The Raw Steels Monthly Metals Index (MMI) increased by 5.4% this month, as U.S. steel prices continued to rise last month.
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U.S. and Chinese prices relation
U.S. steel prices continued to increase in October for the third consecutive month.
HRC, CRC, HDG and plate prices increased by 15.4%, 10.0%, 9.0% and 5.3%, respectively. As demand recovers, so have prices.
Wire rod, however, was the only form of steel that did not increase in price this month, as it instead remained flat.
In contrast, Chinese HRC, CRC and plate prices increased around 2% in October. Meanwhile, HDG prices remained flat throughout the month. For the second month,
U.S. prices surpassed Chinese HRC, CRC and HDG prices. No price arbitrage existed for Chinese buyers, as local prices were lower than imported prices. Chinese prices had a four-month uptrend before prices flattened. On the other hand, U.S. prices started their uptrend approximately 2.5 months ago.
For the past two years, Chinese prices have led U.S. prices. Will that relationship mean U.S. prices will flatten within the next month and half?
Domestic demand increases, supports U.S. steel prices
Steel demand in the U.S. seems to be getting stronger.
As we have reported for a few months now, U.S. automotive production is on the rise.
According to Cox Automotive, October total new vehicle sales not only increased compared to September but also year over year. Sales jumped 0.9%, from 1,333,995 units in 2019 to 1,345,401 units in 2020.
This is backed up by the increase for the fifth consecutive month of new durable goods orders. The U.S. Department of Commerce reported a 1.9% increase in new orders for manufactured durable goods in September. Transportation equipment production led the increase in new orders.
However, commercial construction is another industry that is picking up. The Architecture Billings Index (ABI) rose from 40 in August to 47 in September. The Design Contracts Index rose by 6.3% to 48.9, which signals that at least the number of inquiries into new projects is increasing.
Similarly, Reliance Steel and Aluminum indicated demand in nonresidential construction continued to increase slowly during the third quarter due to healthy bidding activity for new projects and the restart of projects that had previously been put on hold.
Moreover, the Associated General Contractors of America reported construction employment increased by 84,000 jobs in October. However, nonresidential construction employment remains at 262,000 jobs, or 5.6% below pre-pandemic levels.
Chinese steel production remains steady
Even though steel prices in China have stalled, steel production seems to remain strong.
The General Administration of Customs reported iron ore imports declined by 1.7% to 106.74 million metric tons in October compared to the previous month. In the year to date, however, iron ore imports are up 11.2% from 2019, coming in at 975.2 million metric tons.
Most of the iron ore imports are coming from Brazil and South Africa.
Actual metals prices and trends
The Chinese slab price rose 2.1% month over month to $566.29/mt as of Nov. 1. In addition, the Chinese billet price rose 1.9% to $527.44/mt.
Chinese coking coal increased 15.3% to $336.93/mt.
As mentioned earlier, U.S. steel prices continued to rise.
U.S. three-month HRC rose 9.7% to $665/st. U.S. shredded scrap steel fell 6.6% to $290/st.
Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?