The Raw Steels Monthly Metals Index (MMI) fell 7.2% this month, as steel prices in the basket were down across the board.
Steel prices under pressure
Raw carbon steel is under pressure, like most everything else, but steel mills are doing a good job of idling furnaces to control supply.
Despite these efforts, lead times are still very short. Demand is still good in pockets — it’s not an across-the-board shutdown of steel consumption.
The plate market has fewer outlets and is heavily dependent on energy. With oil around $30 a barrel, that is hurting the plate mills more than it is the coil mills.
ArcelorMittal, U.S. Steel idle production
In the U.S., major steelmakers ArcelorMittal and U.S. Steel have idled production at Indiana facilities amid the coronavirus outbreak in recent weeks.
Earlier this month, the Northwest Indiana Times reported ArcelorMittal would lay off new hires at its Burns Harbor facility.
Meanwhile, U.S. Steel on March 27 announced it would idle the #4 blast furnace at its Gary Works facility.
“The company expects the Gary #4 blast furnace to remain idled until market conditions improve,” U.S. Steel said in the March 27 release. “In addition, the company will temporarily idle blast furnace ‘A’ at Granite City Works, effective immediately. As previously communicated, the company will also complete the indefinite idling of the iron and steelmaking facilities at Great Lakes Works. The company will continue to monitor the impacts of the coronavirus on its orderbook and will regularly assess the footprint required to support its customers’ needs.”
In addition, U.S. Steel said it would idle all or most of its Lone Star Tubular Operations and Lorain Tubular Operations indefinitely.
As a result of market conditions, U.S. Steel said it would reduce capital spending by $125 million in 2020, bringing its expected 2020 capital spending to $750 million.
ArcelorMittal: Apparent steel consumption up 1.1% in 2019
ArcelorMittal recently released its Annual Report 2019, in which it estimated global apparent steel consumption increased by 1.1% in 2019 after growth of 2.4% in 2018.
Steel consumption growth in China was estimated at 3%, “primarily driven by construction, supporting robust machinery output, offsetting declining automotive output and slower growth in infrastructure,” according to the steelmaker.
For 2020, the company expects consumption growth to come in between 1-2%.
“Supply chain destocking constrained demand in ArcelorMittal’s core markets, particularly for flat products, and the Company estimates that World-ex China ASC declined by 0.8% in 2019,” the annual report states. “China had a better than expected year with ASC estimated to have increased by 3%. Whilst acknowledging the risks and uncertainties, ArcelorMittal believes that there are signs that the real demand slowdown is beginning to stabilize, and the supportive inventory environment means that the Company is more optimistic on the apparent demand outlook for 2020.”
However, the company acknowledges the estimate could be revised downward, pending the state of the coronavirus situation outside of China.
Despite the coronavirus outbreak, ArcelorMittal forecasts U.S. steel consumption will rise between 0-1% in 2020, up from an estimated 2% decline last year.
Similarly, U.S. Steel said it “expects a meaningful reduction in demand for the full fiscal year, though an updated full-year estimate of third-party shipments for each of its operating segments cannot be determined at this time.”
“The company is continuing to monitor the financial and operational impacts of the coronavirus on the business and plans to provide more information in its first quarter disclosures and on its first quarter earnings call,” U.S. Steel said.
Iron ore lags, but finally feels downward pressure
As MetalMiner’s Stuart Burns noted recently, the iron ore price had been fairly resilient to date relative to other commodities.
However, even iron ore felt some pressure later in March.
“Prices were supported last year by weather-related disruptions – a cyclone in Australia and heavy rains in Brazil, underpinning a widely held (if probably misplaced) expectation that Beijing is going to unleash a tsunami of infrastructure projects, as it did after the 2008 financial crisis,” Burns wrote.
“What has punctured the bubble is a growing realization that infrastructure investment is going to be targeted and likely on a much smaller scale than previously hoped. Meanwhile, demand in the rest of the world is falling off a cliff as the COVID-19 virus shuts down large parts of Europe and begins to impact the U.S.”
Prices for steelmaking materials fell across the board, including coking coal, he noted.
However, with China returning to work — if not back to “business as usual” then an incremental step toward that — and the resulting demand stemming from infrastructure stimulus, iron ore prices could rise as ample steel stocks are drawn down.
On the Dalian Commodity Exchange (DCE), iron ore volume and turnover in March increased 63% and 66%, respectively.
Late last week, Reuters reported the most-active contract on the DCE jumped 3.3% to 598 yuan per ton ($84.64).
The most-active contract on the exchange closed at 596 yuan per ton on Monday, April 13.
Actual metals prices and trends
Chinese steel slab prices increased 1.5% month over month to $506.91/mt as of April 1. Chinese steel billet dropped 1.3% to $458.90/mt.
Chinese iron ore 58% fines fell 1.3% to $62.83 per dry metric ton, while coking coal fell 14.4% to $225.07/mt.
U.S. three-month HRC futures fell 15.8% to $480/st. U.S. shredded scrap steel fell 7.5% to $260/st.