Raw Steels MMI: U.S. price increases push three-point index gain

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The Raw Steels Monthly Metals Index (MMI) showed some strength again this month with another three-point increase, rising to 72.

U.S. HRC and scrap prices increased quite a bit, while LME billet prices also registered double-digit increases.

Key forms of steel increased across the board in the first half of December 2019. Plate prices increased the most, with prices spiking a couple of times during the month.

Source: MetalMiner data from MetalMiner IndX(™)

However, HRC, CRC and HDG increases lost some steam later in December.

Still, CRC and plate prices managed to match values hit during Q3 2019, while HRC and HDG prices did not reach quite as high as they did during Q3.

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Despite the short-term price increases, steel prices — particularly HRC and HDG — have yet to break out of the longer-term bearish price downtrend. Nor have recent price increases shifted the longer-term trend to sideways (CRC and plate).

Source: MetalMiner data from MetalMiner IndX(™)

For example, in the HRC chart above, we see lows getting progressively lower. Meanwhile, late in December, HRC had not quite regained the “high” price from around August.

As of press time, at least one producer attempted an additional early January price increase on HRC, up to $640/st. Nucor announced early January 2020 price increases on HRC, CRC, and HDG of $40/st, marking Nucor’s fifth price increase since October 2019.

Analysts mostly express skepticism over whether sufficient demand exists to support these additional price increases, beyond typical restocking activities that many companies schedule at this time year.

Chinese HRC, CRC steel prices show slight gains

Chinese steel prices increased again during December but more mildly than a month earlier.

Source: MetalMiner data from MetalMiner IndX(™)

All four key forms increased mildly, with HRC prices showing the largest gain over the course of December.

According to World Steel Association (WSA) data, China’s October 2019 production dropped 0.6% compared with October 2018.

In November, production increased by 4.0% compared with November 2018.

Source: MetalMiner analysis of World Steel Association data

Lower rates of increase in September, as well as October’s declining output volume, can be at least somewhat attributed to production controls implemented to improve air quality for China’s national holiday.

While the overall trend points to a declining rate of increase, as producers in China hold the capacity to produce large runs at lower marginal costs, the declining rate may not hold simply due to the level of effort needed to enforce production cuts.

One way steel output could more realistically fall would involve mergers and acquisition activity, which could knock more capacity out of the market.

China’s National Board of Statistics PMI Index held flat in December

Source: MetalMiner analysis of China’s National Board of Statistics

China’s National Board of Statistics Industrial (NBI) Purchasing Managers Index (PMI) remained at the same value in December 2019 as in November 2019 (at 50.2).

Throughout 2019, the index remained above a reading of 49 — a value last seen in 2016, when most commodity prices traded lower.

As noted in the January 2020 MetalMiner Monthly Outlook report, the Caixin China General Manufacturing PMI index fell to 51.5 in December following November’s reading of 51.8.

While both provide expansionary readings of over 50, upward momentum may have temporarily stalled out late in 2019.

What this means for industrial buyers

Annual restocking activities kept demand higher recently. It remains to be seen whether recent price increases will stick throughout Q1 2020.

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Buying organizations seeking more monthly insight into steel price trends can learn more about our MetalMiner Monthly Buying Outlook.

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Actual raw steel prices and trends 

The U.S. Midwest HRC futures spot price jumped 19.7% to $590/st, while the Midwest HRC futures three-month price fell by 0.9% to $585/st.

U.S. shredded scrap prices increased 18.3% to $278/st.

LME billet three-month prices increased by 12.7% to $295/st.

Korean scrap prices increased by 8.4%, turning around a three-month decline, now at $78/mt. Korean pig iron increased by 2.3% to $372/mt.

Chinese prices in the index increased in the range of 1-4.5%. The Chinese HRC price increased the most, jumping 4.5% to $554/st. Iron ore prices increased the least, at around 1.0%, now priced in the range of $64-$65 per dry metric ton.

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