Construction MMI: Indices and Demand Decline for Another Month

The Construction MMI (Monthly Metals Index) extended its decline from last month. Altogether, the index fell 10.69% from June to July.


China is Poised to Inject Big Money into Infrastructure

News recently broke that China’s State Council is preparing to increase credit lines across the board, providing an additional 800 billion yuan to fund infrastructure projects. This puts the country at around 93% of its annual spending quota for infrastructure. However, the government seems committed to keeping the money coming.
Immediately after the announcement, share prices among Indian steel and aluminum producers rose more than 5%. Exporters are understandably thrilled at the prospect of a commodities-hungry China. However, there’s no escaping the sheer number of hurdles the country faces, some of which they seem powerless to do anything about.
For instance, China has been enforcing a zero-COVID initiative for months now. Despite oppressive and expensive lockdowns, rolling outbreaks are still occurring. There’s also the looming threat of a global recession, the war in Ukraine, and rising interest rates to contend with. In the end, only time will tell if the investment will pay off. Meanwhile, the announcement has not affected the Construction MMI one bit.
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Contruction MMI

US Construction Industry Still Projecting Growth

The US economy has been rocked by instability, sending some buyers and investors running for the hills. However, industry insiders remain confident that the construction sector will experience substantial growth. In fact, last month’s report from GlobeData detailed how the $1.9 trillion industry should expand by 3% between next year and 2026.
It’s true that the US housing market is starting to cool. However, we’re still seeing significant investments in renewable energy, transportation, and housing. And while Reuters has made it clear for months that home building permits are on the decline, commercial projects are on the rise. It’s a hodgepodge of positives and negatives, but the industry appears in a position to come out on top.
It’s also worth noting that the construction industry added 13,000 jobs last month. Though this was lower than May’s hiring surge, it’s still a sign that there are projects to be completed and money coming in. In an economic climate where the prevailing sentiment is “what now?” this is enough to keep most analysts happy.
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China Expected to Ramp Down Steel Output

An early July report from S&P Global detailed how China is expected to reduce 2022 crude steel output by 2%-3% this year. Altogether, this would remove around 20 to 30 million metric tons from the marketplace. But while global demand is indeed going into the gutter, Chinese producers are unlikely to cut back production much more. According to one source, doing so would “trigger unemployment and put great downward pressure on GDP growth.”
Of course, as with everything else in our global economy, this isn’t a “China only” problem. Raw materials suppliers from Brazil to Australia are going to feel the pinch of the ramp down. In fact, on Friday, representatives from Hunan Province’s Hunan Valin Iron and Steel held an online meeting with investors. They explained that the current supply and demand situation is unlikely to support a sharp rise in raw material prices.
Already the country has implemented a zero import duty on coal, negatively affecting prices. As iron ore supplies increase, support for those prices will also start to weaken.

USSteelHQ 300

A Rocky Few Weeks for US Steel

At the end of June, news hit the wire about a potential closure of the US Steel plant in Granite City, Illinois. The company stated that it plans to sell and repurpose the facility’s blast furnaces, which may end up switching to pig iron production. And while company representatives repeatedly stated that the move would not lead to immediate job losses, they do plan to lay off some 950 workers over two years.
The local union feels the move is a “betrayal” to workers, saying that “the announced potential agreement could cause the permanent shut down of the steel making and finishing operations at the Granite City works. The result would be the permanent loss of close to one thousand jobs.” It’s true that the Granite City economy is heavily dependent on the steel industry and has been for nearly 100 years. For a city with a population of just 28,000, this would be a crippling blow to the job market.
On the other side of the spectrum, US Steel has announced it will be investing some $50  million into one of its Minnesota mines. The move is intended to upgrade the facility to produce iron or feedstock. These are DR-grade pellets that can be used to make Direct Reduced Iron and Hot Briquetted Iron for steel mills.
While those employed by US Steel are wary of their overall job security, the company remains incredibly proud of its recent moves. “We are strategically investing in our raw materials that will feed the advanced steel mills of today and tomorrow,” said CEO David Burritt. “Our conviction remains that steel mined, melted, and made in America is vital to our national and economic security.”

Construction MMI: Actual Metal Prices and Trends

  • China H-Beam steel fell by 8.84% to $656.83. In addition, China Rebar fell by 7.65% to $662.59
  • China aluminum bar also saw a significant drop of 7.6% to $3034/mt.
  • Other notable drops included US shred scrap and European aluminum.

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