and zinc prices have also dropped. China’s Purchasing Managers’ Index (PMI) dropped to 50.2 in October, down from 50.8.

U.S. Steel Prices Surge

On the other hand, prices of U.S. steel have been on the rise this year.

According to a research report by Business Forward Inc., prices of U.S. steel have surged by 11% since February, while prices of foreign steel fell 4.8% on average.

MetalMiner’s Take: It’s easy to blame tariffs for rising steel prices; certainly, tariffs provide price support.

However, most buying organizations MetalMiner has spoken to or worked with this year are having banner years with very healthy order books. The PMI data supports that assertion, as well. Strong demand, not just tariffs, provides price support.

In addition, as MetalMiner has written about extensively, commodities and industrial metals have been in a bull market since the end of July 2017. In bull markets, prices rise anyway, and that’s why buying organizations have also seen significant price increases for aluminum, zinc, nickel and, to a lesser extent, copper.

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The world price of steel has been depressed because Chinese overcapacity has nowhere to go except elsewhere, and those trade flows have put a lid on European prices. Now, the Europeans have begun to reconsider their own trade strategy so as not to harm the little steel manufacturing capacity that remains.

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