Raw Steel MMI: Steel Prices Continue to Lose Momentum

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Oleg Totskyi/Adobe Stock

The Raw Steels Monthly Metals Index (MMI) fell again this month, dropping to 83 points. The Raw Steels MMI held at 89 points since August for four consecutive months, but started decreasing in November.

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The recent slowdown in domestic steel price momentum led to the decline. Domestic steel prices recently decreased sharply on the back of slower demand and softer Chinese prices.

Domestic steel prices have showed slowing momentum since June 2018. Domestic steel prices increased sharply at the beginning of the year, driven by a bullish market in commodities and industrial metals and Section 232 tariffs. During most of 2018, domestic steel prices have remained at seven-year highs.

Source: MetalMiner data from MetalMiner IndX(™)

All forms of steel decreased in November except plate, which increased (driven by tight supply). Domestic plate has longer lead times than other forms of steel.

Hot-rolled coil (HRC), and hot-dip galvanized (HDG) prices also fell in December, while cold-rolled coil (CRC) prices increased slightly.

However, domestic steel prices remain in a downtrend that may last until the Chinese steel sector shows some strength again.

Historically, prices tend to drift lower during the beginning of Q4 and then rise. Last year, HRC domestic prices started to increase in December, then skyrocketed during the first quarter of 2018. However, MetalMiner does not see this increase happening during this year’s Q4 cycle.

Chinese Steel Prices

So far in December, prices of all forms of Chinese steel have decreased.

Chinese domestic steel prices started to decrease at the end of October, driven by the start of the winter season.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese steel domestic demand appears weaker; fears around the Chinese economy and manufacturing growth have sent prices down.

HRC prices have declined by 5% in December already, while CRC prices have fallen by 7%.

Lower prices in China come as a result of weaker demand and increasing production. October Chinese steel output increased for a third straight month, as mills boosted output ahead of production cuts.

Chinese stock market (FXI Shares). Source: MetalMiner analysis from SeekingAlpha

The yuan continues to weaken, and the yuan/USD exchange rate is falling. U.S. importing organizations might want to remember that a weaker yuan makes Chinese goods more appealing, despite the tariffs.

Meanwhile, the Chinese stock market (FXI Shares) has fallen during most of 2018 after reaching a peak at the beginning of the year. The new downtrend comes as a result of a slowdown in China.

What This Means for Industrial Buyers

Current domestic steel prices seem to have started a downtrend.

Adapting the right buying strategy becomes crucial to reducing risks.

Only the MetalMiner monthly outlooks provide a continually updated snapshot of the market from which buying organizations can determine when and how much to buy of the underlying metal.

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

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Actual Raw Steel Prices and Trends

The U.S. Midwest HRC 3-month futures price fell this month by 6.86%, moving to $760/st.

Chinese steel billet prices fell this month by 12.81%, while Chinese slab prices fell by 10.78% to $536/mt. The U.S. shredded scrap price closed the month at $358/st, increasing by 4.6% month over month.

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