Raw Steels MMI: Steel market recovery shows strength

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Pavel Ignatov/Adobe Stock

The Raw Steels Monthly Metals Index (MMI) increased 2.8% for this month’s index value amid a steel market recovery.

October 2020 Raw Steels MMI chart

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

Steel market recovery

All U.S. forms of steel prices increased throughout September.

HRC, CRC and HDG prices increased rapidly by 20.4%, 16.4% and 15.4%, respectively. Meanwhile, the plate price increased 4.3%. The wire rod price increased by 1.5%.

However, the Chinese steel market showed the opposite trend or traded sideways.

The Chinese HRC price dropped by 4.4%. CRC increased by 0.22% and HDG had a 6.4% jump the first day of September but remained flat for the rest of the months and through the first two weeks of October.

The prices’ increase in the U.S. market were followed by an increase in capability utilization rate. By the week ending Oct. 3, raw steel production increased to 66.1%. As such, the year-to-date capability utilization rate rose to 66.2% according to the American Iron and Steel Institute.

Over in the Asian market, there are overcapacity concerns.

The South East Asia Iron and Steel Institute (SEAISI) reported that the region, particularly Chinese steelmakers and banks, might have overinvested in new basic oxygen furnace (BOF) integrated mills.

The region’s current capacity is approximately 151 million metric tons. The proposed investment could bring it up to 50 million metric tons, creating 60 million metric tons of overcapacity from BOF alone. It is important to note that BOF mills cannot operate at low capacity.

U.S. prices increase

Increasing demand has boosted U.S. steel prices.

The U.S. auto industry, in particular, has made a significant recovery.

During September, light vehicle sales rose 6.1% year over year, with sales totaling 1.27 million units. Similarly, light trucks sales increased 12.9% year over year. However, year-to-date sales are down 18.7% compared with the same time frame in 2019.

Despite full production rates, light vehicle and light truck inventories remain down 21% year over year. This should continue to boost steel demand throughout the remainder of the year.

Changes in ArcelorMittal

On Sept. 28, Cleveland-Cliffs announced its intention to acquire ArcelorMittal USA, with the exception of AM/NS Calvert, Dofasco and ArcelorMittal Mexico operations within USMCA, which ArcelorMittal USA will retain.

The consolidation aims to address the long-declining domestic steel industry, making Cleveland-Cliffs the largest flat-rolled producer in North America and giving the domestic integrated market some price stability. Meanwhile, ArcelorMittal sees the transaction as an opportunity to add value for its shareholders while retaining its exposure to the U.S. market through its high-quality USMCA assets, which will be better-integrated into the U.S. market.

Within less than two weeks, on Oct. 8, ArcelorMittal Poland decided to permanently close its blast furnace and steel plant in Poland due to high energy costs, rising carbon prices and lack of emergency trade measures. ArcelorMittal Poland expects to improve its cost competitiveness in its other Poland facilities.

Actual metals prices and trends

The Chinese slab price dropped 1.0% month over month to $554.58/mt as of Oct. 1. Meanwhile, the Chinese billet price rose 1.7% to $517.81/mt.

Chinese coking coal increased 0.8% to $292.3/mt.

U.S. three-month HRC rose 8.5% to $597/st. U.S. shredded scrap steel fell 9.7% to $272/st.

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