Raw Steels MMI: U.S. steel prices flatten after recent gains

The Raw Steels Monthly Metals Index (MMI) gave up some of last month’s gains with a one-point drop to 71 (following a three-point increase to 72 last month).
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Recent U.S. steel price increases flattened out in January, while plate prices dropped back somewhat from recent price highs.

Source: MetalMiner data from MetalMiner IndX(™)

Some stronger signs of improvement in U.S. manufacturing activity, plus reports of increased activity in the housing market, may continue to provide sideways support to U.S. steel prices in the short term.
As noted in the MetalMiner Monthly Outlook (free trial available) released this week for February 2020, the ISM PMI increased to 50.9 for its January activity reading — a 3.1-point increase compared to December — and back in expansionary territory with a value over 50.
Similarly, the IHS Markit U.S. Manufacturing PMI also maintained an expansionary value of 51.7 for January activity; however, this value dropped compared to the previous month’s value of 52.4.

Chinese steel prices mostly held steady in January, but showed weakness late in the month

Chinese steel prices generally held steady during most of January.
However, at the end of the month, some prices declined slightly as demand reportedly weakened.

Source: MetalMiner data from MetalMiner IndX(™)

The China Iron and Steel Association (CISA), according to press reports, issued a public statement calling for steel producers to maintain price stability rather than rashly altering prices as demand temporarily slumps in China due to coronavirus-related logistics issues.
On Jan. 11, CISA issued a report forecasting a 2% increase in China’s domestic steel demand this year, with around 890 million tons to be consumed, citing construction, railway and home appliances as areas of demand growth.

World Steel Association: Global crude steel production increased by 3.1% in 2019

According to numbers published by the World Steel Association (WSA) for 2019 in full, global steel production increased by 3.1% to 1.85 billion tons produced (compared to 1.79 billion tons in 2018).
U.S. steel production increased by around 1.5% year over year in 2019 to 88 million tons.
Indian crude steel production also increased in 2019 compared to 2018, rising by 1.8% to 111 million tons.
China’s production increased 7.6% in 2019 to around 993 million tons produced.
Iran and Vietnam showed sizable increases of 30% and 43%, respectively, compared to 2018, bringing total crude steel tons produced to around 32 million tons in Iran and 21 million tons in Vietnam.
South Korean production fell by 1.4% to 71.4 million tons, while production in Russia fell by 0.8% to 71.5 million tons.
Japanese production fell by 4.8% to 99 million tons produced.
The majority of European countries also saw production drops. Spain, Italy, France and Germany saw the highest steel production declines, all coming in the 5% to 6% range for 2019.

U.S. Section 232 steel tariffs of 25% extended to additional downstream steel products

In January, President Donald Trump announced Section 232 tariffs at the rate of 25% would be extended to additional derivative steel products on Feb. 8, as explained by MetalMiner’s Fouad Egbaria. Trump cited a need to support higher capacity utilization rates, which have not appeared to satisfactorily stabilize above the critical 80% mark.
Expansion of Section 232 tariffs to cover some steel products could ultimately provide steel price support to upstream U.S. steel producers.

What this means for industrial buyers

Recent steel price increases flattened, which could indicate further price weakness on the horizon.
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Actual raw steel prices and trends

The U.S. Midwest HRC futures spot price dropped 2% month over month to $578/st as of Feb. 1, while the Midwest HRC futures three-month price fell by 6.8% to $545/st.
The U.S. shredded scrap steel price increased 6.5% to $296/st.
The LME billet three-month price decreased by 2% to $289/mt.
The Korean scrap price increased by 2% to $79/mt. Korean pig iron increased by 3.4% to $360/mt.
Chinese slab increased mildly, rising by 0.6% to $536/mt. Chinese HRC prices remained essentially unchanged at $554/mt, as did iron ore prices, still in the range of $64 to $65 per dry metric ton.
Chinese billet dropped by 6% to $490/mt, while coking coal dropped 7% to $250/mt.

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